Made to measure

The vast majority of the Middle East’s organisations fall under the small-to-medium sized business (SMB) category. When combined, they create a technology market that totals US$2.1 billion. As such, a growing number of tier one vendors are targeting smaller organisations, and tailoring their solutions to convince end users that they truly understand their needs.

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By  Alicia Buller Published  November 7, 2004

|~|Ned---high-res.jpg|~|Ned Jaroudi, regional marketing director for CA, Arab countries.|~|
The Middle East’s small-to-medium sized business (SMB) sector will be worth US$2.1 billion by 2005 and account for a whopping 37% of the region’s total US$5.8 billion IT market, according to IDC.

Such figures mean the technology industry’s tier one vendors are targeting the small business community with a vengeance. To ensure they get a slice of the SMB pie, many are restructuring their marketing strategies and developing new product lines.

Computer Associates (CA), for example, has unveiled plans to target the SMB sector, one of three strategic moves aimed at expanding its business in Europe, Middle East & Africa (EMEA). To support its push into this market, CA is investing US$24 million in infrastructure and marketing activities.

It will offer a portfolio of products packaged to meet the specific needs of SMBs, which will be sold through its 17,000-strong partner community in EMEA. CA says its move into the region’s SMB market is the cornerstone of the company’s growth strategy in EMEA, and the vendor claims to have already established a foothold with products such as BrightStor ARCserve Backup.

“CA products have always been restricted to the enterprise market. However, through acquisitions and also through a strategy of geographic expansion and partnerships, we have decided to move down to tap into the SMB market which is increasingly getting automated and choosing to adopt new technologies, ” says Ned Jaroudi, regional marketing director for CA, Arab countries.

“Now we’ve packaged the different bits and pieces that we have and made them into an accessible package for SMBs. SMBs want a full turnkey solution they can roll out and be comfortable with,” he adds.

By providing a ‘one-stop-shop’ for antivirus, backup, anti-spyware and desktop migration, CA plans to differentiate itself against single product suppliers and large IT systems vendors. CA says it proposition to SMBs is its depth and breadth of software solutions.

Oracle also believes the region’s SMB sector cannot be ignored, as it accounts for a significant portion of IT spend. “If somebody is not operating in the SMB market in the Middle East and Africa, it means they not operating at all. Most of the companies [here] are smaller in size,” says Husam Dajani, vice president of Oracle MENA.

“A lot of things are changing [here]. There is the deregulation of the telecommunications sector, real estate boom and [significant] growth in the financial services sector, in addition to governmental reform. So there is more private sector activity — either direct activity or that of companies that are providing services to the growing private sector,” he adds.

Most companies in the Middle East fall into the SMB category. Add up all their IT budgets and the vendors have found that they’re onto a good thing. “SMB customers are far more valuable to us in a macro-economic sense [than enterprises] because the sector is huge,” says Charles Ashman, infrastructure business manager at HP Middle East.

“In economic terms, SMBs now call the shots. It [SMB] is huge and growing much faster than the enterprise sector. The local economy has really begun to take off in-depth in the last eighteen months,” he adds.

In light of this, HP has injected US$750 million into its Smart Office initiative for small businesses. The investment appears to have paid off, since Smart Office sales worldwide have raked in US$21billion.

Meanwhile, vendors such as IBM have been restructuring their marketing strategies. For instance, last year IBM created a channel team to target SMBs, while HP Middle East is planning to recruit specialised SMB personnel in every Middle East country.

Cisco Systems is targeting SMBs with a pair of local area network (LAN) switches and a graphical management application. The Catalyst 4503 modular switch and the Catalyst 4948 rack-mounted server switch are designed to meet SMBs’ growing need for network resiliency, and to support technologies such as wireless LANs and IP telephony as customers embrace them, says John McCool, vice president and general manager of Cisco’s Gigabit Systems Business Unit.

The Cisco Network Assistant (CNA) software is intended to open up management of Cisco kit to employees who lack the training to use Cisco’s CLI (command-line interface.)

The networking giant has also acquired Linksys for US$500 million, America’s largest producer of consumer and SMB electronics, in its bid to enter the small business space. “[We can] provide small businesses with their first LAN and then, as these business grows, they can step up their product portfolio into Cisco. Linksys allows small businesses to get on the ladder,” says David Kelly, sales director for Linksys EMEA.

“SMBs want to do more than just access the internet, but they’re not usually technology savvy. We want to make sure that Linksys line of products are easy to use and simple to install,” he says.

Ease-of-use is a major differentiator when it comes to targeting the region’s SMB segment of the market. Most SMBs don’t have inhouse IT skills or a designated IT support; hence small business products must be simple to install. “Support is crucial,” says Arvind Bhatnagar, CEO of Sahm Technologies, which is part of the Dubai-based Emaar.

“That’s why we don’t use products from too many vendors. We only use those that are proven and that we have confidence in,” he explains.

Most SMBs are aware that technology can improve their business, but in many cases they are not savvy enough to know which IT product will best serve their purpose — a typical Middle East customer is more likely to be a general manager whose duties may include ordering office supplies and processing payroll, as well as buying PCs, for example.

So where vendors can provide value-add is in educating smaller businesses about the benefits of IT and helping them choose the solution that’s best for them.

However, tier one vendors are taking steps to provide support and resources to SMBs. For instance, HP has upped its support ante with its Smart Office initiatives. “Smart Office is for the SMB sector and focuses on providing access to expertise wherever and whenever small businesses need it — either directly or through the reseller,” says Hamid Hassan, segment manager for SMB, HP Middle East.

“We ran a survey last month which confirmed that one of the most critical and important needs of SMBs is local expertise and support to be able to use their technology for competitive advantage,” he adds.
||**|||~|Emaarweb.jpg|~|Arvind Bhatnagar, CEO of Sahm Technologies, part of Emaar.|~|The company has also rolled out Simply Storage Works, a hands-on programme that explains how storage solutions can add value to a company’s IT infrastructure. HP’s other initiatives for the SMB community include a specialised loyalty scheme for small businesses and a tailored financing programme, both of which will be launched soon.

These schemes aim to address another important priority: cost of ownership. Unlike large corporations, small businesses don’t have big IT budgets for their IT infrastructures, so tier one vendors have to sell their products at a competitive price. IBM, for instance, has repackaged a number of its offerings under the Express banner to make them attractive to SMBs.

The vendor is able to offer cost effective solutions by removing enterprise components that are not necessary for small businesses. In addition, by supplying its solutions through a network of resellers, IBM is able to save costs on support for the SMB sector — a saving that is passed onto the customer.

“Price is important to SMBs… we brought in people to look at the psychology of our SMB buyers, what they need and what their challenges are. Often the mindset is ‘how easy is the solution to implement and how much is it going to cost me?’ These factors were taken into account when tailoring our solutions,” says Dr Samer Shaar, general manager for IBM, Middle East, Egypt & Pakistan.

“We offer Intel-based server solutions, these allow SMBs to scale up when they need to without too much hassle and the initial investment is affordable. We have also repackaged the solution to make it easy… they get to use top technology at a lower price, because of its reduced entry points,” he adds.

Another example of how tier one vendors are working to target the SMB segment of the market is the recent partnership between Oracle and Sun. The duo have teamed up to target the region’s small businesses with an Oracle e-Business Suite Special Edition that runs on a Sun/Linux hardware platform. However, whether these vendors are communicating their new SMB strategies to their target audience effectively remains to be seen.

“We are approached by a lot of vendors but some of their [propositions] don’t make sense to us,” says Sahm’s Bhatnagar.

“All their offerings are tailored towards enterprises and they haven’t really tried to understand our needs. We don’t buy technology just for the sake of it — it has to have a business benefit. A lot of vendors say things like ‘this works great in the States’ but this isn’t relevant to us at this point in time. Anyone that wants our business will have to give us a good price and understand our business,” he explains.

The fact that Bhatnagar mentions that large-scale offerings are not relevant ‘at this point in time’ is revealing. It indicates that small businesses in the Middle East have the potential to become big ones. Tier one vendors are aware of this fact and are willing to provide these organisations with a helping hand.

“We want to ensure we get the knowledge we require to position our SMB products in the Middle East. Our 3000 strong research and development team is now focusing the researching the needs of the SMB market,” says Dr Sharr.

In addition, vendors are promoting IT standards and education in the region. HP has recently opened doors to its two advice centres that provide information and training on ‘mobility’ and ‘imaging and printing’. Cisco is also keen to help SMBs strengthen their IT awareness.

“Of course, IT training is a commercial operation here but the problem is that there is no consistent framework. We try and promote the ITMS standard. But it will be a long time before we see real maturity and depth in the IT department,” says Kelly.

In light of this, vendors are providing consulting services to SMBs in addition to their solutions. “Our business consulting arm used to focus on value propositions for enterprises, but we are now approaching SMBs in the telcos and manufacturing sectors. The take up has been phenomenal,” says Dr Sharr.

Bhatnager says vendors that are willing to go the extra mile will be successful in the long run. However, he does question the ability of these vendors to provide such services. “Service is important to us, in addition to good support mechanisms. How responsive are the suppliers? And how are they able to truly meet our needs?” he asks.

Traditionally, tier one vendors focused on the enterprise segment of the market. Does the shift in the market mean SMBs will take centre stage and that needs of enterprises may be neglected? Not necessarily. The needs of SMBs and enterprises are different and tier one vendors address them accordingly.

“Enterprises require a direct relationship to maintain the trust. We will always need to continuously introduce new products to make sure they get the best value out of their existing products and try to be their trusted advisor. It takes a lot of time to build enterprise relationships in the first place and we don’t want to lose them,” says Ashman.

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