Helping SMBs grow

Affordable and easy-to-use technology could help small and medium-sized businesses (SMBs) to take advantage of the region’s rapid economic growth

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By  Peter Branton Published  March 26, 2006

|~|SMBleadbody.jpg|~|SMBs have flourished in the region as a result of the economic diversification strategy underway in the GCC.|~|The economic diversification currently underway in the GCC has led to a mushrooming in the number of new businesses including the service, trading and construction industries. And the majority of these are in the small and medium-sized business (SMB) sector. According to Madar Research Group, about 70 to 80% of the companies in the region can be classified as SMBs. It is a view shared by Pavan Gupta, general manager, eSys Technologies. “They form the backbone of the regional economy,” he says. High liquidity coupled with high net incomes has led to the current spurt of SMBs in the Middle East. This segment represents more than 35% of the IT spending in the region. For many SMBS, these are early days. “These companies tend to focus all their energy on selling themselves [getting business]. IT systems are not their focus. That is understandable,” says Kevin Isaac, regional director, Symantec, Middle East and North Africa. “But the way you drive business correlates strongly with the success you achieve,” he adds. SMB owners , particularly those who prefer to lead their companies from the front, have little time to address ancillary issues such as administration. “But these issues are equally important. For instance, you are selling, but you haven’t got a system of tracking receivables or invoicing properly, you can run into serious cash flows problems,” says Isaac. “Or if you lose your financial data and can’t figure out who owes you how much money — that could be disastrous,” he adds. The conclusion then, is simple: In today’s environment, scaling up a business without putting proper IT infrastructure in place is virtually impossible. “However, many, if not most, of these SMB companies have little or no dedicated IT resource. They depend on resellers for expertise and recommendation,” says Hanan Kamal, marketing manager, Personal Systems Group and SMB, HP Middle East. Research firm IDC says that two-thirds of SMBs in the region lack a dedicated IT manager. At times, the admin person 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. 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. A look at IDC figures point to five main IT spending segments in the region: telecommunications, oil & gas, government, financial services and education. The first two have very few SMBs — the exception being internet service providers (ISPs). In the other three, there are a number of entities which qualify as SMBs, whether it is a small national bank with a couple of branches across the region, a boutique university, or a ministry outpost in a small country. “I would also argue that the Middle East has a lot more S [small] than M [medium] in the SMB mix, as we are developing economies where new businesses are constantly appearing and have GDP growth rates which are a rarity globally,” says Graham Porter, marketing director, MENA, Sun Microsystems. He argues that the region is pretty much an SMB market in terms of the volume of customers. ||**||Skills shortage|~|hananbody.jpg|~|Hanan Kamal marketing manager, Personal Systems Group and SMB of HP Middle East.|~|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. “They [most SMBs] are started by people who know their trade but IT is new to them. They know IT can help, but there is a perception that it is all very complex,” says Qais Ghai- rabeh, channel sales manager, EMC Middle East. There is a consensus amongst vendors that SMBs have yet to see the strategic value of technology. “Most SMB owners or CEOs still view IT as the necessary evil,” says Porter. Hafeez Khwaja, senior regional director, Western Digital Middle East, agrees: “They see IT as an expe- nse rather than an investment.” This reluctance to invest has led many SMBs to rely on a reseller to handle their IT function, instead of an administrative person who is responsible for the IT equipment. “With a reseller you are basically just covering the administrative level — with practically no advice on a strategic level as to what IT can do for the business. Too many of the resellers offering IT solutions at the moment in the region to SMBs are merely focusing on selling products at low margins, rather than providing services and strategy,” says Porter. But that could be the only path in the interim. “Our research in the region shows that often even the skills to hire IT staff are missing. And there is a general distrust of hiring firms,” says Justin Doo, managing director, Trend Micro Middle East and Africa. Besides, “there is a rich supply of resellers. They know the market. They know how to configure solutions that are inexpensive and effective. They provide services that these companies which often don’t have IT departments need,” he adds. Complete dependence on resellers does lead to certain limitations. Often, the infrastructure is not configured correctly, or is not integrated properly, which leads to the company experiencing lower performance standa- rds than promised. What most companies initially require is e-mail, as well as file and print capability, and perhaps a simple accounting database. As SMBs grow, they move further along the e-enabled road. The dependence on IT increases and with it the perceived value of IT solutions rises. Governments in the region too are trying to set the tone by launching several high profile e-governance initiatives. This is trickling down to the SMB level but has not become apparent yet. “Their initiatives are driven from a ‘must need’ perspective, rather than a strategic initiative though as the youth population across the region matures we expect a more pronounced shift towards a much more IT-enabled SMB market,” says Porter. Kamal points to a change in mood amongst SMBs: “We did some research at Gitex. Around 50-60 per cent strongly agreed that IT helps their business. They were very much aware of security issues,” she says. IDC feels the time is just ripe to put IT firmly on the agenda of SMBs. In tandem with IT vendors, IDC has launched ‘roadshows’ across eight countries in the region, exhorting companies to embrace technology. Just as SMBs in the region are new to technology, vendors, too, have only recently begun to train their sights on the segment. “Big vendors have discovered the SMB segment only in the past 18 months or so,” says Ghairabeh. Till then, vendors’ focus was largely on the enterprise and government. But in the near future, “SMBs will constitute the biggest opportunity in volume terms,” he adds. For firms such as Fujitsu-Siem- ens Computers (FSC), SMBs al- ready make up the biggest market. “They contribute about 65% of our business,” says Farid Sabbagh, distribution manager, FSC Middle East. Therefore, while SMBs offer a great opportunity to IT vendors, they demand solutions that are simple and inexpensive. On top of that, strong local presence is an absolute must since these companies do need a fair bit of handholding. ||**||Get connected|~|DIAbody.jpg|~|Dubai International Academy, which teaches pupils aged three to 18, has partnerships with HP and Microsoft.|~|“The important thing is to present your solution as being simple to install and run. You have to keep in mind that the IT person will buy what’s easy for him to manage,” says Sabbagh. Simpler solutions are one aspect of growing the SMB market. Education is another. And IT vendors are putting a great deal of effort into it. Symantec has come up with a security manual that is available in both English and Arabic. HP too emphasises this aspect. “We have a website which helps users learn and choose the right kind of solutions,” says Kamal. Meanwhile, technology too has evolved to make life easy for SMBs. The initial avatars of technologies that enabled virtualisation or helped store and secure data such as networked attached storage (NAS) were far too expensive and difficult to deploy in an SMB environment. The current versions of these come at a fraction of the cost and don’t require deep IT expertise within the organisation to use them. Ditto for security where vendors have moved from providing anti-virus software to adding security services. This creates new opportunities for SMBs to deploy highly secure and scalable infrastructure without exorbitant spends or very deep in-house IT capabilities. And the deployment usually begins with a humble server. SMBs usually start with quick and cheap networking solutions. These cheap hubs and switches are widely available and are admittedly tempting. However, putting together a network with these devices bought from different vendors can lead to problems in the future. The moment you move to a higher level solution — let’s say you want to deploy VoIP (voice over IP) — the chances are that you will have to dump much of what you had bought. Bare-bone components can also affect the network’s performance. Take the case of a hub which costs virtually nothing and is therefore preferred to a switch on occasions. Both serve as a common connection point for the network and handle a data type known as frames. While cheap, they tend to choke the network as they ‘broadcast’ frames through each of the ports and switches do the job more intelligently. More advanced networks require routers. Routers move pa- ckets, which unlike frames, have the destination address embedded within the data they carry. Routers read those addresses and pass on packets to the right address. Also routers usually provide an interface between at least two networks — it could be between wireless area network (WAN) and local area network (LAN) or LAN and ISP network. They also come with technology that provides some basic level of security. All this need not be daunting to deploy. “Most of these require just one time setting up and no maintenance,” says Samer Al Kharrat, general manager, Cisco Gulf Region and Pakistan. And companies can start with an investment of just US$1,000. In case you have a large mobile workforce that uses notebooks, a wireless network might be worth considering and will make their lives easier. Another factor that can swing the decision in favour of wireless is if you are a small but fast-growing company that is likely to cha- nge premises; there is no point in sinking money into a wired local area network (LAN). While a small office/home office (SOHO) class device such as Apple’s Airport Express wireless router can start an SMB on the wireless path, there are more robust solutions that companies such as Cisco offer. The good thing about these solutions, which the company refers to as SMB Class Solutions, is that they integrate wireless with other useful features such as virtual private network (VPN), telephony, voice mail, routing, switching and security. However, as the number of users scales up and VoIP solutions are deployed, a wired network will be needed as well. “They are both likely to exist side by side,” says Kharrat. Although there are ‘best-of-breed’ or ‘ cheap’ solutions available for different parts of the network, they are not very useful for SMBs. The advantage of sticking to one vendor is that you won’t have to dump any equipment. “You can upgrade as your needs grow. So you can start wi- th an IFR router, then add a 48-port Express series switch. When you need to add VoIP, you buy VoIP phones and turn on the call management function in the IFR router,” says Kharrat. Integration of technologies such as VoIP in the network has many advantages. For instance, users can make calls via their notebooks which have software phones installed on them. The VPN functionality embedded in the router helps mobile workers access the company’s network in a secure manner even when they are traveling. To help SMBs deploy the solution, Cisco includes online training as well as a designer tool that educates users on networking and helps them design customised networks. “We have intensive training programmes for our partners that are organised around specific areas such as VoIP solutions,” says Al Kharrat. By making it possible to integrate VoIP with the wireless network, newer generation technologies allow a firm to build a scalable wireless network with VoIP. In fact, considering most SMBs are in an early phase of deploying IT infrastructure, they should seriously consider deploying IP telephony. The perception about VoIP is that it saves money on long distance calls. But there is much more to VoIP. One of the biggest advantages comes from the integration of voice and data networks. This means a company has to manage only one network that handles both voice and data. But what if the company has no internal staff dedicated to IT as is often the case? Can it still opt for VoIP? Kharrat says there are many such organisations in the region using VoIP already. “I would say if you are building a network from scratch, then VoIP is the way to go,” he advises. ||**||

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