Whole Solution for Small Businesses

InfoWorld writes about how small businesses in the U.K. are being offered a one-stop shop for software and broadband through a new joint offering from Britiesh Telecom and Microsoft.

BT Connected and Complete has been put together to give small companies broadband access, e-mail, Office software and support and maintenance on a per-user basis, the companies said. For about 50 ($89) a month per user, depending on the size of the company, a local BT channel partner will install and set up the broadband connection, with firewall and antivirus software, and provide Microsoft’s Solution for Hosted Exchange 2003, Version 2.0, for e-mail, contacts and calendar access, plus Microsoft Office Small Business Edition 2003.

Companies will also be offered a domain name and simple Web design software to help them create their first Web site, Microsoft’s Scottish Regional Manager Raymond O’Hare said.

BT’s channel partners will provide support and will visit each customer every six months to perform an “IT health check up” on the company to assess its infrastructure and future needs.

This is exactly what is needed in India, but at a much lower price point.

From a News.com report:

The growing optimism in the small-business market will see more money being spent on hardware, security software and information management software, Forrester predicted. New security investments are likely for 75 percent of small and midsize companies. About 74 percent are planning to purchase new servers, while 65 percent plan to buy new storage gear. Nearly 70 percent are looking to buy additional Internet connectivity and bandwidth, with 85 percent of these also likely to shop for networking hardware.

Forrester said that 61 percent of small businesses have upgraded at least one PC to Microsoft’s Windows XP operating system, and 95 percent are planning to replace an average of one in four of their PCs.

The companies surveyed said they plan to buy directly from vendors, bypassing the middleman. Among the suppliers preferred by companies in the survey are Dell–which was the choice of 79 percent of the respondents–Microsoft, Cisco Systems and Symantec.

SME Resellers

WSJ writes about the challenges selling to small- and meidum-size enterprises (SMEs):

while many small and midsize businesses constitute a ripe market, selling to these companies can be a difficult game that demands just as much sweat as big-company sales, but with a far smaller payoff. Steadily falling prices of software, stiff competition among resellers, and highly cost-conscious buyers make the business tough. And it’s resellers which act as middlemen of sorts, that are doing the sweating.

In 2003, the 8.1 million U.S. small and midsize businesses spent $75 billion on information technology, a 4.1% increase from the previous year, while overall IT spending in the U.S. grew just 0.7% over the same period, according to IDC, a market-research firm based in Framingham, Mass. IDC predicts that in 2004 investment from small and midsize businesses will rise 6.2%, outpacing the 4% expected increase overall.

[The resellers are] the entrepreneurial worker bees of the industry that handles the details of selling, installing and maintaining software for the big technology companies. Often geographically focused, [they] are the only way many big tech companies can reach the mass of smaller companies without employing armies of sales and support staff.

Still, there are some challenges for resellers. Many of those stem from the ever-falling price of software. Microsoft and other software makers use lower pricing to attract smaller businesses to their technology. But resellers feel the brunt of that strategy, since even as prices fall, their costs don’t, making it increasingly difficult to earn a profit.

The pressure becomes particularly acute as customers, with their own financial concerns, often take far more time than in the past to mull what software to buy. To make the sale, resellers have to stick with those customers — preparing demonstrations and answering questions — which raises their costs.

The selling process can be even more prolonged at the smallest companies, many of which are operated by owners who know they need new technology but are particularly sensitive to its cost. “As they’re writing the check they clutch onto the checkbook thinking, in effect, ‘It’s coming out of my own pocket,'” says Ray Boggs, an analyst who covers small and midsize businesses at IDC.

Then there’s the middleman. Smaller businesses often don’t have technology expertise in-house or standard processes for choosing a technology vendor. That places extra demands on the reseller to educate and hand-hold — often at no charge and with little promise of any return. Other times, the businesses hire consultants to guide them through the process.

Small-Businesses and Technology

Esther Dyson plans to looks at the small-business market for the next issue of Release 1.0. She writes:

The starting thesis: big businesses have already benefited significantly from IT and the attendant economies of scale – though you often can’t see the results because they are overshadowed by countervailing bureaucracy, politics, inefficiencies and waste. Where will the big wins for small business come from? for some [economies] of scale, outsourcing is key. for others, simply using the same technology available to large companies on a micro basis is the answer.

But I suspect a lot of benefit will come from rationalizing supply chains that the small companies are part of. Second question: what’s the best way for vendors to reach (sell to and support) these small companies? There are VARs, but it seems to me that often the best channel is through their suppliers or customers. E.g., if you want to sell to Ford or JC Penney or now Wal-mart, you have to use X… anyone who knows successes or failures in these arenas, or supporting or contrary examples – and economists to explain it all… I would love to hear from you.


SMEs and e-Procurement

NYTimes writes (in the US context):

Among the nation’s biggest 500 companies, the practice of connecting to suppliers via the Web and automating purchases – a process known as e-procurement – is “rising substantially,” said Andrew Bartels, an analyst with the technology consultancy Forrester Research.

Well-financed corporations are willing to invest in Internet software and technology that helps take the inefficiency out of the buying processes, Mr. Bartels said.

But for small- and medium-sized businesses facing an uncertain economy, such investments are often impossible to justify. “Between two-thirds and three-quarters of big companies are doing it,” Mr. Bartels said. “But below that level, the glass floor effect takes over.”

Unlike bigger businesses, second- and third-tier companies cannot be certain that their suppliers will have online electronic catalogs, be able to respond to electronic purchase orders or be willing to make online business proposals. Industry behemoths, on the other hand, can devote the time and money to installing such systems, while also compelling suppliers to link to such systems.

Mr. Bartels said the company that had attracted the most dollars from big businesses – and could benefit most from cracking the glass floor – is Ariba, one of the stars of the business-to-business bubble.

While procurement software can help make that happen by linking suppliers and buyers more closely, it is not yet affordable enough for most companies to risk the investment, said Frank Ruane, director of corporate purchasing and materials management for Olympic Steel, a company in Bedford Heights, Ohio that processes unfinished steel for manufacturers.

Mr. Ruane, who buys about 1.2 million tons worth of steel a year, said he used the Internet extensively to communicate with his 40 or so suppliers, as well as to buy indirect goods like office supplies. But Olympic, which has about $500 million in annual revenues, has yet to buy e-procurement software.

The Internet has, Mr. Ruane said, helped him reduce the cost of the products he buys, by both allowing him to find better prices and complete the transactions quickly.

But because software offered by the various e-procurement vendors is simply too expensive for him to put in place, he has not been able to reduce the company’s reliance on electronic data interchanges, the one-to-one electronic trading systems frequently set up between buyers and sellers.

Olympic would have to replace its three older computer systems with a new enterprise resource planning system, he said, before it could install new procurement technology. “And then there’s the costs of training people,” Mr. Ruane said. “The cost ends up being so astronomical that a $500 million dollar company with very narrow margins just wouldn’t have the cash flow to do it, or the time or staff.”

IT for Small US Businesses

Business Week recommends two products for small businesses – Microsoft’s Small Business Server and EmergeCore’s IT in a Box.

Windows SBS offers corporate-style computing for little companies. It’s based on the Windows Server 2003 operating system plus high-end add-ons such as Exchange Server for e-mail and group scheduling and SharePoint for collaborative use of Microsoft Word and other Office applications. The software is a remarkable bargain: $599 for five users, compared with $999 for Server 2003 Standard Edition alone. Hardware to run it on will typically cost $1,500 or less.

EmergeCore’s IT in a Box is a simpler solution for small companies that prefer to do it themselves. The $1,395 IT-100 is a compact box not much bigger than a cable modem. It provides standard Internet e-mail that is simple but lacks the collaborative features of Exchange, plus file-sharing, network management, a firewall, and built-in wireless access. You can even run a public Web site on it, though it’s a better idea to pay a hosting company for that service, given security concerns.

The IT-100 runs on Linux, but the operating system is completely hidden from users and administrators. All interaction is through a Web browser, and normal maintenance, such as adding and deleting users, is easy. Initial setup is more difficult, so most small businesses could use some help.

SBS is a good product for a small business that wants corporate-style computing and can pay the price. IT in a Box is a solid choice for a company with enough tech smarts to handle the setup and administration, since outside help may be hard to find.

Both products are still too expensive in the Indian context.

China’s Alibaba help SMEs

I have tracked Alibaba since it was launched about 4-5 years ago. In some ways, I would have liked to do something similar for Indian SMEs. Alibaba helps Chinese SMEs connect to each other and with international buyers. It raised a lot of money in its early days (in excess of USD 25 million) from the likes of Softbank and Goldman Sachs. Then, as the bust happened, it too hit a wall. There were some doubts on the company’s road ahead (reflected in 2 HBS case studies).

Well, as it turns out, 2003 has been a banner year for the company – it had a free cash flow of USD 12 million, and recently announced that they have raised USD 82 million in fresh funds. Alibaba is now Asia’s largest the biggest b2b sites.

WSJ writes (also excerpted from another story whose link is not available):

Electronic commerce is changing the way companies all over the world do business, making it easier for them to buy and sell to each other and to connect with customers. But in China, e-commerce is having an especially big impact in helping small private businesses sell nationally and even internationally.

Hampered by poor roads, a creaky transportation network and fractured local markets, small companies have a hard enough time doing deals in other provinces within China; traditionally, it would have been near-impossible for them to identify potential partners abroad. By acting as global trade fairs, Chinese e-commerce sites are allowing many smaller companies to reach a far wider market and to compete directly with larger competitors.

Fu Xiaohui, a researcher who works for a consulting company under the Ministry of Information Industry, estimates that the value of business-to-business deals hit 275.6 billion yuan ($33.30 billion) in 2003, while business-to-consumer deals were valued at 5.2 billion yuan.

Alibaba.com seems to be off to a strong start. Founder Mr. Jack Ma says the company has nearly three million users in 200 countries and attracts nearly 6,000 new users daily…Its sites include two business-oriented ones: an English-language site matching Chinese and international businesses; and a Chinese-language one targeting companies in China. A third Chinese-language site links Chinese consumers with other consumers and businesses, much like U.S.-based eBay.

While anyone can access the two business sites, users who pay a membership fee are entitled to post detailed information about themselves, and can access additional information and services. Alibaba.com charges an annual fee of between $5,000 and $8,000 for Chinese suppliers who post detailed content about themselves on the company’s international business-to-business Web site, for example. More than 4,000 Chinese suppliers have signed up for the for-pay international service, with a 70% renewal rate, Mr. Ma says.

For its domestic business-to-business Web site, suppliers who pay a $300 annual membership fee are entitled to additional services, after they have met background and credit checks by Alibaba.com. Mr. Ma says that Alibaba.com had 30,000 paid subscribers for the domestic service in 2003 and that the company receives more than 3,000 inquiries daily about the service.

A key goal of these services, Mr. Ma says, is to help small and medium-size companies earn money by linking them directly to buyers and markets to which they otherwise wouldn’t have access. Another is to help them assess the credit-worthiness of potential business partners. As China’s market economy takes off but before the establishment of any national credit-rating systems, the ability to accurately assess potential partners’ credit-worthiness is critical to running a successful business, whether it be a national commercial bank or a corner store.

To reach Mr. Ma’s goal of becoming a global player, Alibaba.com will have to make the transition from serving as an online global trade fair to a for-pay, online transactions service — a critical test that faces the company over the next few years.

“That’s always been the holy grail for B2B,” says Duncan Clark, chairman of BDA China Ltd., a technology-research company, referring to companies that facilitate online business deals. “If Alibaba wants to live up to Jack’s promise of becoming a major force in global business, it will need to be taking a fee on the deals it is facilitating.”

Mr. Ma said the funds will go toward developing technology, training personnel and building customers to move the company’s business-to-business Web sites from a “meet at Alibaba” model to a “work at Alibaba” model.

Kalam on Indian SMEs

Rediff reports on the Indian President’s vision of a developed India, covering tourism, small-scale industries and rural development, excerpted from the inaugural address at the 23rd India International Trade Fair in New Delhi. Here is what he spoke about SMEs:

The small-scale industries sector plays a vital role in the growth of the country. It contributes almost 40 per cent of the gross industrial value added in the Indian economy. It has been estimated that the turn over to capital employed is approximately 4.62. The small-scale sector has grown rapidly over the years. The number of small-scale units has increased from an estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.

The small-scale industry sector in India creates largest employment opportunities for the Indian populace, next only to agriculture. The SSI sector plays a major role in India’s present export performance. About 45 per cent to 50 per cent of the Indian exports are contributed by the SSI sector. Direct exports from the SSI sector account for nearly 35 per cent of the total exports.

Besides direct exports, it is estimated that small-scale industrial units contribute around 15 per cent to exports indirectly. This takes place through merchant exporters, trading houses and export houses. It would surprise many to know that non-traditional products account for more than 95 per cent of the SSI exports. The product groups where the SSI sector dominates in exports are sports goods, readymade garments, woolen garments and knitwear, plastic products, processed food and leather products.

The strategy for enhancing the exports of goods and services from SSI sector has to be based technology upgradation, value addition techniques, credit support and export marketing zones.

Semantic Web and XBRL

Tim Bray joins in the discussion:

Right now, if I hear of some company by name (for example, lets imagine a company called Example Corporation) I know that if I stick www. in front of the name and .com after it, then I can point a web browser at http://www.example.com and find out a bunch of stuff, including:

– How long theyve been around.
– Whether I know anyone in their management.
– Whether theyre private or public.
– If theyre private, who their investors are, and if theyre public, a whole lot of detailed financial information.
– Where their office is.
– What their phone number is.
– Whether theyre hiring.
– What the names of their products are.

Of course, when I say I can find out I mean that I as a human can plow through Flash intros and HTML pages and PDF printouts to laboriously hand-assemble all this useful information. Which basically sucks.

So imagine that given any http://www.example.com, I could count on there also being a data.example.com, which would typically have all these facts available in some straightforward XML dialect, so that I could use a program to do the tedious basic factfinding work.

In this context, its interesting to note that I gave a keynote speech last week at the 8th XBRL International Conference; XBRL is Extensible Business Reporting Language, designed to capture all the minutiae of financial statements in a machine-processable form. The value proposition for XBRL is a no-brainer: cost reduction. The financial industry depends totally on consuming accurate financial information, and since at the moment this is generally available only on paper, or if electronically, in PDF or the hardly-more-useful EDGAR version, a huge amount of time and error-prone human effort goes into extracting and repackaging it.

Of course, if companies as a matter of routine posted XBRL versions of their financials at addresses like data.ibm.com and data.renault.com and data.hsbc.com and data.daimler-chrysler.com, a huge amount of time and money would be saved. And youd have taken some useful steps towards a machine-processable web.

Excellent ideas – which we should apply to build a SME Trade Information Marketplace.

SMEs driving IT Recovery

Barron’s writes:

So if the world’s global conglomerates aren’t driving a tech recovery, who the heck is? Answer: Small and medium-sized businesses, or SMBs. Just as the SMB is the salvation for a broader economic recovery, the smaller companies are the ones kick-starting tech, says analyst Jaime Roca of Precursor, an independent technology-research boutique.

Consequently, those IT vendors who were the biggest suppliers to the SMB going in to the tech depression will be the biggest winners coming out of the slump, Roca says. This group has the earnings power and incentive to increase their tech spending prior to the end of the year and well in to 2004. For the most part, most of the SMB companies did not overindulge in massive software and hardware upgrades during the bubble to the same extreme extent that their enterprise-class brethren did, and that means they will be generating more of a demand now, he adds.

In a September study of large and SMB spending, Precursor concluded that small and medium-sized firms (100-1,000 employees) have increased their capital spending, including tech, at a rate eight times faster than larger corporations.

Thus, the research shop has identified a group of IT vendors who are most likely to benefit, calling it the “growth pack.” They are: Microsoft, Intuit, International Business Machines, Dell Computer, Symantec and Lexmark.

Unsurprisingly, software and services will gain the biggest share, with hardware following and telecom scraping for crumbs, he says. Companies of many sizes and stripes are trying to reduce the complexity of their networks and improve their return on investment, but the SMB is more likely to turn to fewer vendors to do so. They want what technology that they already own to work better through improved integration. And they want to add new applications and services that allow them to better track their supply chains, sales, and finances. Sound familiar?

But they aren’t likely to go to a dozen vendors to do so. This is why Microsoft and IBM stand to do well. They are already providing a lot of these things to small and medium-sized businesses. In fact, Microsoft best serves the smallest businesses, where the least competition lies, but it is progressively moving up into the middle tier as well. Microsoft, as well as Intuit, have entrenched customer bases amid the smallest companies, where they can up-sell and cross-sell new product lines, Roca says. Intuit, for its part, has expanded well beyond its consumer-retail roots (Quicken) and is offering accounting and other back-office software for small businesses.

Roca’s colleague, Bill Whyman, thinks that Microsoft’s launch this week of its new Office System business software will be a big winner, accounting for about half of the company’s revenues and about 70% of its net profits. Along with its growth in servers, Microsoft will morph from being a PC-centric software company of its past to a networking software company of the future.

Meantime, Dell and Lexmark will continue to win the business of the SMB through their lower price strategies. Dell is becoming their supplier of choice in servers and storage, and Lexmark continues to grow through its concentration on all-in-one machines that print, fax and copy. (Lexmark also sells machines under the Dell name through a joint venture between the two). As for Symantec, its dominance in the security software makes it a staple for any IT upgrade, regardless of the size of the company, Roca says.