Value for money

A flexible hosted CRM system enabled the Royal Academy of Arts to boost efficiency and take on additional contract publishing work

Three of the big challenges for small to medium-sized enterprises (SMEs) are finding and retaining good staff, punching above their weight in the marketplace, and ensuring that cash flow is robust enough to stay in business.

Tackling such issues means putting in place the right processes and systems, while also structuring for future growth. It also means offering an increasingly flexible working environment, not least to compensate for wages that are often by necessity lower than those provided by larger organisations.

IT can help SMEs to tackle many of the challenges they face. But many do not consider technology a business enabler, rather a necessary evil on which they have to spend money. In fact, many small firms frequently do not budget for IT, and only spend on systems when strictly necessary.

As a result, says Celia Hyde, commercial director at IT services and consultancy firm Small Business Computing, while companies that consider IT fundamental to their business, and can afford to do so will invest an average of £1,000 per employee per annum, the rest are more likely to spend as little as £400 per staff member each year.

The highest-spending sector tends to be professional services, primarily within the financial sector, as many of these organisations have been set up by managers who have previously worked in the City and are aware of the benefits IT can bring. The lowest-spending sector is retail, which tends to invest in little beyond basic electronic point of sale equipment.

Clive Longbottom, service director at analyst Quocirca, says SMEs have one common theme when it comes to expenditure – money is perceived as being a one-person decision on whether it is spent or not. ‘Therefore, budgets are pretty static and depend strongly on how well the previous IT project went,’ he says.

It also does not help that many SMEs do not have enough in-house knowledge or bandwidth to look at new technologies, let alone to implement, manage and support them. While larger companies may have IT managers and a small technology department, SMEs are generally stretched and do not necessarily have time to develop long-term strategies or keep abreast of new trends.

SMEs tend to be several years behind large corporates in terms of IT adoption, principally because of concerns about the upfront capital outlay, high management costs and the impact on the business if the technology does not work.

Such issues are leading to a growing trend towards the adoption of outsourcing. This could involve hiring a third party to manage the entire IT infrastructure, introducing managed services for routine tasks such as network or email management, or subscribing on a monthly basis to hosted applications such as customer relationship management.

Peter Critchley, strategy director at IT services firm Morse Consulting, says the growing interest in outsourcing and hosting will continue in the next few years.

‘A lot of SMEs don’t know how to do IT themselves, but they realise that they have to buy right and not restrict themselves in growth terms,’ he says. ‘Key issues include support and maintenance, but because cash flow is everything, they also like the idea of buying on a subscription or pay-as-you-use basis because they want low upfront predictable costs.’

Another benefit of the on-demand model is that it can be flexed up and down depending on requirements. If an organisation reduces headcount, it simply pays less that month, or has the option to increase subscriber numbers as it grows.

But among many SMEs, there is still a lack of awareness of the options available, a general fear of passing control to an external provider and concerns about becoming tied in to a given vendor’s model – factors that have inhibited the market. Longbottom also warns that there are challenges involved in successfully creating and managing a dynamic service level agreement, and ensuring that the provider advises at the right level.

‘It’s important to check out that they provide a full support service, which includes business continuity and disaster recovery,’ he says. ‘It’s also important to figure out what should be done if the provider gets into commercial difficulties.’

Beyond the challenge of learning to deal with external service providers, another key issue for SMEs is how to attract and retain staff. Many small firms are turning to the idea of introducing remote and flexible working practices as an incentive for individuals to join them, rather than their larger rivals.

Tom Kelly, managing director of IT services firm Logicalis, says everyone is looking for bright young things capable of thinking creatively and who will add value to the business.

‘They were brought up in an era of broadband, MP3 players and mobile phones, and expect a good work-life balance,’ he says. ‘SMEs are starting to realise that unless they can provide all that and more in their working environment, they won’t attract quality personnel.’

Such an approach relies heavily on enabling technology to make it feasible – systems that include voice over IP to reduce the cost of internal calls across multiple sites, presence-based applications for seamless call routing and virtual private networks for security purposes.

While adoption is at a relatively early stage, as SMEs wait to see if such technology really works to their advantage, some organisations are starting to understand that such systems have the advantage of allowing them to appear more structured when dealing with customers, suppliers and partners.

For the same reason, collaboration tools are also expected to play an increasing role in facilitating both internal and external interactions and transactions.

Although the market is immature, a growing interest is being reflected in the fact that vendors such as Microsoft are starting to assemble collaboration platforms that comprise a set of integrated software services.

Systems include messaging capabilities such as email and calendaring, team collaboration such as workspaces and document repositories, real-time communications such as instant messaging and videoconferencing, and social networking tools such as blogs and wikis.

Because speed of response can be paramount, many SMEs are finding that it is not enough to just take orders by email, says Longbottom. ‘If they have customers on the phone saying they want an order in two days, they’re finding that they need collaboration tools to bring suppliers into the same conversation to speed up the process,’ he says.

Longbottom expects hosted applications such as WebEx to become increasingly important in the next three to five years, although awareness and understanding of the benefits is still relatively low at the moment.

While no IT system or product can solve all of an SME’s issues, they can help. And as with most things, Small Business Computing’s Hyde says the main thing holding small firms back from dabbling with technology tends to be the cost of implementing and managing.

‘But this can be alleviated a little if business or IT managers take the time to strategise properly, involve outside help if required, and give it the level of attention it requires,’ she says.

What the experts say about small businesses

Information is fundamental to any business, but the hardest thing in today’s world is only getting access to what you need, as there’s so much out there. With the information that you do require, however, you have to be able to get at it immediately when dealing with customers, as they can be very demanding. And if you don’t have a system to help with this, you’re really missing a trick.
Kim Jenner, business manager, Royal Academy of Arts

In general, small businesses do not consider IT as an investment, although there are obviously exceptions. Instead, they see it as a necessary evil, which they will only spend money on when they absolutely have to, such as when something is on the verge of breaking down. Therefore, they frequently don’t budget for it.
Celia Hyde, commercial director, Small Business Computing

It’s really important for SMEs to have tools that enable them to have all th e information they need at their
fingertips. So while in the past, our sales team only had the standard phone and internet access, since introducing our integrated communications system, they can access things such as our stock and accounting systems, which saves a lot of time and increases their efficiency.
Matt Mayers, managing director, Flexible Steel

While in the past, it was too expensive and complex for most SMEs to build an in-house application, things such as Google Maps make it easy to put together a mashup. I’m expecting to see a lot more things like that – things that require no coding – to come along over the next few years. It’ll just be drag-and-drop and be based much more on process, which means that business people will be able to do it for themselves.
Clive Longbottom, service director, Quocirca

Where I am starting to see a link between value and technology in smaller organisations is in the use of the internet, mobile technology and different channels to market. If they want to access a fairly broad market, they won’t have a massive sales force, call centres, marketing departments and the like. This means that they have to use technology more creatively and some, for example, are starting to do things such as creating interesting content for social networking sites.
Peter Critchley, strategy director, Morse Consulting

Every SME, regardless of the industry they’re in, wants to portray themselves as bigger than they are, and one of the few ways they can do that is by using technology to make them more flexible. While they weren’t available five years ago, products coming out now from vendors such as IBM, Microsoft and Cisco in terms of presence, unified communications and collaboration are making it much easier for SMEs to do the job effectively.
Tom Kelly, managing director, Logicalis