Not a 'Small' Opportunity: Are the Solution Providers Ready?

SMBs are a burgeoning element of the
open economy, capable of driving profitable growth. According to the
SME Chamber of India, it is estimated that there are 35 million SMBs
in India and they contribute 45% of the industrial output, 40% of
exports, 42 million in employment, creating 1 million jobs every
year. According to IDC, the SMB PC spending in India was estimated to
be Rs 5,515 crore in 2010. Thus, solution providers (SPs) should
consider the SMBs as a vital component of the ecosystem and merely a
process while pushing their products to them.

TRANSFORMATION IN SMBs

It is also true that traditionally SMBs
have been looking at process as a key parameter. However, the
modern-age SMBs are more tech-savvy. SMB sector used to be
conservative but in recent times they are showing signs of adventure,
adaptive outlook and evolution, which is a welcome sign for service
providers. SMEs are willing to invest in technology which gives them
the cutting edge in the market. Cost effective solutions is a
paramount need but yes, they are willing to experiment. According to
the Access Markets International-Partners (AMI), a significant
proportion of Indian SMBs are well on their way towards the second wave
of IT adoption. Some are even likely to migrate to the third.
The key booster of this rapid adoption of technologies is the
Internet. Hence, after installing the basic hardware infrastructure,
they are looking at an advanced framework of storage, security, etc.
Technology is changing the way business is conducted and this has
brought changes in the business model of SMBs as well. According to
the Symantec 2010 Global SMB Information Protection Survey India
Findings, the SMEs on an average spent approximately Rs 1,48,000 on
IT in a year. According to Vineet Sood, head-channels and
alliances, Symantec, “IT demand from SMB is growing. The SMBs, though
different from large
enterprises in requirements, are now making protecting their
information one of their highest IT priority and are moving towards
the internet for networking, business transactions and ommunication
in a big way.” The AMI-Partners, 2011 study on SMB spending
revealed that Indian SMBs are planning to spend more than $2 million
on ICT in 2011 and there is an anticipated growth of nearly five
times of this spending by 2014. This is an indication of the trend
that will seeincreased awareness and conscious willingness to earmark
IT Budgets that will help them sustain, secure and grow their
businesses.

Delhi-based Saket Kapur, director, Green Vision said,
“The transformations in SMBs are bound to happen. In order to
survive, and thrive in the current ecosystems, where margins are
wafer thin, SMBs have understood that for their future growth they
have to invest on IT to manage their business and to run better
administration." Moreover, the solution providers have also
observed that small business has slowly and steadily started moving
up to the medium and from medium to large organization. Hence, a
small office entering into medium phase, they have a limitation with
existing IT infrastructure. For eg, moving from the Tally financial
accounting, the company needs ERP, CRM, HR management solutions for
future growth in the business process. This is the phase, when
solution providers come into the picture and extend their hand to
educate SMBs in the right direction. As the IT requirement of SMBs is
growing faster, solutions providers have started positioning such
solutions which fit into their requirement and budget. Paresh Shah,
CEO, PK Teknow said, “Today, SMBs are rapidly embracing new
technologies. Gone are the days when SMBs were limited to one PC
concept. Presently, we are offering latest technologies such as
messaging, infrastructure, networking and backup solutions and
virtualization solutions to SMBs. Moreover, this year, SMBs spending
on IT will be increased by almost 30% from the last year.”

KEY IT PRIORITIES AND CHALLENGE FOR
SMBs

Right now their foremost priority is to
optimize existing IT resources. Of course, this also implies hiring
full-time IT staff, apart from allocating budgets for new hardware,
software, and platform-based services. Consequently, a large part of
their IT spend will go towards virtualization. “As the pace of
growth for the Indian SMB is dynamic, it is critical to proceed with
caution, as SMBs are witnessing highly mobile workplaces, as
mobility increases, so do vulnerabilities. Today, SMEs are on the
lookout for technologies that help them to increase efficiency, save
money, and make the most of their IT resources,” emphasized Sood.
According to KV Jagannath, MD, Choice Solution Ltd, “In the SMB space,
IT priorities include running their key applications in
accounting, inventory, manufacturing, payroll etc, and office
automation tools like office and mail. In the infrastructure area it
is the connectivity, security, backup and hosting, etc.” While
highlighting key priorities of SMBs, Amit Rambhia,
director-technology, Panache Infotech said, “Looking at the
topmost IT priorities of SMBs require good advice in areas such as
the process of production, selection of machinery, and technical
collaboration available both domestically and internationally.
Therefore, strong support is needed regarding information on
technologies available, research and development activities for
technology acquisition.”

On the challenge front, since the small
businesses are not visionary about their future growth, therefore
they have scarcity of good talent. “Since 90% of our business comes
from SMBs, we have seen that new talent feels hesitant to work with
these SMBs companies as they do not see any growth path in these
small businesses,” added Kapur. Ankesh Kumar, director-channel
products & marketing, Emerson Network Power, said, "Typically,
the key challenges we face while doing so is that SMEs are currently
unaware about the technology going into our products. We
also face issues while explaining the concept of ideal capital and
operational expenditure while purchasing these products. SMEs focus
on low capex and end up buying some products which are not efficient
enough to provide better return on their investments. Thus we make
it our priority to create awareness about IT usage to our customers."
Kapur pointed out, “The biggest challenge for SMBs in our country
is borrowing. They can have an investable capital either through
equity or debt. Ironically, there are very few capital equity firms
who are investing on SMBs, and largely SMBs have to depend on debt.
But, debt in our country is very expensive if compared to world
standards. Typically, if you have to invest on collateral, SMBs have
to shell out 15% interest on borrowed which is phenomenally high.”
Moreover, rising infrastructure costs and managing working capital
are key pain points for Indian SMBs today. Commercial space is
becoming very expensive and SMEs are bearing the brunt of it as they
are not monetarily well equipped as larger players. So the crux is
the SMBs should have to define their vision for at least next 10
years. They have to think of investing in right areas. They should
introspect about the present work and future growth.

GROWTH OPPORTUNITIES FOR SMBs

Typically, a SMB does not have
dedicated IT personnel running the operations and they depend on
service providers to guide them through the buying, deployment and
management processes. "The role of the service provider is akin
to that of a trusted advisor and they are expected to be solution
experts in ensuring that the SMB user is getting the right product
for his specific requirement. They also need to bear in mind that the
typical SMB will depend upon them for market knowledge and latest
issues or threats," said Sood. A solution provider has to play
the role of a trusted partner for SMBs when it comes to delivering
value becoming aligned with the business strategy and helping
organization become more agile, responsive, innovative and profitable.
Girish Madhavan, CEO, Quadsel Systems, a solution
provider said, “It is important for solution provider to understand
their pain points andcontribute in improving topline, bottom line,
people productivity and operational efficiency of SMBs customer.”
Gurmukh S Malhotra, head-business marketing, Intel, South Asia,
said, “However,a significant proportionof SMBs have been
considering the RoI and long-term TCO as more compelling factors.
Hence, it is important for solution provider to put across their
views on these parameters to SMB endusers while convincing them about
the utility.”

BEST PRACTICES FOR SOLUTION
PROVIDERS

With so many challenges on the road of
SMBs, what are the best practices solution providers should have that
one can adopt for a smoother ride? Jagannath pointed out, “If one
needs to play in this space, one should be using the consultative
approach to win customers. At times SPs may get frustrated as time
investment verses returns in short term are very low. One needs to
work with the customers to grow with them and reap the benefits.
Second biggest problem is most of the time the owner or the key family
member is involved, if you do a separate sale then you are
having the challenge of payment release from them.” In a nutshell,
he said, “Consultative selling, long lead times, smaller order
value, systematic growth, relationship management and payment terms
are key points one should be prepared to work with in the SMB
segment. Lastly, the deal size may not be big and the vendor support
becomes an issue in some areas and also achieving the SP company
goal.” Madhavan said, “While selecting a particular solution
provider, SMBs look at the after-sales-support scenario since they
usually have a less evolved IT management infrastructure in terms of
in-house IT service and support team. Thus, SMBs consider the
after-sales-support infrastructure being provided by channel
partners as a paramount factor. Ideally, they want a 24x7
infrastructure.” Meanwhile, Shah said, "As a trend amidst
SMBs, it is noticed that most of the solution providers have
specific strategies for tapping SMBs and follow best practices. We
provide considerable insight into best practices right from information
requirements, survey, products, information flow analysis
to more implementation specific details like data extraction and
transform studies."

CONCLUSION

In the changing scenario, the business
dynamics of the SMBs will definitely change. India is basically
thriving upon the growth of its SMBs. And these SMBs need to make a
revisit to their strategy. They should watch out for the opportunity
and adapt themselves to play a significant role in the growing
economy of the country. To make it happen the SMBs entrepreneurs have
to behave prognostically. They should evolve themselves as leaders
for their employees and customers. Not focusing on the business
competitions, they should look at a larger goal because the market
will be too big to accommodate a number of brands. New technologies
are driving business growth these days. Definitely, it has resulted
in an increased IT spending. SMEs are building websites, automating
their accounting, implementing ERPs and CRMs. They have understood
that IT not only speeds up their operation but also provides better
visibility to their businesses.