Zoho survey reveals that 81% of Indian MSMEs plan to increase their cloud spend in 2025, high cost of software a top hurdle

Zoho, the Chennai-headquartered global technology company,  announced the findings from its recent survey, “State of Digital and Customer Operations in Indian MSMEs”. As per the survey, 81% of the respondents want to increase their cloud spending budget in 2025. The top digital adoption challenges that these MSMEs currently face are high software costs, budgetary constraints, lack of tech skills, and integration hassles. According to the findings, the key technology areas for businesses this year are CRM, financial services, and business intelligence.

The number of MSMEs in India is expected to grow from 6.3 crore, to around 7.5 crore, making it a crucial sector for the country’s GDP growth. The company surveyed 5149 micro, small & medium enterprises (MSMEs) across India, between April and June 2024, to gauge the level of digital adoption amongst the sector, the usage trends, and hurdles these businesses face in their digital transformation (DX) journey.

To understand the current environment within the sector, the survey explored the sentiment of businesses pertaining to growth; 73% of the respondents claimed that they were optimistic about their growth in the next six months. The businesses are, however, concerned about three aspects of the current macroeconomic landscape, which are economic uncertainty (54%), inflation (44%), and a shortage of skilled labour (33%).

Amongst the surveyed MSMEs that plan their IT spends (98%), while 77% have allocated up to 50% of their 2024 budget towards cloud solutions, 23% of businesses have allocated more than 50% of their budget for the same. This shows that MSMEs recognise the importance of adopting cloud solutions to achieve operational efficiency and remain competitive in the long term.

“This MSME Day, we commemorate the vital role of these businesses in our country,” said Praval Singh, VP Marketing and Customer Experience, Zoho Corp. “As we have closely worked with them for over two decades, we understand that a prominent hurdle these businesses face as they scale is the lack of feature-rich and accessible solutions in the market. Therefore, we have invested in building products like Bigin that are focused on their specific needs, and have made them affordable, packed them with the right set of features, and ensured they are easy to set up and use.”

Here are other findings from the survey:

MSMEs’ spending on IT and Cloud is on the rise: As the focus of MSMEs on DX becomes stronger, and they aim to improve their growth prospects they bank on IT and cloud solutions. 81% of the respondents said they will increase their cloud spending for 2025, and 97% of the respondents allocate up to 20 percent of their revenue to their IT and cloud needs.

The survey found that as businesses scale and their operations grow or become complex in nature, their digital needs also tend to grow. While 49% of the micro enterprises (Turnover less than Rs.5 Cr) said they would like to reduce their cloud spending next year, 44% of medium-sized enterprises (Turnover between Rs.100 Cr and Rs.250 Cr) stated that they want to increase their cloud spend for 2025.

Indian MSMEs and their DX focus: As MSMEs embrace and leverage digital capabilities, they regard technology areas like Customer Relationship Management (CRM), Finance Services Solutions, Cybersecurity and Business Intelligence to be the most important. The next set of tools that businesses prefer to leverage include Collaboration, Human Resources, and Artificial Intelligence.

-While 86% of micro businesses state that CRM and financial service solutions are important for them, 83% feel that cybersecurity is also a critical technology they want to focus on.
-Small businesses feel that CRM is the most critical digital solution (93%), followed by Financial services solutions (91%). 90% of them said that Business Intelligence and Cybersecurity are also crucial for accelerating their digital adoption journey.
-MSMEs are focusing their efforts on implementing IT Infrastructure Management and CRM solutions by 2026, in order to enhance their overall business and customer management operations.

Increasing needs for CRM solutions: 87% of the respondents have either used a CRM solution before or currently use one, out of which 97% said they have seen an improvement in their customer operations post using a CRM. Additionally, 90% of MSMEs currently not using a CRM solution said that they will adopt one by 2026.

72% of MSMEs shared that they were able to save time, while 71% said that they saw an increase in revenue after using a CRM solution, and 66% said that they were able to improve their decision-making capability owing to the transparency and data-driven reports offered by customer experience (CX) solutions. However, surprisingly, 71% of businesses still use spreadsheets either separately or along with a CRM to manage their customer information, leaving scope for establishing unified customer operations and, in turn, a streamlined customer experience.
Indian MSMEs state that the top three challenges they face in their customer operations are the lack of synergies between sales and marketing functions (91%), targeting potential customers (91%), and reaching out to potential customers (91%). Additionally, they feel that there are three areas that need improvement in their sales journey. The first one being better conversions, the second, enhanced team collaboration, and the third being quality insights and analytics to make data-driven decisions.

The survey also determined that the gaps in the current customer operations processes tend to hinder client acquisition and impacts the CX a business aims to provide its customers. 27% of businesses believe disjointed communication with customers is a major concern, followed by difficulty in conversion of prospects into customers, inconsistent follow-ups and lack of collaboration within the sales teams.