Don't forget the little people

In the UK, companies with less than 1,000 employees spent #12 billion on IT last year. The market is growing annually at 14 per cent and spending will reach #22 billion by 2002. Little wonder that everyone is jumping up and down, raving about the SME market.

But there is a problem. Under 1,000 employees might be the definition the DTI and some vendors apply to SME, but it's misleading. According to the Federation of Small Business, approximately 97 per cent of all businesses employ less than 20 people and have annual sales of less than #1 million, and 91 per cent employ less than 10 people. More than two thirds of them consist of only one or two people.

So the opportunity is not as straightforward as it first seems. Most of the potential customers out there are very small and have to work to tight budgets. Instead, resellers end up chasing the larger businesses - the three per cent with between 100 and 1,000 staff and some kind of IT budget.

If SME schemes are going to work for the majority of resellers, they will need to address the needs that exist in the SME community - and cost effectively, too. That's not going to be easy, as most of these businesses will have very limited funds, yet will demand excellent service levels.

But the opportunity is there. PC penetration is still relatively low and most buyers are not IT literate. They need the help smaller resellers can give them. They just don't want to pay for it. Being able to deliver the service cost effectively is the key.

Dealers can't afford to set up a service that provides endless support for a large number of small businesses. Such companies have to be talked round by the dealer into paying for the time, the advice and the service that the reseller provides.

Some dealers believe that you can do this if you manage the expectations right at the start. That's encouraging, but there are still a couple of problems - the poor reputation of computer dealers and the price-driven attitude of the small business in the UK. They expect a low price and believe that, if they don't fight for it, they will get ripped off. Meanwhile, PCs are advertised at lower and lower prices, setting impossible demands of value.

Little wonder then that dealers, when given the chance to sell to a large SME - i.e. one with more than 100 employees - will take it and leave the small fry to the small fry. From that point on, they never look back.

There is no short-term answer to this problem.

But it would be nice to see better education initiatives and incentives for small businesses to adopt IT, and more creative schemes from the vendor and distributor community to help dealers address the market and small businesses to trust them.

Unless they receive assistance, this small business IT underclass will never get the service they badly need. Resellers will always go for the bigger deal and once the 80-20 rule kicks in, the smaller businesses will just be the smaller businesses again.

Simon Meredith is a freelance IT journalist.