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While many MSMEs have gone digital, only a few are tapping into data-driven tools. In this article, we explore what’s holding them back—and how simple, affordable steps can turn challenges into growth opportunities.
Close to 43% of MSMEs have achieved digital maturity, but only 23% of them have moved into advanced digital territory, according to a report by Cybermedia research. This reflects that digital transformation has started, but the distribution is not uniform. Undoubtedly, the sector has made significant progress in building a strong digital foundation and is now evolving at a reasonable pace.
While platforms like GSTIN and UPI have played a pivotal role in helping MSMEs achieve basic digitalisation, the post-pandemic period created a huge tailwind for the sector to go digital. Having realised this need, online marketplaces and ecommerce platforms went all out to offer single window solutions to MSMEs that helped catalyze the digital journey further.
The result of all these interventions has been that a good number of MSMEs do their tax filing and invoicing online using GST tools, leverage various social media applications like WhatsApp, Instagram, or Facebook to enhance their sales and marketing reach, and adopt online marketplaces.
Moving beyond basic digitisation: The challenges
As the ecosystem evolves, it compels MSMEs to move beyond basic digitisation. However, being digitally mature comes with its own set of challenges. The cultural resistance to change, coupled with logistical issues of access, knowledge, cost, and skill gap, among others, stands in the way of MSMEs becoming a data-intelligent ecosystem.
Affordability & Access: Advanced analytics tools (AI/ML platforms) remain costly for small businesses. Many small businesses lack budgets for custom solutions or skilled personnel.
Skill Gap: Micro and small businesses in India are primarily a one-man army. The limited in-house expertise in data interpretation, AI, or cybersecurity hinders them from achieving advanced data literacy within the business. As per one of the published reports, less than 20% of MSME employees are skilled in data interpretation.
Data Infrastructure: Fragmented data storage, such as spreadsheets, siloed software, and poor interoperability, also makes it difficult to get unified data-led insights. And in rural belts, MSMEs face disrupted power supply and poor internet, leading to a poor experience and adoption.
Cultural Resistance: Lack of skills and knowledge often fosters strong resistance towards data-driven decisions. While new-age businesses are early adopters, on the other hand, traditional wholesale or small manufacturing businesses remain distant from these new-gen tech tools.
Converting challenges into opportunities
To overcome these challenges and get onto the road to data intelligence, businesses can take small steps and start making smart use of data slowly. This includes:
Start with small, affordable, and easy to use tools: There is absolutely no need to be scared of tech jargon and the excessive vocabulary around AI/ML. Start with simple tools like – WhatsApp for Business, Google Analytics, or CRM plug & play tools available online, they can help you deal with customers faster, track how your website is doing, manage the accounting and bills in one place, and reduce stock-outs or overstocks respectively. MSMEs should try to migrate to cloud-based ERP systems to integrate sales, customer data, billing, and inventory etc. Once hands-on, you can experiment with BI dashboards and scale to AI/ML.
Local collaborations: The best way to grasp something new is to do it with someone. Join MSME clusters, or associations in you know that organize group training, bulk software licensing, or shared digital infrastructure. As for the next steps, explore MSME-friendly packages or solutions with SaaS companies. Even for credit access, banks and NBFCs have separate schemes and programs. All you have to do is ask.
Nothing like government support: As the sector has seen tremendous growth, the government has launched multiple schemes to support further development. MeitY’s Cloud Computing Policy, MSME Ministry’s Champions Portal, UDYAM, or Digital Saksham, and Atal Tinkering Labs are some of the programmes that come at no or minimal cost, but help you efficiently use digital tools in the business.
Workforce training: Digital maturity isn’t just about tools but how teams use data. Start with basic training sessions such as dashboards, analysing sales reports, customer feedback, and inventory levels, and encourage the staff to read what the numbers are saying. Build a data-driven culture slowly within the organisation.
Understand real-world use cases: Use of simple checklist apps, pricing insights such as local demand trends and competitor pricing can help in setting dynamic prices for your customers. Customer data can also help in understanding when the purchase frequency is high/low in a month or in a season, thus helping you stock the product accordingly.
The mixed picture
Digitisation alone is not enough to ensure long-term competitiveness and resilience, as technology is moving at an unprecedented pace. The MSME sector has shown immense agility by embracing digital tools at such a pace. Embracing digital intelligence is no longer optional but has become a “must-have” for MSMEs aiming for sustainable growth and an edge over competition.
Online Coverage: SMB Story