Napoleon famously dismissed Britain as a nation of shopkeepers. Today it might be more accurate to describe us as a nation of SMEs.
According to the Department of Trade and Industry (DTI), something like 99 per cent of UK business have fewer than 50 employees, and these provide about 45 per cent of non-government employment and 38 per cent of national turnover.
But what exactly do we mean by a small to medium sized enterprise? Napoleon, the great advocate of standardisation, would not have stood for the confusing number of definitions bandied around.
Different organisations dream up their own small-business jargon. Some vendors, such as Cisco and Hewlett Packard (HP), use SMB, or small to medium-sized business.
But the government and the European Union have some very precise definitions of an SME. A micro-business has anything up to nine employees, a small business has between 10 and 49 and a medium-sized firm employs 50 to 249.
But some vendors have differing views; 3Com, for example, thinks that a business of up to 499 employees is still a medium-sized enterprise.
The problem is that these definitions are not really adequate when it comes to IT.
There is a huge difference between, for example, a company that handles video or cinema post-production and operates in a couple of studios using big SGI boxes and an ATM link - which will have a huge annual spend on IT, will employ some very technically aware people, and will certainly have a dedicated IT person - and a small factory that might employ 150 people but has only a dozen computers for invoicing and possibly a local area network.
The factory might have six times the number of employees, but the IT budget of the creative studio would be much higher.
So size does not always matter. What really counts is how technology is used and, even more importantly, how technology is viewed by the company.
Mark Lewis, 3Com's UK and Ireland marketing manager, believes it to be a question of attitude.
"We did a survey a few years ago and found that there was a different attitude in Europe," he said. "In the UK, SMEs thought that IT was a cost and was generally associated with finance, whereas in Germany IT was seen as a critical part of business and viewed as an opportunity."
That view is endorsed by Mark Bonnamy, technical director at London-based reseller Lanz, who believes that in most UK small businesses the person in charge of IT is the financial chief.
But this is one of the key points about selling to SMEs. The reseller is trying to sell to someone who has no idea about technology or someone who thinks he knows it all.
As Bonnamy pointed out, the worse type of IT manager is the one who thinks he knows more than the reseller. "It's true what they say: a little knowledge is a dangerous thing," he warned.
So how does a business know what system to buy? How does a manager whose only knowledge of IT might be a PC at home make a decision that could cost a small business several thousands of pounds and prove to be an expensive mistake if the wrong decision is made?
The government is supporting an initiative to encourage resellers to win Technology Means Business (TMB) accreditation. But laudable as such a scheme might be, it has its limitations, according to David Marsh, an IT and e-commerce adviser for the government-backed UK Online scheme.
"It is adviser-based rather than knowledge-based," he said, adding that the scheme concentrates too much on the quality of advice given rather than on the level of knowledge that the reseller has.
However, David Smith, HP's UK and Ireland SME business manager, thinks that the TMB is an excellent initiative.
"I would like to see something like the Corgi [Council Of Registered Gas Installers] process. Businesses should be able to flick through the Yellow Pages and find a dealer that is TMB-approved. But we have a long way to go before we reach that stage," he said.
Smith admitted that the TMB isn't perfect, but considers it the best scheme available.
"We have put 10 of our partners through it so I know how tough it is to get accredited," he explained. "I would like to see a few more vendors and resellers get behind the scheme. I know that some retail organisations are looking at it."
So how do SMEs decide which system to buy? Do they make their decisions on price, on reliability or on functionality? Are brands important to them? Unfortunately, there are no easy answers to these questions. It depends entirely on the business and the vendor.
For example, Cisco is putting a lot of marketing effort into building up brand awareness among small businesses. The company has not made much effort in this market in the past and is now trying to catch up. It recently implemented a new scheme for its resellers called SMB Connect.
"There is a huge untapped potential out there," said Richard Bradley, SME operations director at Cisco UK. "We have signed up 100 resellers that are interested in getting into this market, and will support them with marketing and channel sales leads."
Lanz is one of the resellers that has signed up for the programme. Bonnamy is pleased that Cisco is taking the SME market seriously, although he disagrees that brands are important.
"There are all sorts of reasons why a company might choose a product. I have seen one company buy a product because it suited the office decor. Someone else might buy a product because it had more flashing lights than another," he said.
But Bonnamy does think that SMB Connect might be a profitable way to sell into the market. "With a lot of these schemes, there is a lot of noise and they just fade away after a while," he explained.
Nigel Judd, director of marketing at distributor Computer 2000, stressed the importance of supporting resellers trying to move into the SME market.
"We provide workshops for resellers on areas such as e-marketing, direct mail and principles of marketing," he said. "They need help to sell in this sector."
Nearly all vendors agree that this space is an important one to penetrate. The corporate enterprise market has flattened out and the small business market is one area that looks ready to grow. The sector as a whole has not invested heavily in IT and the vendors are licking their lips at the thought of rich pickings.
Bradley suggested that small businesses are going to kick-start the recovery. "In these straitened economic times, it is the SMEs that will lead the way forward," he stated.
Peter Scargill, national IT chairman at the Federation of Small Businesses, thinks that the idea of small businesses being unwilling to invest in IT has been overstated.
"We did a survey a few months ago and found that 70 to 80 per cent of SMEs are online, and about half of those had their own website," he pointed out. "Admittedly, too many of those said they had a website because other companies had one, which is not the best reason for putting a site up."
While vendors and resellers bemoan the fact that SMEs are under-investing in IT, Scargill sees no evidence for this.
"I see too many cases where business people have gone into PC World and bought a machine that is too powerful for their needs," he explained.
"They have listened to the salesman and bought a machine they don't really need. You get companies being told that they need 500MB of Ram and a 10GB hard disk just to surf the web. It makes you wonder how we managed on 386 machines a few years ago."
Of course, not everyone is over-specifying. "A lot of SMEs are surviving on Windows 95," said Scargill. "Why should they change?"
Retail outlets have been slowly encroaching on the business space over the past year or so, and many smaller businesses are turning to them.
PC World recently launched an initiative called Virtual IT Manager, which small businesses can sign up to via the firm's business website.
This provides a sort of automated help desk for companies without technical support of their own. SMEs pay a set-up fee and a yearly subscription depending on how many servers and PCs they have.
Despite such initiatives, small businesses will not go to PC World or similar outlets when they are choosing a system based on business issues; for most people it remains a place to go for products rather than a complete solution.
Judd pointed out that many resellers pick up a lot of business from SMEs that have bought products from retailers and have made the wrong choice. However, Lewis believes that they bring an important element to the marketplace.
"We sell through retail outlets and through resellers, so we don't really mind. They cater for companies that just want products, but they wouldn't be able to implement a solution," he said.
Lewis is aware many resellers are unhappy about the incursion of retail outlets into the market.
"Resellers always complain that they are eating into their margins, but that shouldn't be what resellers sell on. They should be concentrating on adding value to the customer, not just shifting boxes," he explained.
Value-added resellers seem to have forgotten the value-added part of their job description, he added.
Bonnamy agreed that there should be more focus on service by resellers. "I know of some companies that are surviving on consultancy rather than selling," he said, adding that resellers have been transformed into service providers. "We want a relationship, and to build on that relationship."
Perhaps it is not true that all small companies are different. Costs, for example, tend to be much more important to SMEs. "You might say that a computer with software costs only £1,000 or so, but that is quite a lot of money for most small businesses," said Scargill.
And nearly all small companies have slight delusions of grandeur. "They want to be like a big company, but to keep their costs down," explained Bonnamy.
Smith claimed that some forthcoming initiatives from Microsoft and SAP will enable SMEs to improve productivity. He suggested that small businesses would like to give the impression that they are bigger than they actually are by using technology.
However, Scargill is wary of software companies selling more capability than their customers require. He sees many companies buying packages when they don't actually need them, and thinks that the ASP business model still has plenty of life in it.
"I can certainly see a time when small businesses wouldn't have to buy software, but would rent it or download it from a server," he said.
Scargill maintained that broadband is the key to ASP taking off. "Everywhere I go, I hear people talking about broadband, even if they haven't got a clue what it is or what it can do for them," he said.
Like many people Scargill is dissatisfied about the state of broadband infrastructure, where many businesses still cannot get connected. It is a view echoed by Marsh, many of whose clients are in rural areas.
Many other technologies are attracting small businesses, however, and there is a lot of buzz about wireless, for example. But according to Lewis, there are many opportunities for unscrupulous resellers.
"The wireless market is growing rapidly, but there are still people trying to push proprietary products. You have to be able to guarantee that the products you are selling have a future," he warned.
According to Bonnamy, another technology that is attracting SME interest is groupware. "They are getting more interested in improving communications within the office," he said.
There is little doubt, however, that the area SMEs should be most interested in is security. The figures are stark: according to the DTI, 60 per cent of UK organisations have suffered a security breach and of these, 43 per cent have suffered an "extremely serious" or "very serious" breach in their systems.
What is worse is that, despite the dangers, very few companies are taking the risks seriously: only one in seven of all organisations have a formal information management security policy in place.
The picture for small businesses is even worse. Bonnamy pointed out that there are quite a large number of people out there with completely open access.
Lewis agreed. "Not enough people take computer security seriously enough; it's a huge issue that everyone's aware of but won't do much about," he said.
Although Scargill conceded that small businesses do not take security seriously enough, he feels that they shouldn't have to. "I find that a lot of small businesses are spending a good deal of time simply updating antivirus protection," he said.
"It might not be much for a corporate, but SMEs haven't got the resources. The fact remains that computers are too complex to use. It's like telling people before they can drive a car that they have to know how engines work and have to take one apart twice a year. Why should they know that?"
Nor is it easy for smaller businesses to acquire more specialist knowledge. "There are plenty of training courses and seminars available for small businesses, but they are not very convenient for a lot of the companies I talk to," said Scargill.
"Most retail organisations work six days a week. How could they afford time off to learn about technology?"
But it might not be necessary to get fully trained. Certainly education plays a part, but how much knowledge do companies have to take on board?
Judd stated that many of his value-added resellers make the effort to go on courses, but what is important is to sell the business benefits.
Smaller companies don't have the resources to take on a dedicated IT manager, but other personnel are too busy concentrating on the core business to devote time to looking into technical issues. Nor should someone spend hours at work and then be forced to go home and look at computer books.
But if they are not familiar with the latest technologies, how are they going to make informed purchasing decisions?
Marsh suggested that they could go to the local Business Link, but admitted that not many businesses are going down that route.
But should it be such a lottery for SMEs? If it is true that the economic recovery is going to start in this marketplace, then there are tremendous rewards for selling the right products into this sector. The industry can talk the talk, but is it matching words with deeds?
The growth of retail outlets and the strength of the mail-order business is a constant threat to the channel.
It might be true that a small business would not get the quality advice that a reseller would give it, but these are fast becoming trusted brand names, and PC World in particular is making a big push for the SME market.
This market represents a huge opportunity for vendors and channel alike, but the industry must be wary of how it sells to SMEs. It is a sector that is distrustful of salespeople, and fully conscious of its own lack of specialist knowledge.
The IT industry still has a long way to go before it can completely earn SMEs' confidence.
3Com (01442) 438 000
Cisco (020) 8824 1000
Computer 2000 (0870) 060 3344
The Federation of Small Businesses
Hewlett Packard (01344) 360 000
Lanz (020) 7251 2000
Technology Means Business
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