Following one of my columns in PC Dealer last month, a reseller emailed me with a question about my maths. Surely, I'd got it wrong? I had. So let's get a couple of other points straight, too.
The DTI's definition of an SME is a company with fewer than 250 employees.
SMEs apparently account for 40 per cent of the UK's #30 billion spending on IT - #12 billion. It's estimated that there are 5.5 million businesses and that 3.7 million are SME's by the DTI's definition.
But are there really 1.8 million businesses in the UK with more than 250 staff? It is doubtful and other figures call it into question - but let's not worry about that too much just yet.
Most dealers are already focused on the SME market, but not all of it.
There is a big difference between 10 and 250 employees and most resellers will aim for the top end of this market where tens, scores or even 100 or more PCs will be used.
Very few resellers focus on the businesses with 10 or fewer staff - they don't have the money and are too difficult to manage. These users are left to the ravages of retail, mail order and direct sales.
The point is that such a wide definition of SMEs is just not right - it can't be. Nor is the SME opportunity as big as everyone says because dealers can't target all of the SME market.
There is a huge difference between the S and the M, and the very smallest part of the S is what one dealer called 'the hole in the head business you don't want'.
He added: 'The 100-plus market is where resellers begin to make money. Manufacturers mislead us with silly definitions. We need a sensible definition in relation to market opportunity.'
So what is a sensible definition and estimate of the SME market size? There are at least two SME sectors - one of companies where the number of employees range from 100 up to about 250 staff - that's almost a mini-corporate market. The other SME sector includes companies that have between 10 and 100 staff - the small business market.
It is hard to estimate how many companies there are in this small business sector - and remember most firms are very small - but let's be generous and say that it is probably in the region of one million. We must assume that most of the #12 billion IT SME spend will come from the 100-plus firms, but let's be generous again and say the 10 to 100 market has 50 per cent. That leaves one million firms spending #6 billion - about #6,000 each on average per annum. Let's say there are 5,000 dealers addressing this market - that leaves about 200 potential customers and #1.2 million of revenue each.
That makes for a lot of demanding customers to service for not a whole lot of money. It is easy to see why many resellers continue to focus on the M in SME. To win in the S space you need focus and a service that really appeals to small business. Nobody said it was going to be easy, but no one has been saying just how difficult it is.
Simon Meredith is a freelance IT journalist.
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