SMBs – The Bridge of Resilience (Part 2)

Praveen: Welcome to the second part of our podcast on the impact of COVID-19 on the Small Medium Business (SMB) sector. I am Praveen Bhadada, Managing Partner, Zinnov, and I will be your host today. I also have with me, Sameer Garde, President of Cisco India and SAARC. In the first part, we talked about how COVID has impacted the SMB sector, how SMBs are pivoting and diversifying, and the role of technology in enabling SMBs to deal with the current crisis. So, diving right in Sameer, at a global level, Cisco has committed a large amount of money to support customers and partners. How is that program shaping up for you in India, and what are the initiatives you are taking around that financial plan?

Sameer: Yeah, so I think there are three buckets or stakeholders that we are focused on. First is, of course, businesses. Second is citizens, third is government. And then our partners. So, when I say businesses, I mean, our customers. The first thing we started with was to work with the governments to identify the right tracking mechanisms. Governments, like the Ministry of Health, typically have multiple sources of data, right? Today, there are upwards of 100 million people who downloaded the Arogya Setu app. 39,000 hospitals around the country, have data coming in regarding people getting tested, having symptoms, and so on. So, all of that data needs to kind of come together, get correlated. We used the insights from the data and helped first responders to do the right thing, whether it is to do with making ventilators available, whether it has to do with making nurses or doctors available at the right place at the right time. So we help build what we call tracking mechanism, or a crisis tracking and management mechanism with some of our partners; we integrated that with WebEx, and since we are dealing with very critical data, we ensure that we used a secure way of communicating with the first responders. Now that is being very effectively used by the Ministry of Health and after we did this, we’ve seen multiple states come to us seeking help. And this is being done free of cost. It’s not something that we are charging customers for. So that was at the level of the citizen. At the level of the businesses, what we saw was, like you rightly said freeware, whether it is WebEx whether it is Umbrella, which is our DNS protection service, whether it is VPN connected for businesses so that they can have secure work from home environments. Whether it is simple stuff like Meraki WiFi, which self-configures itself. We help people take this stuff free of cost for a 90-day trial and help them build Work from Home solutions very quickly through SAAS because physical products are very difficult to manage. What we realized around three weeks into this lockdown, not just in India, but globally, is how do we help SMBs with their capital and basically SMBs in this regard our partners, and also some direct SMBs and businesses. Cashflow is probably the biggest help that these SMBs require. Banks are not lending very easily right now. We have Cisco Capital, which uses the Cisco balance sheet to lend to SMBs and partners. What we did was, we helped them get a moratorium for 90 days. And even after the 90 days, if you want to continue to not pay, we charge you only a certain small interest rate and you can take that up to around six months. So, the first 90 days without interest rates and the next 90 days are with a nominal interest rate, which is a massive, massive help for these guys in terms of being able to reduce their EMI. So, I think that is probably the biggest help that we provided for our SMBs and our partners. In addition to that, of course, we are helping them with the problem of how to manage product risks, how to manage freight cost increases, and so on.

Praveen: How has been the response so far from the SMBs and partners?

Sameer: It’s a very positive response. Of course, they always want more in this environment. I think it’s always been a question of how much more can we do for them and we continue to evolve that. I think from a business point of view, we’ve seen tremendous response positively. Companies have been extremely happy with what we’re doing, because a lot SMBs import goods and at this stage if you think about it, there is a lot of volatility, but also there is like a 7% to 8% or 10% cost difference because of the rupee and the dollar rate. Freight is very difficult because the costs are much higher. So, we are still working on some of those elements.

Praveen: Absolutely. So, one of the things that we’ve been experimenting with is, purely from a tech ecosystem perspective – can there be a higher order of collaboration between different players that can all be targeted towards enhancing value and solving liquidity issues of the SMB customer? So, any point of view in terms of how you’re looking at the larger, peer network of tech companies and what kind of collaborations, if at all, you are trying to drive in the pursuit of making SMBs survive this scenario?

Sameer: So I think it’s early days in that respect. In one of my interviews, the interviewer asked me, “So Sameer, what do you think is better – WebEx or Microsoft or Zoom?” I think this is not the time to compete. This is the time to figure out ways in which as an industry we come together and help businesses, individuals, and SMBs with whatever is possible for large companies. In the second piece, I think we are all looking at ways in which platforms could be built to help a large cluster of SMBs. It will take a little while. It requires a tremendous amount of collaboration at the country level, at the global level. And I think industry associations like CII, NASSCOM, FICCI (Federation of Indian Chambers of Commerce & Industry) – all of these need to kind of come together, bring OEMs together, bring technology behemoths together, and see how we can help SMBs.

Praveen: So, what are your top recommendations for the government? Anything that they can do to help drive the tech adoption and therefore addresses the pain points of SMBs at the moment?

Sameer: I think one of the things that I would probably say is this is a problem that is so big and so complex that no one person or one stakeholder in the ecosystem can solve this. From a government point of view, I think the first step would be, of course, the stimulus package. Second would be to ensure we look at releasing the lockdown more aggressively. Third, I think you know, upwards of 70,000 crores of procurement is done by the government from SMBs. Thanks to the GeM portals it is becoming much easier for the government to procure and SMBs to sell. I think there needs to be a way in which that becomes even easier from a lead time perspective for people to firstly sell, government to buy, and most importantly, the government to give cash for what they buy quickly. So, in my opinion, they should be dropping their payment cycles and make them much shorter for SMBs. Lastly, I think government and technology companies need to come together. You see the Arogya Setu app was built in conjunction with a very large technology company. And I think it’s the right thing to do. If there are loan payments that are there from banks, which are capital adequate, I think there should be some moratorium for these. Eventually, I think the government may even need to look at something like a bridge loan for companies not to fire people, or SMEs, not to fire at least in the organized sector. So, if you expect to keep people, I think these SMEs will not be able to afford to give them salaries beyond a certain time. So, I think the government might need to step in and figure out is there is a way to give a bridge loan for people with a certain salary and above to be kept in their jobs.

Praveen: Absolutely. I think at the end of the day SMBs contribute to a significant portion of the economy and that part has to be preserved and conserved. So, it that sense any relief measures that government and the larger ecosystem could come up with, I think those will be welcome. And the only challenge is the uncertainties are so grave, no one knows when the situation will be back to normal, right. Some people are projecting that it could be two years before which, you know, any normalcy can be expected. So, assuming a worst-case scenario like that, whether where we are in the situation for the next 18 to 24 months, as a technology expert, what are your recommendations for SMBs? How should they plan for the worst and hope for the best in the situation?

Sameer: Firstly, it’s a mental block that we need to remove. Each of us individually, and the government and the SMBs. A society cannot sustain itself in a lockdown. As I said, the vaccine is at least a year or maybe more away. So, we have to first get to learn to live in this new normal. Assume it’s not going to go away, assume it’s an ongoing situation where you will have an increase in the number of cases and increase probably in deaths and so on. So first the mental block needs to go from the government, from the SMEs, from businesses and citizens. The second is, like I said, anything that is online will thrive. So, go digital, because the people who will get digitally enabled are the ones who have a better chance of surviving in the next two or three years. Next is going digital aggressive, and if you don’t have people to understand digital, then divest to invest in those kinds of people. The third thing is I think people will require in this environment, a formal proof of hygiene, right. So, you’ve got to use digital solutions to figure out how you can give trust to your customer, that whatever you’re doing, is hygienic. I think any digital solution which can help you in that respect will be a big winner. Next is remote consumer and worker – the stay at home economy. So, while the lockdown, can be removed, I think most companies, including Cisco, are already thinking of what portion of our employees can work from home. So, I think there is a massive opportunity for technology companies to build packet solutions for the work from home economy. I think you mentioned about contactless deliveries. Personally, I feel the adoption of something like drones, AR and VR will see huge adoptions fast.

Praveen: Great. Thanks so much for sharing your perspectives. This has been quite an interesting session. I thoroughly enjoyed it, and I hope our audience also enjoyed listening to it and took some ideas in terms of what SMEs can do and how can technology companies create newer opportunities for themselves while we all deal with this unfortunate planetary-scale pandemic situation. Thank you so much for joining us today.

Sameer: Thank you. It was wonderful talking to you.