Helping SMBs to think big

Small and medium-sized businesses (SMBs) have driven forward economic growth in the region. Unsurprisingly, vendors are keen to break into the sector.

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By  Administrator Published  December 3, 2006

If Napoleon once dismissed the British as a nation of shop-keepers then the Middle East may be proudly defined as a region of small-to-medium-sized businesses (SMBs): the economic growth and diversification we’ve seen here in the past few years has led to a positive mushrooming of SMB firms, in such diverse sectors as services, trading and construction industries.

According to Madar Research Group, as many as 70 to 80% of the companies in the region can be classified as SMBs, with high liquidity coupled with high net incomes driving this growth.

Unsurprisingly, this fast growing sector is having a strong influence on regional IT spending, with an estimate earlier this year suggesting that it could account for more than a third of the region’s IT budget.
Equally unsurprisingly, a lot of firms are now looking at the SMB sector to help grow their business here in the region.

This mirrors a global trend which has been seen increasingly in the past few years — as large corporate customers find they’re running out of things they need to spend their IT budgets on, their suppliers have been casting around for new markets to serve.

With IT firms keen to maximise the potential of the region, then targeting such a fast-growing sector is plain good business sense.

At last month’s Gitex trade show in Dubai, a number of vendors were showcasing products and solutions dedicated to the SMB sector and plenty of others were keen to explain just how their products and solutions would work in that space.

“This sector is very important because the Middle East is built largely upon SMBs — there’s a lot of SMB business in the region,” says Kevin Isaac, regional director, Symantec Middle East and North Africa (MENA).

“The fabric of the Middle East is SMBs,” he states.

However, while the prospects for the SMB market look good here in the Middle East, IT managers working in that sector may be entitled to feel a little confused: while the sector may be valued by IT vendors, that is not quite the same as saying that IT is valued by SMBs.

According to IDC statistics released earlier this year, as many as two-thirds of SMB-sized organisations do not even have a dedicated IT team, with the analyst firm warning that many companies in this sector just do not see IT as mission-critical.

“IT is not the same value to SMBs as it is to the corporate sector,” said Paul van Heerden, research manager at IDC, at a conference earlier this year. “The IT budget is typically less than 1% of annual turnover. This implies that it’s not a big budget item and not very important.”

Survey data from IDC discussed at the conference revealed that the main concerns of CIOs in the Middle East are contributing to the bottom line, consolidation, and managing cost.

Two-thirds of SMB’s IT spend in the region was on hardware, with IT services accounting for just under 20% and software just over 13.2%; suggesting that IT spend is still somewhat unsophisticated for this sector.

In such companies it may well be that the admin person or office manager is given the additional responsibility for the upkeep of PCs and servers. Or, there is someone who is responsible for both IT and the website.

“The problem is that SMBs rely more on solutions than they realise because they don’t have IT managers and systems infrastructure,” says Isaac.

“If their system goes down they lose their data and they have no-one to rely on,” he adds.

These kinds of companies are typically commodity buyers — picking up PCs, a server, and some networking technology from a reseller, and outsourcing the implementation and set up.

“The SMBs are small offices, 30-40 users, they do not have an IT guy to help them within the organisation,” says Sanjay Kachroo, regional corporate sales manager, Acer.

“For the SMB market it is important to understand that SMBs will not have dedicated resources available to maintain their infrastructure, they will be dependent on others to maintain and support the infrastructure for the offices,” he states.

Overall, most SMBs come from one of the following categories: business services, travel and tourism, education, healthcare, legal services, public administration, construction, transportation, utilities and logistics, trade (including wholesale), manufacturing and media. However, this list is not exhaustive.

“You’ve got small businesses in just about every sector here,” says Justin Doo, managing director for Trend Micro Middle East and North Africa (MENA).

“There are small businesses serving every industry vertical that you can think of, be it supplying a major oil company with a part or a service, or a component, or supplying the banking industry with services.”

Investing in IT

However, most SMBs firms seem to be characterised — in IT terms at least — by a general reluctance to invest large sums and a desire to make their IT infrastructure as simple as possible.

“[SMBs] want to make it simple, their interest is not in security and IT, they just want to know that the solutions work,” says Anthony O’Mara, vice president, Sales & Operations, Trend Micro EMEA.

“These companies are relatively small and at the lower end they are owner driven. They want to worry about driving their business. They are not as interested in the latest gizmo they just want to understand their business. We’ve positioned and developed our products in such a way for the lower end of the market, the SMB market, that we think we can provide that solution to them.”

Mobile device maker i-Mate provides zero-touch configuration products, making it very easy for SMB and consumer customers to set up and use its devices, according to Robin Bowler, its global marketing director.

“The fact that our Windows Mobile platform is very similar to what they’re used to on their desktops makes it easier for the user,” he says, adding that i-Mate underpins this with its own range of applications.
These give the user extra functionality, such as being able to control the device remotely and to make backups.

While providing simpler solutions makes life easier for the SMB firm, many such organisations rely increasingly on resellers to handle their IT function, instead of an administrative person who is responsible for the IT equipment. “In general small companies are more comfortable dealing with small companies,” says Ayman Abouseif, managing director at Oracle Gulf.

He does not see it so much as a price issue for SMBs, but rather a trust factor: “I think that small companies would probably sacrifice price for trust, this market is based on trust,” he points out.

Oracle takes a slightly different approach than other firms in defining just what makes an SMB customer, Abouseif explains.

While there are a number of different definitions about what constitutes an SMB customer “these definitions don’t always match and can’t always apply to every country,” Abouseif claims.

“Generally speaking in the world of enterprise applications in this region we tend to look at companies with 25-50 information workers as SMBs,” he says.

By information workers, he does not necessarily mean all employees, however. “On the technology side we have products that are priced and packaged for companies as small as just five users,” he explains.

“That could be a company with five employees, 50 employees, or 500 employees,” he reveals.

One of the key problems selling into companies of that size is reaching them in the first place, Abouseif claims.

“Almost by definition, such small companies are going to be ones that you or I have not ever heard of, or are unlikely to know,” he says.

That, coupled with firms’ desire to work with similar-sized firms to themselves, means that a strong partner network is essential for a big player like Oracle to operate in the SMB space. “A reliance on the channel is essential, there is no other way [of reaching SMBs]. You have to be broadly marketing the solution, picking the right company and getting the right message,” Abouseif states simply.

Other vendors agree. Ahmed Khalil, general manager for Toshiba Computer Systems Middle East and Africa (MEA), suggests that getting your sales channel right can be ranked in the same order of importance as getting the right product mix to offer to SMBs.

For Toshiba, the SMB segment is its second fastest growing market, behind the consumer sector, and it is targeting 30-40% of sales coming from SMB customers. Therefore, it is keen to do what it can to develop the market here.

“Widening the channel breadth is the first step,” Tosiba’s Khalil says, adding that the vendor’s role is to help to generate demand for its partners by educating the market. “The vendor responsibility is to develop the market and generate customer demand,” he states. However, such a dependence on resellers does lead to certain limitations for SMB customers.

While such firms can do a very good job — and usually do — all too often the SMB will find that the infrastructure may not be configured correctly, or is not integrated in the way that it wanted. This can lead to the company experiencing lower performance standards than it expected —which could mean that it will see its costs rise higher than expected.

What SMBs want

Khalil points out that Toshiba has invested a fair amount in finding out just what exactly SMB customers actually want, rather than just attempting to sell them a range of products. The firm recently conducted an EMEA level survey of customers, attempting to find out just what makes them tick.

Perhaps unsurprisingly for a firm that makes notebook computers, mobility was a key finding of Toshiba’s research, with the ability to access data both over wired and wireless networks seen as very important. However, the survey did show a number of interesting areas of focus for SMBs.

“One of the key areas of importance is data security,” Khalil says, explaining that this covers far more than conventional IT security but also such factors as availability and physical security — “the customer wants to know ‘If I drop my machine, what will happen?’” he says.

While expensive security systems may seem beyond the means of an SMB firm, Trend Micro’s O’Mara is keen to point out that this could prove to be a false economy.

“They haven’t got the IT infrastructure to be able to do a recovery as quickly as the larger companies,” he says. “So they need to make sure that nothing could come in which would damage their company. They are dependent on the reseller as well for their support and they don’t want to be paying to bring people in to do a recovery for them.”

“This biggest challenge for most of the smaller businesses and small and mid size business is they don’t know that they need a security solution,” says Trend Micro’s Doo. “Half the challenge is getting the message to the company owner of a five PC network that he needs to secure it. And if he did need to secure it it’s not their core business – it’s a necessary evil. It’s something they have to do to compete with their nearest competitor.”

“If they didn’t have the network, they’d have maybe ten people doing the processes manually which would make them non cost effective,” Doo continues. “This is about business agility for them but they don’t live and sleep IT and security as an IT manager would. So they need something which is easy to deploy, doesn’t need any management and it almost manages itself and tells the owner what happened when a virus outbreak took place.”

Khalil agrees that SMB customers don’t see IT as their biggest priority. They don’t tend to talk about, Khalil says, “how fast the processor is or how big is the hard drive”.

Again, Khalil refutes the notion that this lack of interest in the finer points of solutions is all about cost: “One of the most important things about SMB is that it is not purely driven by price,” he states. “Companies are relying more and more on IT to develop their business so they can’t [just go for cheapest option].”

While SMB firms may not be as completely driven by price as some vendors would have you believe, there is no doubt that their needs will be very different from their larger corporate cousins. “A company with just five employees isn’t likely to have an enterprise resource planning (ERP) package any time soon,” says Abouseif.

“But even if someone is running a one-man show then they need e-mail in today’s world.”

Indeed, e-mail and some form of internet access would appear to be crucial for most organisations, along with some form of file and print capability.

“You clearly have a demand in small business to be present on the internet, to have a website,” says Peter Blampied, director, USRobotics (USR) vice president of international sales and operations, EMEA.

“Even if that website is just showing information allowing people to connect to you, your address, phone number, contact details and so on then everybody wants a website.”

“Everybody needs e-mail so e-mail is another killer application then you start getting into the more advanced [cases] looking at providing additional services,” he continues.

He cites the example of a USR partner on Dubai’s Computer Street, which provides a hot spot environment in its showroom that acts as a test area where customers can test different products over wireless networks.

After that, firms would need to look at accounting packages and tools to help them manage the money side of the business. For a small firm, the importance of cash flow cannot be stressed enough, Abouseif points out. “If you’re a small firm, you would be extremely concerned about your cash flow so you may need a good set of tools to help you with that,” he says.

“The other issue which everybody has, which is a connectivity issue, is processing credit card payments,” says Blampied.

“For us, the analog modem is still a significant product because an analog modem sits behind an awful lot of applications like cash machines, points of sale, credit card payments. USR is still selling a lot of analog modems like that.”

Other vendors highlight the need to provide as much support as possible for their SMB customers. Without large dedicated IT departments to turn to, these firms often benefit from that extra help.

“In the SMB space it is also important to look at the support infrastructure behind the products,” says Acer’s Kachroo.

“SMBs don’t have their own support infrastructure so Acer is fully-equipped in the region to support the SMBs also. We have the independent service providers as far as our desktop and server business is concerned. We have independent service providers that provide onsite support. We also have our authorised service providers that make sales as well as support on site.”

“Where we as HP can help the SMB is by looking at their infrastructure and giving them advice based on their user requirements what kind of devices to use,” says Thomas Valjak, category manager, Imaging and Printing Group, HP Middle East.

“So basically balancing out functionality that comes at a certain price point versus benefits to the various departments inside the end user’s environment.

“We also look at the inherent soft costs or productivity elements that might be reducing the number of calls to a customer care hotline for printer related issues related to over utilisation or under utilisation of products that might also help them on the IT administration side to make it easier to manage a printing and imaging fleet.”

As IT becomes increasingly important to the SMB customer — and in turn that customer base becomes increasingly important to the IT vendor — there is no doubt that we will see more solutions targeted at this space.

For the SMB customer, the future certainly looks bright.

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