Small biz looms large in vendor plans

IDC estimates that there are about 6000 SMEs in Australia, namely organisations with between one and 499 end users.

Constrained by tight budgets and IT resources SMEs are more concerned with being able to get on with business. IDC Australia’s research manager for SMEs and vertical markets, Kourosh Ghassemi, said the focus for SMEs is improving operational efficiency, the ability to service existing clients as well as capture new ones and mobility as more employees work from home.

How this translates into SME IT priorities is that they need to “enhance their system infrastructure, front office customer relationship management processes and also their enterprise resource (back office) management”, Ghassemi said.

“Service and support, ease of installation, and low maintenance cost will characterise the products and services most attractive to small companies,” he said.

Nicholas Day, e-business on demand business development executive for IBM Global Services in Australia, said that at the end of the day SMEs want to know that an IT solution fits them economically and architecturally for their particular business needs.

Put simply, smaller companies are demanding low-cost solutions that are easy to maintain, and want continuing access to responsive providers.

However, overall satisfaction with vendors at the higher end has always eluded mid-market businesses like JB Hi-Fi.

Since growing its employee base from around 400 employees to 1500 over the last three years, the Melbourne-based music retailer has struggled to find vendors which offer IT as a “proper” service — one which encompasses value-added services like consulting, support and training, on top of just products and implementation, JB Hi-Fi’s IT manager, Geoff Craig, said.

With two IT support staff for its 30 branches in Australia, the retailer simply wants vendors who don’t see SMEs as a group whose business needs are any less sophisticated than their corporate customers, Craig said.

As a bricks-and-mortar company which has matured into the mid-market over the last three years, JB Hi-Fi can only attest to being “very happy” with one vendor, (Nortel Networks) for the hardware, support and service which came with a Business Communications Manager IP PABX system it purchased a year ago.

“It treats us as a large company instead of an ‘SME’. And it gave us a price we wanted,” Craig said, adding: “Now that vendors like [Nortel] do treat us as a [larger] business, that also changes the way a lot of other IT suppliers treat us.”

In the past, Craig said the retailer fought tooth and nail to get the attention of mainstream telco providers. Telstra, for example, viewed suburban retailers like JB Hi-Fi as simply an SME — as a national chain it had only 12 stores some three years ago.

“It’s been a battle to get them to take us seriously and get their support,” he said. “They only seem interested in taking on the higher-end of the market or in ‘gold’ clients which have had services entrenched for the last 10 years.”

The company has also struggled to secure competitive pricing for a VoIP solution, which it depends on to help run its national business. Craig argued that vendors across the board overlook the growth potential of a lot of small business, usually only thinking in the ‘here and now’ of a margin from a sale.

“[Vendors] are not going to be able to grow their businesses or grow in the [SME] space if they ignore the SME customer,” he said.

“We’ve had many, many meetings with Telstra over the last few months about our [telephony] requirements. We’ve grown our turnover to $120 million a year and our annual expenditure with them now is well over $1 million a year. This has given us some clout with them.”

Craig believes JB Hi-Fi’s recent growth has also influenced how much advice and support vendors like Microsoft are willing to offer customers like his organisation.

“As a growing company 12 months ago, I couldn’t [get Microsoft] to give me any free advice or for a [sales rep] to call me back without saying the advice would cost me,” he said.

“Recently we made a $180,000 investment in a Microsoft SQL Server database, no small investment even by a large company. [Only] now do we have direct access to Microsoft and its consultants and skills. The same with IBM,” he said.

Craig cites a lack of proactiveness among tech vendors as a key weakness when dealing with their mid-market clients.

“It’s all in their attitude. For example, they don’t take the initiative to support mid-market customers with value-added solutions as their business changes,” he said. “Some vendors wouldn’t know proactiveness if it bit them on the arse.”

According to IDC, SMEs represent some 59 per cent of total IT spend in Australia.

Naturally, most vendors want to crack this opportunity by moving into this space or reinforce their presence within it, IDC’s Ghassemi said.

However, he said vendors are failing to address the SME market because they don’t target the right people.

Also, the information they are providing to that market is more suited to the corporate sector.

“In mid-size Australian companies, software projects are larger than their smaller business counterparts, requiring more internal resources, and are longer-term projects,” Ghassemi said.

“The medium-size company will often have the need of a large company for solutions, but behave as a small company. Therefore, there is some under investment in this segment.”

Research firm Needham & Company analyst Richard Davis believes poorly targeted marketing and the dumbing down of enterprise-level technology for the mid-market are the Achilles heel of vendors when trying to capitalise on the SME sector.

The mid-market is more complex than vendors believe, Davis warns.

“While software companies may claim their new mantra is the middle-market — with large customers no longer writing cheques for huge deployments — vendors’ usual response is to dumb down a highly-engineered application stack,” he said.

“This is akin to putting a small engine and tyres to a Hummer and calling it a viable competitor to the VW bug. It doesn’t work architecturally or economically. Large applications are priced too high.”

Join the newsletter!

Error: Please check your email address.

More about IBM AustraliaIDC AustraliaMicrosoftNortel NetworksOracleSun MicrosystemsTelstra Corporation

Show Comments