SME Software

Paul Kedrosky writes:

With 37signals’ launch today of Highrise, its small-business CRM product, I got to thinking about 37signals and the small & medium business market for software. One of the hoariest and most accepted bits of wisdom about the SMB market is that it sucks. Not that it’s small, because it demonstrably isn’t, but because the market is full of tiny companies who don’t purchase enough to justify the sales/marketing to get to them.

Enter 37signals. What Jason et al., have done well is to recognize that the path to profitable SMB sales is to become the default choice of a new generation of companies. Their Basecamp, Backpack, and, now, Highrise, are part of a suite of hosted tools that are near-ubiquitous at startups, not just because they’re well done, but because they are what everyone else is using. Yes, they’re hosted, and yes they’re simple, but it helps to be everywhere in a self-referencing niche too.

Yahoo’s Small Business Opportunity

Screenwerk writes:

Yahoo! Small Business has self-service templates (380 of em) that allow for a pseudo-customized site. What Ive argued to Yahoo! is that most businesses want simplification in terms of choices and only need customization at the margins. But they want true customization capabilities (i.e., logos, photos and some measure of control over formats and colors). Yahoo! has some of this but with its Flickr, mapping and other assets should be able to offer much more.

Now that were in the realm of drag and drop functionality online with AJAX somebody is going to come along with a very simple application to enable SMEs to create sites in an intuitive way using simply WYSIWYG text editing and drag and drop widgets or modules.

Yahoo! is in a position to be that company. They have the resources and a trusted brand. Having domain registration, site building and hosting is a perfect channel for search and other online marketing.

Outsourcing IT

Nicholas Carr writes: “Back when electric utilites first emerged, it was the smaller companies who led the way in hooking up to the shared grid. The prospect of avoiding big capital expenses and high labor costs, and all the associated headaches of owning a lot of specialized technology, outweighed the risks involved in moving to a new supply model. The same thing’s happening with IT today. Big companies, with lots of capital and lots of legacy systems, may be able to justify building their own internel IT utilities – they can gain considerable economies of scale on their own – but the equation’s very different for SMBs. As Berlind suggests, SMBs today would be well advised to approach their IT requirements – both hardware and software – with the assumption that they should be buying services, not assets. Sure, there’ll be plenty of exceptions, but that should be the going-in assumption. If IT isn’t your business, get out of the IT business.”

SAP for SMEs

Business Week writes:

SAP is moving down the food chain. Its entry-level Business One software can be had for well under $10,000, installedthough more sophisticated packages may run to the hundreds of thousands of dollars. Along with a host of competitors including Microsoft and Britain’s Sage Group, SAP is making it possible for smaller businesses to enjoy some of the same efficiencies previously available only to the big guys. Soy Basics sales have grown to $20 million from $1 million in just four years, says Nicolaisen, adding, “We don’t think we’d have been able to do this without SAP.”

SAP says it already has 19,000 customers with sales of less than $1 billion. That’s nothing compared with the estimated 56 million companies that could conceivably become customers someday.

Web Services for Small Businesses

The New York Times writes:

The second-generation Internet technologies combined with earlier tools like the Web itself and e-mail are drastically reducing the cost of communicating, finding things and distributing and receiving services online. That means a cost leveling that puts small companies on equal footing with big ones, making it easier for upstarts to innovate, disrupt industries and even get big fast.

The phenomenon is a big step in the democratization of information technology. Its imprint is evident well beyond business, in the social and cultural impact of everything from blogs to online role-playing games. Still, it seems that small businesses, and the marketplace they represent, will be affected the most in the overall economy. Long-held assumptions are suddenly under assault.

Tech for Small Businesses

WSJ writes:

Thanks to new technologies small firms can look — and in many cases operate — like only larger firms could just a few years ago.

“You want to give the impression that you are efficient, creative and professional, and that you have access to all the resources and capabilities that a large business does,” says Bruce Judson, a faculty fellow at the Yale School of Management and the founder of three Web-based small businesses. “Certain technologies can help you do this.”

In the effort to look bigger than they are, small businesses can start with the Internet. In the past, hiring a Web designer to launch a site with the necessary links, animation, stereo sound and interactive navigation was prohibitively expensive for many start-ups. They could create a Web site — but it would look as small-time as they were.

New technology, however, makes it easy for pretty much anybody to offer a Web site to rival the big guys. ImpactBuilder.com offers industry-specific multimedia templates that let an enterprise build a complex Web site or deliver Web-based presentations.

Tech as Business Leveller

Hal Varian writes: “When we think about the economic impact of information technology, the first companies to spring to mind are the industry giants like Amazon, eBay, Google and Yahoo. But the biggest impact on the economy may well show up in small and medium-size enterprises…The reason is that information technology is a great leveler. As computers get cheaper, more powerful and more connected, technologies that were only available to the Wal-Marts of the world become available to the small fry.”

Virtual Offices for Smaller Companies

PortalsMag writes: “Let’s take a look at a virtual office built out of the following elements: Webmail; IM; personal calendars; an online group; and a home page to serve as a lightweight portal to aggregate these and other services. The goal of the office is to provide a basic (and free) communications and collaboration platform for geographically separated employees.”

SMEs and IT

The Economic Times had an article yesterday which had a few quotes from me:

If you were an SME, you almost certainly managed all your business processes manually, the way it has been done very smoothly thank you very much for almost a century.

But now, it is almost safe to say that IT is becoming mandatory even for SMEs. There is a lot to gain by doing it with IT, and IT is becoming affordable.

But like every other investment, one needs to understand the ‘WHY’ and ‘HOW’ and whether ‘WHY’ is greater than the ‘HOW’ meaning whether ‘returns’ justify the ‘investments’.

How would you manage your operations differently if everybody in your organisation had a computer, is the question that Rajesh Jain, MD, Netcore, wants every SME to ask itself. It is not just the automation of flawed processes, but the potential to re-engineer every business processes and the benefits that come along that needs to be considered.

Rajesh points out that there are almost 4m SMEs in India and they employ close to 40m people. But the number of computers in the SME sector is hardly 4m. This means only one in 10 personnel in the sector has a computer.

This hinders collaborative use of IT. Rajesh strongly believes that intense deployment of information technology will help small organisations to grow business and become mid-sized organisations.

And mid-sized organisations, on their part, could deploy information technology to bring in efficiency and cut costs.

One should choose a technology that delivers required functionality at the lowest cost. SMEs should deploy CRM type applications to grow their business, advises Rajesh.

He says that ERP companies are realising that their next growth potential is in small and middle level enterprises and, hence, are tailoring their offerings to suit the SME sector. These typically cost as low as Rs 5 lakh and are certainly affordable.

Vendors, both hardware and software, are gearing up their offerings so that SMEs can spend on IT as if it is an operating expense and not a capital expense. Of course, SMEs have an option to get software developed by an independent software vendor too.

When getting customised applications developed, the focus, Rajesh advises, should be to get the information on the change happening, and not report the norm. The need is to distil information and get the right kind of information. Another good examples of keeping IT costs on the lower side is Crossroads mall and Piramyd group of stores.

Rajesh says that the vendors should gear themselves up to provide hosted IT services to SME clients. SMEs should be able to receive one bill that includes the use of hardware, software and communications.

He says that while the ASP (application service provider) model failed a few years ago, as it focused on organisations that already had IT infrastructure, there is a clear case for redeploying ASP.

A9 and Small Businesses

[via Andy Beal] Clickz has an interview with Amazon.com’s Barnaby Dorfman, VP of A9.

We’re encouraging businesses to provide information to us. The yellow pages industry has a problem of data becoming stale. We’ve created an interface that allows businesses to visit the site and update that information directly on the site. In addition to making changes, they can add a link to their site. Businesses can also upload their own images, pictures of the menu, marketing collateral, whatever they want.

With the click-to-call service, consumers can either talk using their PC or we can do a third party call. It’s all about reducing the friction.

We need a similar service for India.

Small Business Branding Manifesto

[via Doc Searls] Small Business Branding Blog suggests:

1. Forget Customers and Prospects. Think Partners.
2. Forget Marketing. Feed Your Network.
2a. Forget Marketing. Think Conversations.
3. Forget Control. It’s an Illusion.
4. Forget Selling. Connect.
5. Forget Logos. Think Gut Feelings.
6. Forget “Think Big.” Think Small.
7. Forget “Think Big” (again). Think Be/Do Me.
8. Forget “Next Big Thing.” Think Just This Thing.
9. Forget Professionalism. Think Humanism.

Google and Small Businesses

CBS News had a segment on Google recently. An excerpt from the transcript:

Eric Schmidt, Googles 49-year-old CEO who was hired in 2001 to be the resident grown-up, says that the pool of potential advertisers is almost limitless: “Theres a lot of evidence that the companies of which Google is a member are enabling a new kind of commerce, between very small communities, people who can find each other, for whom the traditional advertising mechanisms, whether its television advertising or radio, do not serve.

“An example: a friend of mine named Peter puts his credit card in and he give us $50 [for a sponsored link]. And his wife knits a particular kind of rug. I said, ‘Call me back, give me an update.’ So Peter calls back and says, ‘Were ecstatic. For $50, we got all these customers.’ And I said, ‘Well, how many did you get?’ And he said 100. And I thought, ‘Wow, you know, thats great. What a wonderful outcome.’ And he said, ‘Theres a problem…my wife does one rug per year.’ So thats all the revenue were ever gonna get from Peter.”

But there are millions of Peters out there, and billions in potential ad revenue. The business world is just beginning to grasp the potential.

India’s SME Market

Business Standard writes:

Access Market International (AMI), the US-based IT research agency, reckons that the size of the Indian SME market will rise sharply from $ 6.33 billion (Rs 28,504 crore) in 2003 to over $ 10.45 billion (Rs 47,056 crore) in 2005.

Dhawan points out that SMEs already account for over 45 per cent of the total IT revenues in the country. Whats more, the segment is growing faster than the overall IT industry by 20-25 per cent this year versus the average growth rate in the IT market of 17 per cent. More importantly, India has some 18 lakh SMEs and only the surface has been scratched.

An AMI study of SMEs shows that only three per cent of them in India have a local area network at their offices or factories, just 15 per cent have a internet connection, four per cent have broadband and a mere one per cent have their own website. Notes AMI analyst Deepinder Sahni: This clearly shows what a large untapped market is waiting for everyone to leverage.

Encouragingly for IT companies, Sahnis market research suggests that most SMEs are increasingly realising that investing in IT can improve bottomlines. The AMI study found that over the next 12 to 18 months, 17 per cent of the SMEs AMI contacted want a data back up and recovery system, 18 per cent want to interconnect their offices, and about 21 per cent want instant messaging systems to be installed in their offices.

To be sure, IT companies realise that catering to SMEs is an entirely different ball game. Unlike the big boys, they are extremely sensitive to price, demand quick implementation, want continuous support as they dont have IT departments and often are not located in metropolitan cities.

SME IT Challenges

InfoWorld writes: “Four big technology challenges face IT managers who work at small to medium-size businesses. And guess what? The challenges look a lot like the ones confronting large organizations: VoIP, SANs, Gigabit Ethernet, and security. Few IT shops, big or small, would be crazy enough to tackle all four issues at once. Together, all this new technology may have reached the critical mass necessary for SMBs to think seriously about a network overhaul.”

HP’s SME Services

InfoWorld writes about HP’s plans to make “commPuting” a utility:

HP will begin selling managed IT and communications services next year to small and medium-size businesses in three continents, offering Internet access, servers, voice over Internet Protocol (VOIP) and help desk calls at fixed monthly rates, an HP official said.

The service, called HP Ready Office, has been in pilot in France since May. It will be rolled out there in the first half of next year, in partnership with France Telecom SA, which provides the communications services, and Alcatel SA, which provides IP telephony equipment.

HP is betting that smaller businesses — those with up to about 1,000 employees — would prefer to “lease” servers and IP phones for a fixed fee, and have their equipment managed remotely by an experienced IT provider. Mateo cited having a single point of contact for all support calls as a key benefit. In France, France Telecom will receive the calls, with the IT queries handled by HP behind the scenes.

The services will be offered in a variety of packages. A help desk component is 24.90 ($20.26) per employee per month. It includes support calls for desktop applications, as well as remote management and diagnostics of desktop PCs, including non-HP systems.

For 48.50 per month, customers receive a HP Proliant Server with an 80GB hard drive running Microsoft (Profile, Products, Articles) Corp.’s Windows Small Business Server 2003. The price includes the hardware itself and remote management services. Customers must sign up for a minimum of three years. A similar server with two hard drives and RAID is 62 per month, Mateo said.

The VOIP component is 17 per line per month, with services hosted by France Telecom on Alcatel’s PBX equipment. A DSL (Digital Subscriber Line) connection from France Telecom’s Olane business is 59 per month.

India’s Economy

WSJ has an article by Arvind Panagariya, the Jagdish Bhagwati Professor of Indian Political Economy at Columbia:

Four months into UPA rule, prospects are less rosy. GDP growth, which had touched 8% in 2003-04, is set to decline to 6% this year. Inflation, at 3.4% in 2002-03 and 5.4% in 2003-04, has edged up to 7.5%. Until April, everyone was betting on the appreciation of the rupee. But it has depreciated more than 6% against the dollar since then, despite the sale of several billion dollars by the central bank. The stock index Sensex has declined 10% from its April peak.

Some of this results from events beyond Dr. Singh’s control: The lower growth-rate projections are largely attributable to the expected decline in agricultural growth due to bad weather; and inflation has been fed by increased world prices of oil and metals, especially steel. But some of the scaling down of expectations is due to UPA policy. Pessimists are justifiably alarmed over two developments. First, having embraced the view that its election success owes much to the neglect of India’s rural poor in the past decade, the UPA plans to increase expenditure substantially in agriculture, education and health. Second, the intensification of India’s economic reforms is in doubt. The UPA has abandoned the privatization program that had finally gained some momentum under the BJP government and has ruled out labor-market reforms.

There remains insufficient recognition of the need for clean-up in other areas if India is to achieve the announced target of 7% to 8% annual growth rate over the next five years. The growth rate in industry needs to improve: Contrary to the experience in other countries, its share in the GDP has failed to grow even as the share of agriculture has declined. Despite an immense pool of unskilled labor and low wages, unskilled-labor-intensive industry has performed relatively poorly in India. India’s export growth has accelerated in response to the opening up during the ’90s but the fastest growing exports have been either capital-intensive (such as auto parts and machinery) or skilled-labor-intensive (pharmaceuticals and software). So industrial expansion has failed to create well-paying jobs for the unskilled and to reduce pressure on the farms.

The policy obstacles behind this sorry situation are widely known. First, a large number of the unskilled-labor-intensive products are reserved for small-scale enterprises. This has handicapped the growth of modern enterprises that can compete effectively abroad. It has also affected the inward flow of direct investment: Tyco will not produce toys in India if toy manufacturing is restricted to small enterprises. Second, under the labor laws, firms with 100-plus workers are not permitted to lay off workers under any circumstances, deterring larger firms from manufacturing even products that are free from the small-scale-industries reservations.

By turning a blind eye to these ills, the UPA invites economic failure. Dr. Singh is too good an economist and too accomplished a reformer not to appreciate the need for caution on expenditure and boldness on reform. The question is whether politics will force him into missteps. India’s friends can only hope he will prevail.

Internet Opps for Small Businesses

Adam Hanft writes:

The entrepreneurial edge. We’ve seen it in action and we know what it represents. The ability to respond quickly to opportunity. To see trends before they leap into front page fodder. To seize and run with new technology before large and lumbering competitors wake up and smell the skim decaf latte.

It’s an instinct and behavior that’s true most of the time. But puzzlingly, I don’t see it happening in the hot and buzzy area of Internet marketing –specifically, as it relates to two distinct areas: search marketing and rich media.

Search marketing, of course, is the practice of using keywords and other terms to drive Web surfers and Web seekers to your site. It’s the phenomenon behind Google’s monumental market cap and the holy grail of one-to-one communication: Someone raises their hand and says, “I am interested in learning more about this subject, or this product category, or this service area.” No more qualified, valuable prospect exists on the face of this ozone-depleted, fossil-fuel dependent earth.

The second online marketing opportunity that entrepreneurs need to grab is rich media. While traditional banners are declining in use as an advertising vehicle — they’re boring and uninspiring — rich media is booming. “Rich media” describes a range of more sophisticated and involved online advertising formats – messages enhanced by sound and motion, by interactivity, by pull-down menus, or other multimedia options. Sometimes, rich media units float or “take over” a page, as with the industry-leading, innovative messages made available from PointRoll.

Small-Scale Industry Clusters in India

UNIDO has a series of papers on the SSI clusters in India from studiesthey did in the 1990s. “With a contribution of 40% to the country’s industrial output and 35% to direct exports, the Small-Scale Industry (SSI) sector has achieved significant milestones for the industrial development of India. Within the SSI sector, an important role is played by the numerous clusters that have been in existence for decades and sometimes even for centuries. According to a UNIDO survey of Indian SSI clusters undertaken in 1996, there are 350 SSI clusters and approximately 2000 rural and artisan based clusters in India. It is estimated that these clusters contribute 60% of the manufactured exports from India…Despite such achievements, the majority of the Indian SSI clusters share significant constraints like technological obsolescence, relatively poor product quality, information deficiencies, poor market linkages and inadequate management systems.”

I wonder if there are any more recent studies.

We need the eqivalent of Tech 7-11s in these SSI neighbourhoods to take IT to them – they are a large, untapped market offering great potential, but also hard to reach and convince.