Big opportunities for small businesses

Major software providers are recognising the purchasing power of SMEs

All businesses operate according to the same core principles, whatever their size. Small and medium-sized enterprises (SMEs) are under the same pressures as their larger counterparts to streamline operations, delight their customers, win new business and turn a profit. And as with large corporations, IT is playing a growing role in helping SMEs achieve those goals.

However, this increasing reliance on fast-changing business technology can be a double-edged sword for smaller companies. Warren Wilson, research director at analyst Ovum, believes that the pressure on smaller businesses to exploit IT is rising as competition increases and broadens.

“SMEs today are in competition with many more – ­ and further-flung – organisations,” he says. “But at the same time, they are resource-constrained in both financial and human terms. They have less IT expertise than larger companies and are therefore less able to take advantage of technology advances.”

One area of obvious difference is the use of third-party services. Until recently, cost has been a barrier to SME adoption of third-party services. This stands in stark contrast to larger organisations, where managed services are viewed as a means to realise cost savings.

According to Maxine Holt, senior research analyst at Butler Group, only 25 per cent of SMEs have business applications delivered by a service provider. However, as more affordable solutions appear, the number of SMEs adopting managed business services will increase.

But a gimlet-eyed focus on cost is not the only defining feature of SME IT adoption. Ease of use, speed of deployment and the ability to fit with existing infrastructure all have decisive roles in determining which technologies are embraced.

“SMEs want solutions that can be tailored for them through configuration, rather than hard coding,” says Ovum’s Wilson. “And it has to be easy to use and integrate with desktop applications such as Outlook.”

For many SMEs there is usually one killer application that makes a significant difference to the way the business performs.

James Briggs, chairman of rubber moulding specialists Harboro Rubber, changed the way the company operated following the introduction of the QlikView business intelligence package.

“Suddenly I could analyse my business and interrogate the enterprise resource planning (ERP) system to see exactly where I am making and losing money,” says Briggs. “We have now changed our policies regarding purchasing and pricing as we can immediately see the potential margins and know where we need to re-cost.

“Having historical data online and easily visible allowed us to demonstrate to a footwear manufacturer exactly how much our costs had increased over the years, helping to justify an increase in price and the retention of a customer.”

With the QlikView software showing not just what customers owe in unpaid bills but also the stock levels invested by the company for future orders, Harboro Rubber can see where its greatest exposure lies in terms of customers.

“It is not just about price and margins – ­ quality issues are flagged up in the system, giving us advance warning of a machine that may be failing or an operative who might need additional training,” says Briggs. “It gives us the answers to questions we did not even know we should be asking ­ – and it is making a difference to our company.”

Bristan Group is a medium-sized business formed from a collection of smaller companies. It took the decision to consolidate and centralise its IT resources to provide a higher level of service throughout its operations.

Head of IT Richard Evans has put together a core team to look after the company’s central ERP system, Lotus Notes email server and Domino groupware, while other areas of work are set to be outsourced to specialists.

“Our web strategy to date has been patchy,” says Evans. “With up to 4,000 customer contacts a day, we want the ability to move some of those interactions online, so we looked for a partner that has expertise in this area.”

By next month Bristan expects to have a full trade and consumer site up and running using external hosting and expertise from e.Pages.

Bristan also operates an £18m automated warehousing system to ship nearly 10,000 items a day.

“Partnering, especially for project work outside of our expertise, is the best option for us because we get the capability as and when we need it. With a high reliance on technology, it makes sense to look for long-term partners,” says Evans.

Finding a trusted third-party IT partner has also paid dividends for Elaine Whylde, managing director of specialist supplier and maintainer of gas and electrical appliances, Allgas.

“We have always used computer systems but they are not our area of expertise and we have suffered from some bad advice over the years,” says Whylde.

Allgas’ new integrated business suite combines accounts, sales, stock and e-commerce, which is hosted externally and delivered through an internet connection.

“People come to us because we have a wealth of knowledge, but until now a lot of it has been in my head,” says Whylde. “We decided to use the cloud computing model because we like and trust our partner, Gooroo. It has become our IT department.”

Like large companies, SMEs are increasingly reliant on mobile technology to service their customers and win prospective business. According to a recent survey by YouGov, nearly half of SME decision-makers think they can be more productive using a smartphone, with 60 per cent of executives in their twenties and thirties claiming to save up to two hours of productive time each day.

Philip Crowshaw, chief executive of Expertsonline.tv, depends on his BlackBerry mobile device to keep his business running.

“Mobile technology has allowed us to virtualise the business, saving us a fortune while allowing us to become more efficient,” he says. “I like the technology for what it can do for me and my business, not what’s inside.”

One frustration felt by IT leaders in the SME sector is that vendors are sometimes guilty of overlooking their particular requirements. Many of the larger vendors have offered pared-down versions of their enterprise products ­ – which may be offered at a reasonable price, but do not take sufficient account of the other requirements such as ease of use and deployment.

The good news is that the major application providers are recognising the purchasing power of SMEs and are developing versions of their products aimed specifically at this sector.

See page 2 for more best practice tips.

In the second part of our definitive guide to SME IT, we explore how smaller businesses are deploying technologies that meet their particular needs