News Analysis: Taking the initiative on small businesses

3Com programme goes against the trend for suppliers to ignore the IT needs of small businesses

The small business market received a boost this week with 3Com?s announcement in London of its small business initiative 3Com Connection. The company is rolling out the programme in a European tour, which also visited Manchester.

The company?s investment in the potential of the small business market, often called the small to medium enterprise market, looks set to pay off, according to two speakers at the London event and a recent Datamonitor report. The tour is part of 3Com?s Networking Partners Programme, which is aimed at the small business market.

According to Datamonitor, the total small business networking spend will rise dramatically between now and 2003 to account for #600 million out of a total of #4.5 billion.

David Baxter, project director of the Department of Trade & Industry?s Information Society Initiative, outlined the government?s attitude to encouraging the growth of IT in small businesses. He began with an overview of the UK?s comparative place in ownership of the IT infrastructure and hardware worldwide. Not surprisingly, the US takes the lead, with Japan a close second and the UK and Germany close behind. Baxter claimed most countries were evolving rapidly, but usage of IT still lags behind ownership in the UK. He added there is still a wide gap between the large and small firms, and that in general consumer spending is well below business spending.

The government views the main drivers of change as the general economic climate and a general understanding that growth in IT is essential for the health of businesses and that the necessary skills had to be developed. The ISI Programme for Business is aimed at helping UK companies to improve competitiveness by partnering with small businesses and attempting to deliver through intermediaries such as Business Links and trade associations.

What was interesting about Baxter?s predictions was that the government will be targeting particular sectors such as computer-supported co-operative working, safety mission-critical systems, photonics, neural computing, digital broadcasting, and speech and language technology. The fact that the DTI is concentrating so much effort on the small business market reinforces the view that such companies are the very ones that require particular help in identifying which IT solutions will make a difference to their businesses.

The first phase of this programme is the setting up of a UK-wide network of 80 centres, based on Business Link and the Local Enterprise Company network, which will be geared to local business conditions. So far 62 centres have been approved and 24 have opened. Typically these centres will provide drop-in help with demonstration facilities to show sceptical small firms what IT could mean for them. There will also be consultancy support and awareness and training seminars. This will be practical hands-on advice.

Baxter also outlined the IT For All campaign ? a four-year cross-government initiative intended to promote awareness, skills and access to technology among the general public.

Also unveiled at the seminar was a Datamonitor survey, sponsored by 3Com, with some interesting analysis of the size of the SME market. According to the report, about half of the SMEs which start each year have PC capability, representing a total of 300,000 PCs. Datamonitor estimates the size of the market at 2.5 million firms with a total installed PC base of 1.5 million.

The report says the PC is the workhorse of the SME sector and that suppliers should concentrate on selling PCs before trying to sell any other system. This goes against conventional wisdom ? many resellers avoid the small business market because of its fragmented nature and suspicion of IT solutions.

Baxter quoted a few typical reactions to the argument that small businesses should buy IT: ?Often the SME will say that software is too expensive, PCs are too expensive, I don?t know which PC to buy, I don?t understand PCs or I have no need for a PC.? But he went on to argue that small firms could often benefit from a simple network, allowing them to print to one central printer, fax and email electronically and improve communications. Such requirements should make the market attractive to resellers.

Billy Lineham of Business Link, London City Partners, outlined some of the new developments in business growth. For the first time since 1992, businesses registering for VAT outstripped those going out of business and bankrupt. Over three million people, according to his statistics, are employed in small enterprises.

Datamonitor estimates that the total UK IT spend will continue to grow for the next six years as UK companies and consumers make first-time purchases, and firms that already have PCs are forced to upgrade. The volume of peripherals will increase as networking burgeons and multimedia devices are embraced increasingly by companies and consumers.

Datamonitor seems to think that the internet will also drive up PC sales and that Intel?s marketing campaign has helped to drive up demand in the SME sector. It points out that suppliers are starting to build systems and software designed for use by the SME and that suppliers and distributors, in alliance, are singling out SMEs as a growth area because the corporate market is too aggressive.