Indian Tech SME Sector Revenue To Grow In Double Digits To $40 Bn By FY30E: NASSCOM Report

A latest report by NASSCOM has indicated that the Tech SME sector in India is projected to double revenue and reach USD 40 billion by FY30 as there is significant potential for growth.

NASSCOM report noted that the sector's digital revenue share is also expected to grow rapidly due to the increasing demand for dedicated Cloud, AI/ML, or IoT service providers. But Traditional Tech SMEs may face risks due to a temporary market shrink caused by a global slowdown.

“By addressing the challenges and making the necessary shifts, SMEs can capitalise on the growth potential and improve their overall competitiveness,” mentioned the report.

The report noted that the growing tech demand means that the sector is expected to contribute 7–9 per cent to the overall FY23E tech industry revenue at USD 15 billion – USD 20 billion, higher than the pre-pandemic share of the tech industry at 4-6 per cent.

The segment is also diversifying digital offerings across geographies. North America accounts for 50-55 per cent of the Indian tech SMEs revenue with specific focus around niche cloud, AI, IoT and SaaS products. This is followed by Europe at 19-20 per cent, and the domestic market at 17-18 per cent, 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 middle east markets like UAE and Saudi Arabia.

Increased investment in cloud, migration, SaaS, and AI-based solutions have led to significant growth of four-fold in digital technology SMEs since FY19. These SMEs generate 80 per cent of their revenue from cloud, AI/ML, analytics, and digital services.

Further, the demand for digital has led to a sectoral diversification for the tech SME sector in India, particularly in the retail and ecommerce verticals that grew during the pandemic in the backdrop of higher digital consumption. However, BFSI & FinTech continues to drive maximum revenue share at 50-55 per cent. The sector is also witnessing wider partnerships from tech start-ups, who in turn are leveraging the tech SME ecosystem in India for product development support, AI/ML data tagging, testing, product engineering services.

In terms of headcount, the Indian tech SME sector is estimated to close FY23 with 7,40,000 employees, with hiring for digital skills growing two times faster than traditional tech talent in FY20. Areas such as Cloud, Digital Engineering Services, Advanced AI/ML & Analytics and IoT and Blockchain constitutes key digital talent areas for the sector in FY23E.

Speaking at the launch, Debjani Ghosh, President, NASSCOM said, “The Indian tech sector has more than 10,000 SMEs dedicated to provide traditional & digital services to tech buyers globally as well as domestic. The thrust to digital services has also led innovative digital SME betting on deep-tech solutions that either vertically integrate functions, or horizontally integrate value chains. However, for traditional tech SMEs to navigate headwinds, shift to digital is eminent. Fast tracking innovation, supportive government policies & incentive schemes and dedicated SME – industry – academia connects will further augment the sector’s growth and help achieve double digital revenue growth vision by FY30E.”