“Spending on telecom services such as cellular services, and local and long-distance telephony accounted for more than 90 percent of total telecom spending last year,” says Dev Chakravarty, Senior Analyst at AMI-Partners.

Small businesses (SBs or companies with up to 99 employees) account for the bulk (about 80 percent) of the telecom spending among Indian SMBs. This is due to their sheer numbers as SBs account for more than 99 percent of all SMBs in India. SBs want to set up a robust connectivity infrastructure that enables them to interact with their business partners and other stakeholders.

“Cellular penetration within SBs has reached near-saturation at 98 percent—almost on par with usage of local phones,” Mr. Chakravarty says.

The India telecom sector is set to move forward—the SMB sector itself speaks of adding around 0.5 million new telephone lines in the next 12 months. Future trends indicate a likely advent of 3G communications and the possible entry of foreign operators into the spectrum fray. These are likely to bring in good tidings for SMBs as these services will bring in increased value-added services and tools for SMBs that will help them improve their services to customers as a part of better customer relationship management.

India SMBs are set to adopt unified communications—which integrates multiple communication systems such as fixed and mobile voice, e-mail, instant messaging, fax, VoIP, etc—to streamline their methods of information dissemination and collaboration with remotely located employees. The service sector dominates overall India SMB unified communication spending—comprising more than four fifths of the total. Within the former, audio conferencing has a relatively larger share of the pie, followed by other communication methods like video, web conferencing and instant messaging. “Usage of video and web conferencing is still at an embryonic stage within India SMBs but is anticipated to move forward along with greater availability and affordability of bandwidth; many ISPs are indeed striving to bring down the broadband costs.”

”SMBs are considering cutting down on business travel to bring down costs—especially in the wake of spiraling fuel prices,” Mr. Chakravarty says. “Other real-time communication methods like audio and video conferencing can help them reduce the needs of business travel and face-to-face meetings.”

Among India telecom service providers, BSNL/MTNL continues to be the market leader in terms of local and long-distance services. This is followed by Bharti Telecom. The rest of the market is fragmented with Reliance and Tata battling for market share. However, the overall market leader for telephone equipment is Beetel—it enjoys a healthy penetration—being used by 40 percent of SMBs.