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TECH TALK: SMEs and Technology: The Market Opportunity

October 6th, 2003 · No Comments

Technology has changed a lot over the past decade. And yet, when we look at how small- and medium-sized enterprises (SMEs) use technology, there has been only a limited adoption of the various new technologies. Even as the rate of change in technology accelerates, the pace of usage of these technologies in businesses at the bottom of the pyramid has not increased dramatically. In this series, we will look at how SMEs, especially those in emerging markets, can make better use of the new, emerging technologies and also consider the business opportunities that entrepreneurs can look at in targeting these organisations.

SMEs are seen as the next frontier in new markets for technology. In the recent past, companies from IBM to Microsoft, and HP to Cisco have all announced specialised solutions targeting SMEs. As growth in established markets (the large companies in the developed markets) slows, there is a greater focus on looking at the business and technology needs of SMEs.

And why not? Just look at the numbers. There are estimated to be more than 75 million small and 600,000 medium-sized businesses. (While definitions vary, typically, a small business is one with less than 100 employees, while a medium-sized business is one with 100-1,000 employees.) It is estimated that the market for hardware, software, services and other related IT spend by SMEs is about USD 420 billion. While more than two-thirds of the business are reckoned to have more than one computer, only a fifth of them have a server, according to Microsofts Orlando Ayala.

Even among SMEs, there are two clear segments. The SMEs in the developed markets have a greater capability to spend on technology than do the ones in the emerging markets. In fact, if one were to look at the IT maturity levels of companies, even some of the larger companies in the emerging markets would be considered as IT babies. So, the potential for improved use of technology is substantial in fact, one could argue that what we have so seen so far with technology adoption across the value chain has been restricted to the larger companies. The SMEs have been impacted only to a small extent with usage being primarily driven by email, Internet access, accounting and promotional use of an infrequently-updated website.

At the same time, we are seeing new technological innovations. This raises the question: how can SMEs partake in this revolution? Do SMEs have the ability to leapfrog with these new technologies? How can they make their businesses more productive by leveraging some of the newest ideas?

Our focus in this series will be on the SMEs in the emerging markets think of them as SMEEMS (Small- and Medium-Enterprises in Emerging MarketS). There is an opportunity to define a new IT reference architecture for this category and create a computing platform out of many cold technologies which can dramatically reduce cost of ownership and management. At the same time, there are plenty of opportunities for entrepreneurs in targeting these SMEEMs. Think of this category as the teenagers of the consumer market growing, aspirational, a greater ability to spend and needing unique solutions.

Tomorrow: Recent Developments

Tags: Tech Talk

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