For long, SMEs in Emerging Markets (SMEEMs) have been the ignored market caught between the consumers and large enterprises. While companies like Dell and Microsoft can provide the basic hardware and software infrastructure for SMEEMs, there is no equivalent of an SAP or Yahoo for SMEEMs for their business software needs, even as companies like Salesforce.com and NetSuite target the SMEs in the developed markets. This is the ASP market opportunity. In a country like India alone, there are an estimated 4 million SMEEMs employing about 40 million employees who need to process information. Of these, just over a tenth have access to computing. So, if the market exists, why havent companies rushed in? To understand the answer, one needs to first consider the two other segments consumers and large enterprises.
Consumers are the mass-market targeted by the likes of Microsoft on the one hand, and Yahoo on the other. Microsofts strength comes from its Windows and Office franchise. Desktops have been the way most computing has been done for the past two decades. The Internet added the additional dimension of services delivered centrally from a browser, which has become a window to the world. In the past decade, consumer email has already migrated to the Web for most people. For much of this period, the distinction between the desktop and web platforms has been maintained.
Of late, this is starting to get blurred as the likes of Google and Yahoo seek to extend the services they offer. Googles Desktop Search which also integrates results from the Web is one such example. In addition, various portals and websites have become part of our lives, starting with the search engines. We rely on these sites almost as much as we do on our own memory! From storing wish lists to buying items from storefronts and auctions to participating in online communities, the Webs influence on our life has grown. In a sense, portals like Yahoo, Amazon and eBay were the very early application services providers. We just didnt call them ASPs! In fact, as consumers, theres almost nothing we cannot do online. A thin client with a browser would suffice for most people as long as there is a broadband connection which is increasingly starting to happen.
Software for large enterprises has been, for long, the domain of companies like IBM, SAP, Oracle, Computer Associates and Microsoft. In the enterprise software world, SAP and Oracle are slugging it out for leadership in a maturing market. Most of the large enterprises buy infrastructure software and business applications for use within the firewall on their own networks. Deal sizes are large, and enterprise application integration is an important requirement to stitch together various software packages.
Sandwiched in between are the SMEs. For long, theyve managed with a limited set of applications. A spreadsheet doubles as a sales- and customer-tracker. Email is used for all kinds of workflow. Even though many companies have tried to target SMEs, only a few have succeeded. A fragmented market (SMEs are everywhere), channels who are little more than courier companies, customers with limited IT infrastructure and understanding of what IT can do have all combined to limit the penetration of IT in SMEs, especially those in the emerging markets the SMEEMs. In short, the market is ready for a disruptive innovation. And this is where ASPs come in. The needs of SMEEMs form what Joe Kraus has termed as the long tail of software.
Tomorrow: SMEEM Needs
TECH TALK The Coming Age of ASPs+T