The role of Micro, Small and Medium-sized Enterprises (MSMEs) in supporting economic growth and job creation is well recognized. Recently, tech MSMEs and startups have been thrust into focus, with countries around the world seeking to enable domestic ICT ecosystems and encourage home-grown digital products and services, such as online marketplaces which make it easier for companies to transact with customers locally and abroad. ICT services have enabled the broader MSME population in general, but have also created unique opportunities in the tech sector for new entrants to introduce products and services which are transforming traditional industries.
Here are 5 key ways that the ICT sector is indirectly supporting tech MSMEs:
Infrastructure: Infrastructure such as data centres and Internet exchanges are fundamental to the tech startup ecosystem to support cloud services and rapid data transfer. Startups themselves are tapping into the data centre market with innovative approaches and products such as the utilization of smaller servers, optimization software, server conversion and data de-duplication.
Distribution of products/services: ICT-enabled startups and MSMEs need high-speed Internet or mobile networks to distribute content and services. At the same time, users of startup products need access to broadband and cell phone networks. These networks enable the platforms created by tech MSMEs to link buyers and sellers. The platforms can be generalized as:
- On-demand / sharing economy such as ride sharing services that link passengers with drivers.
- Match-making services in areas such as real estate, employment, travel, dating, investment and others.
- E-commerce platforms and online marketplaces, such as auction sites.
APIs: Many tech companies, including mobile network operators and leading social networks, are realizing the potential of allowing third party developers to tap into their source code to programme applications with increased functionality. Such applications typically leverage an existing function of the source code to perform a new task, and the practice is helping to uncover new and innovate uses for existing software by empowering large communities of independent developers around the world.
Every time an operator opens a new set of APIs, it creates a powerful cycle of innovation as start-ups can combine several APIs to create new services. In many emerging markets where 2G networks, feature phones, and cash payments are still dominant, the most useful local operator APIs are messaging (SMS, USSD), billing (direct operator billing), mobile money, and location APIs. In this context channels like mobile messaging, operator billing, mobile money, or even cellular positioning, remain extremely relevant for emerging market start-ups to reach and charge their end users for mobile services.
Mobile Payments: The ability to make and receive online payments is critical for tech startup and MSMEs. Many startup business models are based on online or mobile payments. Startups need to monetize if they are going to scale, and the non-availability or limited adoption of electronic payments could discourage growth of the ecosystem.
ICT helps build business models for social business: ICT is making it easier to build business models for social businesses. Open source represents an exciting prospective model, and many companies have been successful at introducing their open source products globally because of the existing user base, which helps generates revenue and increases the firm’s economic outcomes. Funding is becoming increasingly available to open source businesses, and the model is helping them identify new revenue streams from, for example, consulting and software-as-a-service (SaaS). Open source represents an exciting opportunity for burgeoning entrepreneurs to have a demonstrated social impact.
The following findings are taken from chapter 2 of the recent ITU Publication A review of Micro, Small and Medium-sized Enterprises in the ICT Sector. Download the publication free of charge here.
Doug ( @DougiCourt) is an analyst at the International Telecommunication Union, and supports the organization’s work on tech startups and MSMEs.