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

Best practice – How SMEs can implement IT systems tailored to their needs

Too often, small and medium-sized enterprises (SMEs) do not take responsibility for educating themselves sufficiently about technology, instead putting their trust in technology vendors or channel partners whose interests are not always aligned with the SME’s.

SMEs should act more like large businesses by managing their IT investments and IT use proactively. Think – and measure – before you jump in.

Specifically, SMEs should:

Mine SME peers for knowledge and experiences. First and foremost, arm yourself with knowledge. Finding and talking to others of your ilk is easy through online communities. There are communities designed specifically for small businesses, mid-sized businesses and startups; the full spectrum of technology domains; and very specific vertical industries. Moreover, some technology vendors sponsor communities specifically for SMEs. These communities embody a great deal of experiential knowledge that can be used by SME decision-makers, not only for IT, but for general business knowledge.

Find the time to perform due diligence and metrics. Customer references are there for the asking from technology vendors and channel partners (if they are not forthcoming, you are working with the wrong vendor or channel partner). Before making a final technology decision, ask for five customer references, of a size and sector similar to your own. No IT implementation or usage expectation is perfect – cut through references’ glowing reports, and pin them down on something that did not turn out as anticipated. Moreover, just as you do with your business plan, write down your expectations and goals. This will make it easier for vendors and channel partners to deliver to your needs, and will give you a sense of whether and how fast your IT investments pay off.

Look for vendors that offer more value than just their products. Technology vendors have accumulated a wealth of business knowledge around their products, knowledge that savvy SMEs should look for and can tap for nothing. After all, technology vendors claim they want customers to be their partners. That means they should be able to provide SMEs with knowledge and content concerning best practices, business processes, business metrics, and integration. For example, have you ever wondered how to shorten your sales cycle, given your regional business conditions? Ask a customer relationship management vendor.

Look for solution providers that can act as your vendor management office. IT licences, contracts, payment terms, usage parameters and maintenance agreements have become more, not less, complex. In particular, maintenance and upgrades are the most costly long-term factors. Channel solution providers should be able to provide you with total cost of ownership metrics and proactively manage vendor relationship complexity for you.

Do not be taken in by the SaaS siren song. Software-as-a-service (SaaS) vendors will be the first to tell you that SaaS solutions are less expensive than on-premises implementations. While this might sometimes be the case, it is not always true. One of the hidden costs in any IT decision and implementation is integration – the uniqueness of the solution for your business and IT environment – and integration can sometimes be harder and more costly with certain SaaS products. Look for vendors and channel partners that have built-in integration ease via a proven service-oriented architecture.

Tim Harmon, senior analyst at Forrester Research

Visit www.forrester.com/computinguk for several complimentary reports made available to Computing readers by Forrester Research.

Five tips for a more effective SME IT strategy

Get smarter with your mobiles
Smartphones have evolved from being tools for accessing email, diary and contacts into platforms for mobilising desk-based operations. A recent survey of SME leaders by YouGov identified banking, customer relationship management, conference calling, instant messaging and satellite navigation as the most beneficial applications. The research also found that the typical SME user was able to convert between one and two hours each day into additional productive time using mobile technologies.

Consider software-as-a-service
Software no longer needs to be run in-house or looked after by an internal IT team – it can be hosted as a service and delivered to customers via the web. Support, maintenance and daily operation are all handled externally by a team of specialists, allowing an SME to concentrate on its core business. Paid for by a monthly subscription, there are no large upfront costs, and adding extra users is easy.

Use business intelligence
Data and information are the lifeblood of any business and SMEs are no exception. Years of historical data are often locked away in company filing systems that range from sophisticated ERP databases to spreadsheets full of contact information. Adding a simple layer of business intelligence to provide analytics, data mining, reporting, performance management and predictive analysis, all in a simple-to-view dashboard, can lead to better business decision-making and improved performance.

Centralise IT resources
Bringing together multiple subsidiary IT operations under one roof can deliver enormous dividends. Lower costs with higher levels of support and development can be delivered to each part of the organisation, while still keeping control of the IT resources in-house.

Take advantage of managed services
Many SMEs are too small to justify the expense of an IT department and often rely on an interested amateur to keep everything running. Employing a managed service, where an expert third-party team takes on the task of operating and maintaining the company’s IT resources, usually remotely, can be a more effective way of ensuring the reliability and availability of essential applications and data. Although take-up within the SME sector has been relatively low to date, this is a model that offers peace of mind, as well as dealing effectively with issues such as security, backup and resilience.