Decisions: The beginnings of a great love affair

The mid-market hasn't traditionally enjoyed a great love affair with technology. All the romance seemed to be at the big end of town where enterprises experimented with the potential benefits of IT. But today that's all changing. The SMB sector is embracing IT with both arms in a bid to accommodate rapid growth. Despite big demand, resources are small. The result? Companies are taking what they can, wherever they can get it. And ultimately, creating magic.

Loren Hicks, CIO of online dating company Lavalife, presides over a proprietary system that has been cobbled together over the years as the company rocketed from obscurity to prominence on the World Wide Web. The company uses an array of emerging technologies to reach its customers via Web, wireless, instant messaging and video.

And it needed a unique approach to technology. Hicks said, while many companies go for standard models and methods, like driving Fords, his company's needs were different. "At Lavalife, we built our own car. We had to, because no one else was doing what we do," he says. "I work at a firm where all our products are customer-facing and technology-based, and I tell you, IT matters."

Outsourcing is a red herring, he says, and an issue that has been over-blown. In his view, it is simply a different way of managing IT rather than disbanding it.

Technology components that provide no competitive advantage can be treated like utilities, as controversial author Nicholas Carr suggests, and decisions to keep them or farm them out are purely economic, he says.

"Who provides Microsoft Word on your desktop is completely irrelevant," Hicks says.

"It's important it gets done, but the company doesn't get a cent of revenue from it."

In certain established industries where the business processes and workings of IT are cut and dried, an in-house IT department brings no strategic advantage and makes little economic sense, Hicks says. In the oil refinery business, for example, the process controls and the technology needed to automate refining is an exact, well-known science.

"So does IT matter in that instance? Yes. But is it strategic? No. Could you outsource it? Yes. Could you have IT be part of the engineering department? Yes. Does it mean it's not IT work? That's debatable."

Hicks points out that a redefinition of what constitutes IT work may be needed in the coming years as more and more aspects of modern life are computerized and connected and society grows more techno-literate.

"There's a computer in your car. Does that mean your mechanic is now an IT guy when he's checking your fuel emission system, which is all computer-controlled? It all depends on what you mean by IT specialist," he says.

As an online company Lavalife has a much more sophisticated IT environment than most midmarket companies. And for most Australian SMBs, tech budgets will remain tight this year. IDC predicts a worldwide IT spending increase of 5.5 percent over last year.

And while SMBs are the major engine of the Australian economy - 99 percent have fewer than 100 employees - significant IT investment is still in its infancy.

Vendors need to present clear value propositions regarding products such as bundled SMB servers, wireless LANs (WLANs) and remote access through VPN," according to Jean-Marc Annonier, SMB research manager at IDC Australia.

Remote access remains a substantial opportunity in the local market with broadband Internet access becoming more and more frequent, and VPN solutions easily deployed while leveraging the existing investment in Internet connections.

"Businesses that are already operating remote access solutions are mostly using it to allow employees to work from home and increase the efficiency of their sales force," Annonier said.

"The SMB networking market in Australia represents more than a million businesses and exceeded $1 billion in 2005.

"The opportunities are in infrastructure software and networking equipment. The server market will remain stationary."

The SMB packaged software market in Australia reached $881 million in 2005, up 13 percent on 2004.

Application software represents around 22 percent of this market.

Annonier said small companies tend to use a fixed set of applications such as office applications that will address their immediate requirements whereas medium-sized companies have a stronger focus on productivity and will more frequently deploy applications that will facilitate company-wide business processes.

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