The SME puzzle

The small and medium enterprise (SME) market in SA is proving to be the main growth area for the IT industry, particularly in the area of networking and connectivity, according to research firm BMI-TechKnowledge.

However, many SMEs feel their IT needs are not being adequately addressed, as many of the major vendors attempt to offer the SME market solutions that are merely "scaled-down" versions of enterprise-level products.

Due to the divergent needs of SMEs, this is an approach that seldom works, and although there has been a big move towards packaged solutions - the idea of bundling a number of solutions in one box - the real question is whether this is the right strategy for the South African market, particularly as the SME sector requires that solutions are customisable to a large extent.

It seems solutions providers need to not only find all the "pieces of the puzzle" that fit the needs of the SME sector, but also put them together in such a way that they make a perfect picture.

"Most SMEs can`t afford customised solutions because they, by their very nature, are expensive, which is why they turn to packaged solutions," says Migal Van As, CEO of solutions provider Intervate.

"When it comes to these packaged solutions, instead of understanding what SMEs need, the big players tend to look to provide the best match to this market based on their enterprise products, rather than focusing specifically on the needs of the SME sector."

What generally happens, he says, is that these players simply create a solution with a wide range of key components they feel will match the needs of a specific SME vertical. This has both advantages and disadvantages.

"Perhaps the greatest advantage a packaged solution has for this sector of the market is that a small business gets a lot of capabilities and features for the amount of rand spend, which translates into a value-for-money proposition most SMEs are happy with.

"However, the other side of the coin is that these players can often feel a little like second-class citizens, in that they simply have to use what is provided to them, because the solution is far more generic than one would find with a customised offer."

While the top end of the SME market often does look for some type of customisation, Van As points out that these companies will often use a packaged solution, which is then later customised to better suit their needs.

According to SAP`s SME director, Brett Parker, SMEs need access to business experience, not only the right technology.

"SMEs have never really had access to strategies, methodologies and the like, as these tend to be too expensive, but we have packaged a complete methodology to help them with their business strategy.

"What it boils down to is that they know where they are and they know where they want to go, but then don`t really know how to get there, which why we can help them make the right decision. Once they`ve decided to upgrade, or even if they are implementing this technology for the first time, we can put a package together for them that provides an end-to-end solution."

When SAP originally decided to enter the SME market several years ago (which meant starting a value-added reseller channel from scratch), it had to overcome certain awkward pre-dispositions in both the channel and the vendor community, says Parker.

"We didn`t want to reinvent the channel wheel, but we had one of the most powerful brands in the industry to protect, which did mean having to discard some channel conventions, along with a few of our own."

The big players tend to look to provide the best match to the SME market based on their enterprise products, rather than focusing specifically on the needs of the SME sector.

Migal Van As, CEO, Intervate

This was not as easy as it sounds, he says, considering the channel`s focus on sales volume almost to the exclusion of customer satisfaction.

"Sure, there`s a lot of talk by vendors about achieving both volume and happy customers, but it`s undermined by the fact that business partners are, generally, rewarded primarily on their number of sales," continues Parker.

"This invariably leads to some of the uglier aspects of the channel - price wars, business partners within a channel working against instead of with one another as part of an integrated ecosystem, and, in the end, a reduction of the value to the customer of the solution itself. Everyone`s so focused on their own profitability that they don`t bother with increasing the customer`s profitability.

"In part, that`s the result of having to survive in a constantly changing industry. But it`s also because the channel has never been involved in fully-fledged enterprise resource planning (ERP), which is the converse of the channel`s traditional quick-fix, margin-driven approach."

ERP is an in-depth, coherent, integrated business discipline, Parker points out, and in its SME form can be implemented quickly, easily and affordably. It nonetheless still needs business partners to invest time and attention in the customer`s strategic business, rather than on purely operational needs.

"There has been a massive amount of media hype around voice over IP (VOIP) since the announcement that it would be legalised and now the SME market is waking up and realising it too can take advantage of this technology," says Clayton Hayward, CTO at OpenVoice.

"Remember, hosted call centres weren`t legal before the VOIP announcement, but now that it is available, SMEs only need IP connectivity to have a contact centre of their own."

He says that in today`s service-driven world, the value of a contact centre - even for a smaller organisation - cannot be underestimated, and because VOIP makes the offering so cheap, it is now accessible to most players.

"OpenVoice will build a specific solution for an SME after doing a scoping exercise to find out their needs. Once it is built to their requirements, we will also train their agents on-site, who then simply use a Web-based browser to access the centre.

"Obviously there are factors, like a lack of bandwidth in SA, that can affect a call centre of this type, and we know that ADSL is an expensive technology, but when one weighs up the fact that prior to the legalisation of VOIP, an entry-level centre could set a business back anywhere between R500 000 and R1 million. The R5 000 an SME must pay for an entry-level diginet circuit is really a massive cost saving," he says.

Speaking generally about open source software (OSS), Hayward says there are huge advantages here for the SME market in particular, even though there is something of a shortage of OSS skills at present.

"We are doing a lot to change this in terms of training people and it is a skills set that is developing. What we really need is more participation from government and other industry players.

"The OSS community is fantastic too, as everyone helps each other, which is something that a lot of the commercial guys don`t understand. The OSS community has a totally different set of ethics to the mainstream vendors," he says.

Hayward believes OSS is the only way to go for an SME, as licensing all a company`s desktops and software can be costly for a small business, but open source gives a business the same options but for a fraction of the cost.

The race for dominance in mobile commerce has begun, but the promise of this technology will not be fully realised if companies simply make their existing online services available through wireless devices without first understanding the needs of the SME sector.

PayCell has developed a solution for the SME market that enables businesses to process payments - such as those via credit card - through a cellular or landline telephone, making it possible for even small organisations to accept such payments anywhere and at any time.

"It effectively works the same as a point-of-sale (POS) device and is particularly useful for those businesses that require mobility, or involve being out of the office much of the time, such as plumbers, electricians or any business that has sales people on the road much of the time," says Deon Botes, the company`s sales and marketing director.

"It serves the same purpose as a POS, except that, not only is it mobile, but it is a lot cheaper."

This ability to transact while mobile and also the cost-effectiveness of the solution are its biggest advantages, he believes, especially as up until now, SMEs have been unable to compete with bigger players because it`s too expensive to get into the game.

There has already been exceptional uptake of the product, according to Botes. This, he believes, is because it is an entry-level type product and aimed at a market that is customer-centric and therefore does not believe in dictating the way the customer must pay, but rather wants to enable customers to pay by whichever method they choose.

There are many solutions and opportunities in the market right now for the SME sector, dependant on the needs of the particular business.

Ultimately, however, the most important player in the market at present is the reseller, as this is the business that has the opportunity to find the best pieces of the proverbial puzzle on the market and put them together in a viable solution for each of its customers.

The channel has never been involved in fully-fledged ERP, which is the converse of the channel`s traditional quick-fix, margin-driven approach.

Brett Parker, SMB director, SAP

Since few distributors or vendors offer this full range of "puzzle pieces" across the board, the concept of building bundles for the SME market looks likely to grow in popularity as more resellers realise how much both themselves and their customers stand to gain from this.

However, while this is an exciting market filled with opportunities, players must also realise that overselling and overburdening potential clients won`t get them very far.

SMEs are price-sensitive and fully aware they have a number of options to choose from, so if players want to capture a substantial portion of this market, they need to ensure they not only offer market-leading products but also provide consulting, much-needed support and after-sales service.

To view solutions offered by IT vendors for the SME, click here.