India's tech SME sector revenue to reach $40 bn by FY30

The Indian tech small and medium-sized enterprise (SME) sector revenue is likely to grow in double digits to reach $40 billion by FY30. With growing tech demand, the tech SME sector is expected to contribute 7-9 percent to the overall FY23E tech industry revenue at $15-$20 billion, higher than the pre-pandemic share of the tech industry at 4-6 percent. In terms of headcount, the Indian tech SME sector is estimated to close FY23 with 740,000 employees, with hiring for digital skills growing 2 times faster than traditional tech talent in FY20, according to the report by Nasscom, in collaboration with ProHance.

Areas such as cloud, digital engineering services, advanced AI/ML and analytics and IoT and Blockchain constitute key digital talent areas for the sector in FY23E. "The Indian tech sector has more than 10,000 SMEs dedicated to providing traditional and digital services to tech buyers globally as well as domestically," Nasscom President Debjani Ghosh said. "Fast tracking innovation, supportive government policies and incentive schemes and dedicated SME-industry-academia connect will further augment the sector's growth and help achieve double digital revenue growth vision by FY30E," she added.

The India tech SME segment is also diversifying digital offerings across geographies. North America accounts for 50-55 percent of the Indian tech SME revenue with specific focus on niche cloud, AI, IoT, and SaaS products. This is followed by Europe at 19-20 percent and the domestic market at 17-18 percent, in FY23E. SMEs have also increased their presence in the APAC region by making inroads into non-traditional Japanese and Australian markets and are exploring deeper penetration into the Middle East markets like the UAE and Saudi Arabia, the report mentioned.

Increased investment in cloud, migration, Saas, and AI-based solutions have led to significant growth of 4X in digital technology SMEs since FY19. Although the digital tech SMEs are growing rapidly on the back of IT modernization and increasing digital demand, the segment still operates at a lower base compared to the traditional SME sector. "Lack of leadership pipeline, limited enterprise clients, and no sustained product innovation are some of the growth headwinds faced by tech SMEs today, resulting in slower growth and range-bound pricing," the report mentioned.

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