Are your IT systems helping you manage your business more effectively? Roulla Yiacoumi takes a look at the upcoming growth areas in the SME market.
Is there a single small or medium business in Australia that does not rely on some form of information technology (IT) today?
Whether a phone line, computer, network, or software, running a business today means implementing and managing a range of technology solutions.
The big question for managers is: Which ones are right for my business?.
With hundreds of products on offer, knowing which products can give your business a competitive advantage is more critical than ever.
Small and medium enterprises (SMEs) with fewer than 200 employees face a particularly hard time especially at the smaller end as there is less likelihood of having a dedicated IT person on staff.
According to the Australian Bureau of Statistics, there are 1.2 million SMEs in Australia; more than half (56 per cent) of these are sole operators.
A September 2004 study by research firm IDC found that 55 per cent of Australian SMEs relied on no one but themselves to manage their entire IT needs. Or as Kevin Burke, Group Manager Small Business at Microsoft Australia, calls them, the DIYers.
There is a large do-it-yourself component in SMEs and there are three main reasons for this, says Burke. First, they usually need something fixed urgently, so they will try to fix the problem themselves. Second is cost; it can be expensive to get someone to come out and look at your problem. And third is trust. SMEs don’t know who they can trust with their machine and their data.
For the past few years, IT spending has largely been on the back burner.
In the lead-up to 2000, IT systems were urgently upgraded to cope with anticipated Year 2000 problems. For many SMEs, that was their last significant IT upgrade.
This year has seen a substantial rise in IT spending. According to SME research firm Access Markets International Partners (AMI), spending by SMEs in the Asia Pacific grew 16 per cent from 2002 to 2003 to total $US84 billion.
By the end of 2004, AMI Partners estimates this will have risen another 19 per cent.
Managers who haven’t had much to play with for three or four years, are discovering revamped IT budgets to upgrade computers and other IT systems.
What are the current growth areas that SMEs should be considering? What are the software, hardware and telecommunications trends that will be making their mark over the coming months? And how can you use them to stay ahead of the competition?
The most common type of software an SME is likely to be using is an accounting package. No one wants to buy a software package, but it’s a necessary evil, says Grant Cowie, Managing Director of accounting software company, Cognito, creators of SME accounting solution, MoneyWorks.
When considering an accounting package, Cowie says business managers should consider whether the software can grow with the business, its ease of operation, and flexibility.
There are accounting solution vendors who try and lock customers into their packages by forcing them into annual software upgrade cycles, says Cowie. The truth is, things don’t change that much. You should only need to upgrade your software package if there is a major change, for example, the introduction of a GST. And even then, you should ask your accounting vendor, If the GST rate changes, can I make that change myself or do I need to buy a new package?’.
While accounting packages are integral to any SME’s business, the two segments of the software market experiencing the greatest growth rates are business process automation software and network security.
The broad group of business process automation software includes customer relationship management (CRM), enterprise resource planning (ERP), sales force automation (SFA), and supply chain management (SCM), to name a few. Essentially, these types of software solutions help a business streamline its processes, and most importantly, retain and grow its customer base.
Even companies traditionally associated with the bigger end of town, such as Oracle, are beginning to make inroads in the SME market.
CRM software allows a business to keep track of a customer’s behaviours in order to develop a stronger relationship with them. This can include their buying patterns, for example to later up sell or make related purchasing suggestions to them, and personal details, such as their partner’s name and how often they play golf.
Talking about procedures and processes is boring, admits Daithi Holden, Senior VP of CRM provider ACCPAC. But as a business grows, you need to have those systems in place in order to keep on growing. Say you want to see who still has unpaid invoices from 30 days ago, or 60 days ago. A good CRM package will manage that kind of thing seamlessly.
But don’t leave it too late to invest in CRM, warns Steve Ironside, MD of fellow CRM provider Intentia. When’s the best time to take up CRM? When you start losing customers, he says.
In 2003, there was a 20 per cent growth in the number of Asia Pacific SMEs using business process automation software over the preceding year, creating an industry worth $US190 million. This growth was further driven by large enterprises demanding SMEs have CRM software to establish electronic linkages with their own sophisticated systems if they wish to conduct business with them, that is.
Expecting even bigger growth in 2004 are security solutions. Growing at between 25-30 per cent annually worldwide, spending on security solutions by Asia Pacific SMEs reached $US1.4 billion last year, according to AMI Partners.
But for most managers of SMEs, managing the security and integrity of their systems is beyond their knowledge. Firms specialising in managed security solutions can relieve this burden.
Five years ago, only the big corporations entertained the thought of securing their data, says Keith Glennan, CEO of security company Network Box. As more and more businesses realise the value of the data sitting on their systems, they’re calling in the experts to protect their assets. In security, there’s a constant barrage of threats emerging, says Glennan. You can’t just buy a product to make the problem go away. If you make a mistake with [implementing and managing] security, the results can be ghastly.
For SMEs who have no security in place, Glennan advises conducting a basic risk analysis in the first instance. What if you couldn’t access a file server for a day? Is the business open to liability if you send out an email with a virus that infects a customer’s computer?
Tim Hartman, Senior Technical Director at antivirus and information security company, Symantec, agrees security is a top concern amongst SME managers. Viruses are becoming a lot smarter; they no longer simply infect your machine. They can open a back door to your computer, allowing hackers to compromise your data.
Hartman says a good security solution should incorporate antivirus, antispam, and antispyware software, as well as a firewall to detect attempted intrusions into your system.
The magic word in hardware for SMEs is networking. Networking has greatly reduced costs for SMEs because a business today can have a large number of users simultaneously connected to the same devices.
Even more liberating for the SME worker is wireless networking, even though this causes some angst amongst managers who have until now avoided implementing wireless solutions in a business environment.
In the past, there were some concerns that wireless had speed, security, and manageability issues, says Ian McLean, VP of networking firm, NetGear. But that has improved over the last six months. In terms of speed, though, McLean says wired networks are the way to go. Wireless as an overlay technology [sitting in addition to the wired network] is a superb technology.
The proliferation of hotspots locations where you can wirelessly connect your notebook PC or PDA to the Internet is also driving the move to wireless. A manager travelling around the world with his notebook can pop into a hotspot-enabled café and instantly and securely access his email back on the home server. There’s no doubt there is huge growth in wireless solutions, says McLean.
The growth in wireless is also driving the huge uptake of notebook PCs and handheld devices such as the Blackberry. It is expected that this year, notebook PC sales will account for one quarter of all computer shipments worldwide, and this is expected to increase 18 per cent by April 2005, according to AMI Partners.
Guatam Das, Manager of Small Business at computer vendor IBM, says there has been a definite increase in notebook PC sales over the past two years. IBM notebook PCs, known as ThinkPads, have wireless capabilities built into them, a solution now offered by a number of notebook PC vendors.
The two other huge growth areas in hardware for SMEs are networked storage and multi-function devices (MFDs).
As businesses are relying more and more on their computers to produce documents and files, it’s critical that the computer does not also become the default storage centre for this work. If the hard drive fails or if the computer is stolen, there is no backup. By ensuring your business saves its files on a storage area network (SAN), files can be backed up on a regular basis.
Many people consider storage an expensive option, but it’s not, says Clive Gold, Product Marketing Manager at storage vendor, EMC. Information is becoming more important. SMEs need to get out of the business of having computers and storage together.
Gold says the tremendous growth in this area has seen the cost of storage halving every 12 to 18 months.
As a printing solution, MFDs are proving to be an extremely cost-efficient solution for SMEs. An MFD, also referred to as an all-in-one, is a unit that incorporates a printer, fax, copier, and scanner. MDFs are now outselling standalone printers and sales are booming.
According to Scott Millington, National Sales and Marketing Manager, consumer and small business division, at printing solutions company Lexmark, MDFs offer value for money for the SME manager.
You can buy a top-of-the-line MDF for under $500. Lexmark also offers a unique warranty on all of its products in Australia. If a product breaks down beyond repair within the first 12 months, it will be replaced next business day with a new one, meaning SMEs aren’t left in the lurch, Millington says.
While broadband has definitely been the buzzword of 2004, the big change in telecommunication is yet to come. Next year, it’s expected there will be a revolutionary transformation, if predictions about the take up of VoIP prove true.
VoIP stands for voice over Internet protocol, and in simple terms, means making phones calls over the Internet. Bringing VoIP into your SME means never having to pay for phone calls local or international ever again, offering impressive cost savings to business.
VoIP offers a number of advantages over traditional telephone networks. At office installation stage, you only need to run one cable to each workspace instead of two.
The phone is used like a normal phone, and making phone calls is a transparent process users would not even know the difference, says Craig Neil, Founder of Australian VoIP company, NSC. Features such as voicemail work as they would on a normal telephone. You’d be foolish to upgrade to another PABX, says Neil. With VoIP, the amount of hardware needed is considerably less.
One of the greatest advantages of VoIP is that each handset is assigned a permanent address. When you move desks or offices, you simply take your handset with you to your new location and plug in. There’s no more waiting for your telco to show up to move phone lines around.
Also making great strides into the SME market is web conferencing. Unlike video conferencing, which depends on equipment and images to conduct a virtual meeting, web conferencing does away with the niceties. It strips it back to absolute basics all you need to web conference is a computer with a Net connection and a phone line.
In business, being able to see people is nice, but sharing information is more important, says Kevin Mackin, Managing Director of WebEx, the world’s largest provider of web conferencing solutions. With WebEx, a host invites participants to an online meeting. Both parties logon to the website and a connection is established.
The savings to an SME manager are enormous. A virtual meeting can save on flights costs, accommodation, meals, and travel time.
With so many IT solutions available to SMEs, is your business ready to make the move into its next phase of growth?