What’s stopping small business growth in India?
How tech industry has kept the small businesses in India captive and deprived.
The story starts from a basement in Bangalore in the mid-80s where the first software product in India was developed — a DOS-based accounting software.
Well in the 90s, to sell this software, a desktop computer was bundled. There were a few takers — larger businesses who were struggling to keep up with the volume of transactions and inordinate time taken to prepare business reports from paper-based accounting books. It wasn’t a cakewalk to train the accountants to operate the computer as well as the accounting software. The accounting software maker started establishing this market in India.
By the early 2000s, computer-based accounting systems were gaining inroads as accountants did not have to mindlessly tally the numbers and add them for days to get basic reports. Accounting software market was now expanding as more accountants were trained.
Accounting software speeded up generating business reports which helped CAs move down the value chain by offering outsourced accounting services. Outsourced accounting came as a boon to smaller businesses, it effectively lowered their cost of operations. Accounting moved out of smaller businesses to CAs premises. Computer-based accounting also got deeply established in the in-house accounting operations in larger businesses.
Widely available pirated versions of MS Office and other productivity software, excellent quality printers, and affordable personal computers were gaining ground for smaller businesses in India in the early 2000s. With a few clicks of the mouse, complex business numbers on spreadsheets were a child’s play. Typing pools started retiring as the business owners were impressed by the ease of formatting and reliability in duplication. Internet and emails were making it easier to conduct business.
Rampant piracy also spread the accounting software wide. Piracy was good — a sign of popularity and value. The software maker used piracy as a strategic tool to increase market share.
There were two types of customers that were holding the fort for the accounting software maker — chartered accountants who ran outsourced accounting for smaller businesses and the army of in-house accountants working with larger businesses. Without an iota of doubt, the accounting software maker’s ears were highly tuned to accountants’ concerns and demands — the product followed closely.
There were two quintessential expectations from the accountants — generate accurate business reports periodically and minimise of the damn corporate income tax.
The in-house accountants were able to organise themselves to provide for both the demands well. However, in the quest to garner more clients, the outsourced accountants struggled. With businesses shoving down their throat to minimise taxes, they solely focused on taxes, giving a kick in the butt to periodic business reports.
In absence of these reports, smaller businesses could not figure out what was happening to their business. No reporting of sales and no reporting of purchases, the payables and receivables suffered. In absence of any reliable data, they started depending on their gut for all business decisions. They kept living in the fallacy that their accountants will fulfil the promise of updated records.
Some businesses started keeping alternate records to be on top of the business numbers, you could count these on your fingertips.
Computer-savvy businesses take the first blow
As they say, success is the greatest fear. Fearing rejection, even by the mid-2000s, the legendary accounting software maker did not make the shift from it’s DOS-based product to a more contemporary product that gained from a modern operating system.
Computer-savvy businesses wanted to move back business records in-house for timely access, but the keyboard-operated accounting software did not cut ice. It was tightly made for accounts with jargon that businessmen despised. Plus they had to memorise a few hundred shortcuts just to operate the software — too much learning and therefore highly error-prone. It left them humiliated and feeling inadequate. The interaction paradigm reminded the mouse-savvy businessmen the horrors of mainframes.
With the businessmen handicapped to operate an accounting software in-house, the outsourced accounting business grew leaps and bounds.
If you can’t lead, follow — every other accounting software maker in India followed the leader. They left the businessmen helpless with unusable software and thereby reliant on the mercy of their outsourced accountants. And accountants were happily busy with compliance and taxation matters.
Growing businesses take the second blow
By the beginning of this decade, businesses in India had much larger ambitions and they were growing fast. Internet was the established backbone of communication and information.
The unimaginable started happening in India — railway reservations moved online and so did Indian banks! A lot of very popular desktop applications moved to the cloud as it helped people anywhere & anytime access, offered simultaneous editing, and removed the fear of losing data.
By now every commerce graduate in the country was learning this software in school and every accounting job description mandated the knowledge of all the million shortcuts of the software. Every roadside ‘computer school’ was offering learning this accounting software as a ‘job guarantee’ scheme. No doubt, it was everywhere.
But he same grim reality was catching up on the other side. The ever-growing Indian businesses could not still access updated business numbers whenever and wherever they were needed. It was a painful ping pong game with their accountants to keep business data in-sync. They had to be satisfied with incomplete and erroneous compliance numbers all the time.
Business was still suffering after two decades, silently. But, did they have an alternative?
Every business is held captive
Despite the absence of business number on their fingertips, with the globalisation of the Indian economy, Indian businesses were growing faster then ever in the middle of this decade.
Smartphones made business even easier and data was cheap. WhatsApp became a tool for sales, marketing, and business communication. Sluggish banks ran fast enough to help businesses conduct business anywhere and everywhere on their mobile phones. Payments, stocks trading, travel reservations, shopping, entertainment — everything became on-the-go — there were apps for everything. One could even offer prayers to their favourite gods online!
What still didn’t budge to the mobile was the legendary accounting software. It still firmly believed that the accounting operations are confined to one-room cubby holes and businesses (small or big) have no right to benefit from the latest technology. No sane business could use such archaic software.
There are a few global players and some Indian players with compelling offerings. Then what’s holding Indian businesses?
When businesses send their digital ledger to their accountants, the accountants should be able to import these records in their archaic software — which is time-consuming, difficult, and erroneous. So, accountants reject anything else that comes from their clients.
But why didn’t accountants and CAs in India move to modern accounting software? The answer lies in India’s regulations which mandate that businesses must maintain accounts for 7 years.
To migrate 8 years of accounts of several million tax registered businesses in India is nothing short of a nightmare. Each accountant will need a few days of unproductive time to migrate their many clients records and verify each record — impossible! Plus, everyone believes that they will have to learn new software which no one else uses.
Accounting software has therefore become a compliance need — not a tool to grow business. Everyone is held captive and businesses in India suffer due to the extreme irresponsibility of the leader.
Breaching the moat
Despite being very expensive to buy, the accounting software maker has a massive moat of training every school-going future accountant, every road-side computer training institute offering learning to operate this software as a job guarantee, regulations that lock accountants in particular software, and accountants that reject anything new from their clients.
How does anyone breach this very deep moat?
Deep-pocketed accounting software makers like Intuit and Zoho need these strategies to transform Indian businesses and relieve them of chronic pain:
- Help migrate all the data of all the clients of all the previous years for outsourced accounting shops as well as in-house accounting departments.
- Showcase the benefits of the new-age software — anywhere & anytime access to reports by clients on their mobile phones, data security, data updates by multiple people, search records, etc.
- A massive PR and advertising campaign to showcase the business benefits of a cloud + mobile-based business accounting for business growth.
And, for newer software companies like Vyapaar and KhataBook which are trying to gain a foothold in this market, they need to solve for one deep pain of businesses and then expand their offering over time.
Read the story of Ramesh, the pickle maker from Jodhpur. It’s the story of his struggle and success with his business.
