A recent Zoho survey titled State of Digital and Customer Operations in Indian MSMEs reveals significant insights into the digital transformation trends among micro, small, and medium enterprises (MSMEs) across India. Conducted between April and June 2024 with responses from 5,149 MSMEs, the survey highlights a growing inclination toward cloud adoption and IT investments. Notably, 81% of respondents indicated plans to increase their cloud spending in 2025, marking a clear push toward enhancing digital capabilities.

One of the key challenges faced by MSMEs in this journey is the high cost of software, budget limitations, lack of technical expertise, and complexities in integrating digital tools. Despite these challenges, core technology focus areas include customer relationship management (CRM), financial service solutions, business intelligence, and cybersecurity.

Zoho’s CEO, Sridhar Vembu, emphasized MSMEs’ vital role in India’s economic growth, noting that many remain underserved in terms of affordable and effective digital tools. The sector is expected to grow from 63 million to around 75 million businesses, making digital empowerment crucial for national GDP growth. The survey found that 73% of MSMEs are optimistic about their growth in the next six months, though concerns remain about economic uncertainty (54%), inflation (44%), and skill shortages (33%).

Among the 98% of businesses planning IT budgets, 77% allocated up to 50% of their IT budget for cloud solutions, while 23% allocated more than 50%, indicating cloud's growing importance in improving operational efficiency and competitiveness. This shift toward cloud is especially evident in medium-sized enterprises, 44% of which plan to increase their cloud spending in 2025. However, 49% of micro-enterprises, which have a turnover of less than ₹5 crore, plan to reduce their cloud investment, likely due to affordability concerns.

As MSMEs continue their digital transformation journey, CRM, financial services, cybersecurity, and business intelligence are considered top priorities. These technologies are seen as essential to streamlining customer management, ensuring data security, and making better business decisions. Businesses are also interested in adopting collaboration tools, HR solutions, and artificial intelligence (AI) in the near future.

A significant 87% of surveyed MSMEs have used or are currently using a CRM system, and among them, 97% reported improvements in customer operations. CRM adoption has helped 72% of businesses save time, 71% report increased revenue, and 66% see better decision-making due to data transparency. Despite these benefits, 71% still rely on spreadsheets alongside or instead of CRM tools, indicating a need for deeper digital integration.

Customer operations remain a challenge for MSMEs. The top three difficulties include poor alignment between sales and marketing, challenges in targeting and reaching potential customers (each cited by 91% of respondents). Businesses also noted a need to improve conversion rates, team collaboration, and access to quality insights. Furthermore, 27% reported communication gaps with customers as a major issue, followed by inconsistent follow-ups and inadequate collaboration within sales teams.

In conclusion, while Indian MSMEs are embracing digital tools to modernize operations, key gaps in affordability, skill access, and system integration continue to hinder full-scale transformation. The push for CRM and cloud adoption suggests a promising direction, but comprehensive strategies are required to address operational and customer-facing challenges.