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TECH TALK: SMEs and Technology: Tech Distribution

November 10th, 2003 · No Comments

Let us begin by looking at the distribution system for technology for the enterprise segment. For the large buyers, there is a well-established system a mix of technology creators, systems integrators, distributors and resellers aided by technology magazines, trade shows and consulting firms which ensure that the message about new technologies and roadmaps gets to the decision makers (CIOs and IT managers). However, the process of decision-making in the small- and medium-sized enterprises (SMEs) is very different, and the system that works so well for the larger enterprises does not work for the SME segment.

Most SMEs are hard to reach, very distributed, have limited IT staff, and cannot afford to pay a lot of money. This makes it a less attractive market for the IT sellers. However, what a single SME lacks in terms of purchasing power is made up for by the entire category. Yet, that in now way alters the magnitude of the challenge faced by IT companies in selling to them. The result has been that SMEs and IT companies find themselves trapped in a low-equilibrium situation, which usage of IT is sub-optimal within SMEs.

Let us consider the tech distribution value chain that is there in India. Most SMEs in India are addressed by the assemblers or GIDs (Genuine Intel Dealers). They sell hardware, provides oftware (legal or pirated) as asked for by the customers, do the networking within the office, provide basic support on the hardware, and undertake the facilities management as part of the annual maintenance contracts. Much of the channel is re-active, responding to what the customer wants. The channel needs to provide a full-solution, but is unable to do so because of its own limitations (limited staff, and the ease of just selling the box).

What is meant by a full-solution? For starters, there is a need for user education, on how technology can make a difference in increasing productivity of the SME. Next, there is a need for technical selling and demonstrations, showing how technology can actually make for an intelligent, real-time enterprise. This would mean showcasing software (vertical, industry-specific solutions) and appropriate other technologies (for example, WiFi). This solutions showcase needs to be round-the-clock and not just limited to periodic roadshows. It also needs to be at a point in the neighbourhood of the SMEs.

In addition, after the sale, the SME needs installation, training, support and upgrades. While this happens today, it leaves much to be desired. Typically, in the event of problems, the channel who takes responsibility only for the hardware will blame the software provider, and vice-versa. The one who suffers is the SME. There is little incentive for the channel to support software which the customer is not paying for. The customer, on the other hand, believes that pirated software is the only way to go, because the cost for legal software is extremely high. As a result, software once installed stays the way it is, and is rarely upgraded.

This sub-optimal situation needs to change. It is not going to be easy to transform the channel. What is needed is a different institution which addresses the shortcomings of the channel and provides a one-stop solution to SMEs. And for that, we turn to ideas from IBM and Wal-mart.

Tomorrow: An IBM for SMEs


TECH TALK SMEs and Technology+T

Tags: Tech Talk

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