Unlocking the SME market
Ideal Hardware's Think SME event showed resellers the value of their partners' new-found interest in small businesses.
If the channel had its own Chinese-style calendar, 2003 would be the year of the small to medium-sized enterprise (SME).
It seems that, after years of classing smaller businesses as the poorer relation to the enterprise, vendors are finally realising the potential of the SME sector and are keen to sell their products to it.
More than 150 channel and SME delegates attended the Think SME event last month run by Ideal Hardware at the Madejski Stadium in Reading.
The event, which was supported by vnunet.com's sister titles Computer Reseller News and Computing, was organised to help SMEs understand the value of technology and to assist value added resellers (VARs) selling into the space.
In a straw poll conducted at the event, most delegates said that, although IT budgets would not increase in 2003, they were not set to decrease either.
Just what is an SME?
Helping SMEs is where resellers can really prove their value, although there remains some confusion among major players as to the exact definition of an SME.
David Reynolds, business development manager at independent software vendor Star Computers, explained that a major problem among vendors is the confusion that arises around the definition.
"The industry really needs to be clear on its terminology. Every firm has a different definition of what an SME is," he said.
"The channel needs to realise that, if it is in anything other than a pure services industry, it probably means only four to six PCs. But these businesses still need services such as a file server, internet connection and firewall."
An example of this confusion is the figures issued by the European Union (EU) and the Department of Trade and Industry (DTI).
According to the DTI, a small business can be defined as one which has 249 employees or less, and medium businesses are those with 250 employees and above.
The EU defines a medium-sized enterprise as having 250 employees or less, small enterprises as 50 employees or less, and micro enterprises as 10 or less employees.
Reynolds suggested that vendors need to come up with a blanket definition of what they term to be small and medium-sized businesses to avoid future confusion.
Nigel Judd, general marketing manager at Computer 2000, the UK arm of Tech Data, explained that the SME market needs to be separated into manageable pieces.
"First, you need to understand that the SME market, by most definitions, is huge and needs to be segmented into marketable chunks," he said.
"Those that don't have IT managers not only need solutions but need to understand the business benefits of the technology. In addition, you need to distinguish between the early adopters on the one hand and the laggards on the other."
Marketing to SMEs requires a multi-vendor approach, but few vendors, apart from Hewlett Packard (HP), Microsoft and Cisco, have a clear strategy for their resellers, Judd added.
Mark Swarbrick, a representative of the DTI's UK Online for Business initiative, said that many SMEs have made the initial investment in technology but have not yet fully exploited its potential. It is down to resellers to help them to do this, he maintained.
"We want to make the UK the best place in the world for e-business and it is our aim to help companies achieve greater use and more productivity out of IT," said Swarbrick.
He warned that the UK lags behind most nations in e-business productivity, and said the channel could be an enabler to help businesses close that gap.
When it comes to global e-business take-up, the UK lies in fourth place behind Germany, Sweden and the US.
How can resellers win over SMEs?
Swarbrick said that VARs have three main ways of communicating the importance of IT to SMEs.
VARs can raise awareness of how technology can benefit customers' businesses, provide front line advice and ensure that information is upgraded on the web.
Swarbrick pointed out that the government's target of getting one million SMEs trading online by 2002 has not been met, but at present about half a million small companies use some form of e-business.
Alex Tatham, vice president of global software distribution at Bell Microproducts, parent company of Ideal, insisted that, above all, SMEs want value for money.
"SMEs want good, trustworthy advice because a lot of them don't have an IT manager," he said. "It is usually the owner that takes charge of IT procurement and, because it is their own money they are spending, they want good value."
Tatham added that IT is seen as just an added cost to their business; a necessary evil. It is only when a company reaches 50 to 100 employees that it starts thinking about IT in a different way.
"However, there is a huge opportunity for the channel in this sector," he said. "The message to resellers is to keep it simple: don't try and sell something that SMEs don't want. Make sure you are a trustworthy business advisor that SMEs can go to in times of need."
Mike Thomas, small to medium sized business channel development manager at HP, claimed that the firm has a good understanding of the SME channel.
"The SME community has been more resistant to market pressures than corporates and, according to Gartner, only 20 per cent plan to reduce spending in 2003," he said. "SMEs allocate six per cent of their revenues to IT and are most likely to benefit from IT advantages.
"Customers are getting smarter and more demanding. Many times in the past IT hasn't been invested in but is perceived as a cost."
Thomas added that IT is about providing tools, support and key business processes.
Most SMEs have the business basics such as email, file sharing and printing, but in the future could consider business solutions such as wireless/mobile, document management, unified messaging and customer relationship management software.
"We have always had a very strong relationship with our resellers and we believe that [SMEs] are the future," said Thomas.
Technology means business
One initiative which is very much geared to simplifying IT for the smaller business is the government-backed Technology Means Business (TMB) scheme.
Joanna Douglas, TMB's agency manager, described the scheme as an industry standard accreditation for the provision of integrated business and ICT advice to SMEs.
Run in alliance with major vendors such as Microsoft, HP, Intel, BT, Sage and Cisco, the scheme was opened up to resellers earlier this year, allowing them to become TMB-accredited.
"TMB covers ICT knowledge, SME understanding and an advisory role, and participants have to be re-accredited on a yearly basis. We make sure that partners keep their knowledge up to date," said Douglas.
According to Andrew Pickup, group manager for small business and breadth channel at Microsoft, the vendor's vision is about realising the potential for businesses, especially SMEs.
"Many SMEs don't have a dedicated IT person and they have to be spoken to in a different way [to enterprises]," he said.
Pickup added that SMEs' main concerns are data back-up and recovery, and security. "Most small businesses want to concentrate on their core business which has nothing to do with IT. They want IT to be a tool and to have the right product for them," he said.
"Almost 99 per cent of our customers are small businesses and, from a customer and partner perspective, they are very important to us."
Vendors make two main mistakes, according to Pickup. The first is in thinking that small businesses are just smaller versions of their own plush offices.
"Many vendors sit in their air conditioned offices and have no real concept of the reality of a small business, many of which operate from Portakabins or from a room in a factory or warehouse," he said.
The second mistake is in trying to apply scaled-down enterprise-level technology to small businesses, which is a "flawed approach", according to Pickup.
"Every large business started as a small business and resellers should remember that they can make a fortune out of growing with their customers," he explained.
Although there are fears that the SME focus is just a stop-gap until the enterprise spend makes the long-awaited recovery, one analyst feels that vendors have learned their lesson.
"In hard times vendors might put more focus on SMEs as funds at the large enterprises dry up," said Bob Tarzey, service director at Quocirca.
"In an upturn they may well revert to the enterprise, but the same argument holds that, if a vendor is dedicated to the channel, they will not make this switch."
CASE STUDY: THE LAPWORTH CONSULTANCY
Corporate reseller The Lapworth Consultancy is a TMB-approved centre, and a Hewlett Packard Centre of Excellence. The firm was formed in October 1995 and now employs 40 people and has a £4m turnover.
Shaun Lapworth, the company's chief executive, attended the Think SME event and gave an example of how varied and unusual business with SMEs can be.
Earlier this year Lapworth approached a firm called Mitcheldever Tyres, described as the third largest tyre distribution and retail business in the UK, which services motorway breakdown tyre service and retail sites.
The reseller wanted a chance to prove the level of its ICT support and asked the managing director for his most difficult problem.
Lapworth said he was given a brief to provide a single system that would interface to three different types of instrumentation and receive updates via email every six hours over a slow link.
The system would also have to run 24 hours a day, but only at selected times of the year and for up to two weeks at a time.
The environment would be "rough" on occasion and Lapworth would have to provide support on call and be able to fix 85 per cent of problems remotely.
The company successfully completed the brief and the solution was used to help the Mitcheldever Atlantic Rally for Cruisers team complete a race from Gran Canaria to St Lucia by providing weather and condition updates.
Thanks, in part, to the technology and the system implemented, the team won the race.
SUMMARY
- 2003 looks set to become the year of the small business.
- Vendors need to agree a definition of what an SME is.
- SMEs often do not have a dedicated IT manager and have to be handled differently to corporates.
- Vendors tend to make the mistake of trying to sell SMEs scaled-down versions of enterprise products.
- Analysts feel that vendors that have pledged commitment to the SME sector will not abandon it when enterprise spend recovers.
CONTACTS
Cisco (020) 8756 8000
Hewlett Packard (0845) 270 4222
Ideal Hardware (020) 8286 5000
Intel (01793) 403 3000
Microsoft (0870) 601 0100
Technology Means Business