TECH TALK: Software SMEs: SME Characteristics

Small and Medium Enterprises (SMEs) need the equivalent of an MS-Office for their business. This e-business suite must enable them to not just reduce costs but also increase revenues. It needs to provide an integrated package which allows them to manage employees, customers and suppliers, along with setting up shop on the Web. It needs to give the SMEs the power of a larger business in terms of technology capabilities. The Internet is not necessarily a friend of the smaller companies – it offers rich rewards only for those who can make it a part of their business. So far, only the larger companies have been able to afford to do this. This needs to change.

First, let us understand some of the characteristics of SMEs. (These are generalizations, and not all may hold true for every SME.)

  • SMEs are strongly owner-manager driven. Much of the time of the top person is spent on doing routine tasks. This is where we need to be able to make a difference. We need to put in place processes and automation for the basic tasks, so that can free the top person to look at growth and management by “exception-handling”. This will happen if we can make the SME an event-driven company.
  • SMEs do not have much of a process or structure. They are run by one individual or a small team who make the decisions. In many cases, they are family/owner-driven. They will invest if they see value in making investments in the “short-term”. So, one has to work on providing immediate and tangible benefits.
  • Since there is little process or structure in SMEs, this also provides a mechanism to put in place “best practice business” processes. SMEs are generally more flexible, and can rejig the way they do their work around a better solution. SMEs do not favour complex, formal methods of project management, preferring simplicity and familiarity.
  • Entrepreneurs at SMEs are generally “all-rounders” with basic knowledge of many areas. They are good at multi-tasking, and since there are many holes in the organization, end up doing many tasks themselves, perhaps not in the most efficient manner. This is where systems can be deployed and SMEs moulded.
  • SMEs are more people-dependent than process-dependent. There are specific people who do certain tasks, with experience and knowledge driving them. This people-dependency needs to change – the knowledge needs to be captured in business rules and processes built around these rules.
  • SMEs are less sophisticated with their IT infrastructure, since it is much harder for them to recruit and retain technology professionals. They lack the sophistication and capability to deploy enterprise-scale systems. They also tend to be somewhat cynical on new technology adoption unless the benefits are clearly visible, or a competitor adopts it, or they are pushed by one of their bigger customers.
  • The focus of SMEs is more on medium-term survival than long-term profits.
  • Since SMEs don’t have the efficiencies, they end up wasting a lot of time and money on SGA (selling, general and administrative expenses).
  • SMEs are so time-pressured that they want just one solid relationship they can count on for top-quality service. They reward that with loyalty and repeat business.

There are over 25 million SMEs across the world. How is that technology and the Internet can help them in their business? How is it that we can get this message to them? We will explore these issues over the next few columns.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.