Category: Emerging Enterprises

The Economist writes about how the world of infotech is changing:

Steven Milunovich, an analyst at Merrill Lynch, thinks that the tech industry evolves through waves lasting 10-15 years, as innovation leads to a burst of spending on new technologies, then to a less exciting period of assimilation. In the 1970s and early 1980s, for instance, firms stocked up on the new thing at the time, mainframe computers. IT spending soared from less than 2% of GDP to about 3%. It then stayed at that level for almost a decade, as firms worked out how to get the most out of their machines. In the 1990s, they started investing again, this time in the new technology of client-server systems. By 2000, tech spending was almost 5% of GDP.

Since then, it has fallen back to about 4% of GDP as IT managers have repented of their bubble sins. Their penance is now pretty much done. Even so, reckons Mr Milunovich, firms have now entered a phase of assimilation, with the emphasis on making tangible returns on their technology investments, past and present. As a result, he says, IT spending is likely to grow only as fast as GDP for a few years.

Pip Coburn, an analyst at UBS, calls this environment cold techin contrast to the bubble era, when tech was hot. Firms now spend on different things, such as software to make their expensive bubble-era systems work together. Antivirus software and firewalls are other big items. Some companies are moving their IT functions to cheaper places such as India.

The hottest cold technology is Linux, an operating system that comes free, except for maintenance costs. In March, Forrester, an IT consultancy, found that 72% of corporate IT managers were intending to move their server-computers to Linux from Microsoft and Unix software.

What is missed out in these calculations is the potential for small- and medium-sized enterprises from emerging markets to spend on IT. But they need simpler, affordable solutions, along with education on how computers and the Internet can make a direct, tangible impact on their productivity and business. This is a market which exists but is not being seen by most of the IT companies, who are too focused on (a) the top of the pyramid, and (b) the developed markets.

A News.com article has some interesting stats: “[Microsoft’s] Ayala said the market, made up of businesses that have fewer than 1,000 workers, currently accounts for more than $420 billion in spending, with that figure projected to reach more than $690 billion by 2008. The figure includes hardware, software, services and other IT spending. According to the company, two-thirds of small businesses have more than one PC, but only about one-fifth of such companies has a server. According to the company, two-thirds of small businesses have more than one PC, but only about one-fifth of such companies has a server.”

Microsoft is launching a simplified bundle with its Windows OS and Exchange software. We will be doing something similar next week – it is called Pragatee. More soon!

InfoWorld writes about HP’s USD 750 million Smart Office initiative for small- and medium-sized enterprises (SMEs):

Among the pieces of the Smart Office initiative:

— HP Smart Finance offerings aimed at simplifying purchasing through HP and its vendor partners, trade-ins and recycling. HP will offer zero percent financing or no payments until 2004 for three months beginning Oct. 1.

— HP ProLiant servers with pre-installed Microsoft Windows Small Business Server 2003, which supports 75 users out of the box.

— New desktop systems, including a health-care PC, and a space-efficient package with a slim-line desktop PC and a flat-screen monitor.

— A variety of new printers, including the HP Color LaserJet 9500, which HP touted as capable of creating professional do-it-yourself marketing materials.

— HP Care Pack services, a set of warranty packages including application support and data backup and recovery.

— An integrated support system that includes help from HP’s vendor partners, resellers, online chat and Web-based seminars.

HP will announce partnerships aimed at four small business vertical markets — accounting, medical offices, legal offices, real estate and health-care, added John Brennan, HP’s new senior vice president of SMBs.

The small and medium-sized business market for IT goods and services is about $460 billion a year worldwide and is expected to grow to more than $640 billion over the next three to four years, Brennan said. HP’s chunk of that pie is $21 billion a year, the number one company in IT sales to SMBs, he said.

This still seems to be quite heavily US-centric. SMEs in the emerging markets need even more affordable and integrated solutions. When will be the IT majors wake up to this opportunity?

INc notes that “a report released by the Small Business Administration’s Office of Advocacy last week reveals that 99.7% of the nation’s businesses are small (fewer than 500 employees), 50.1% of the nation’s non-farm sector employees were employed by small businesses in 2000, and that small businesses created 75% of the net new jobs between 1999 and 2000.”

I wonder what the corresponding figures for India would be.

Information Week writes about how “some small businesses are using an increasingly rich and surprisingly low-cost set of business-technology tools to survive and compete–tools that in the past were often available only to far-larger businesses.”

These small businesses seldom have big IT staffs, but they often have people at the top who are either technically adept or willing to employ new technology that advances the business. They’re geared to react to change and use the Internet, collaborative software, business intelligence, and cheap broadband communications. Most of all, they understand the Web and how it changes the rules of the game.

Shrikant has mentioned about what is happening on South Korea in the context of small businesses on more than one occasion. So, it was good to read this story in Business Week – there are lessons in what we need to do in India for us.

After years of digitizing everything from stock trading to gaming to education, [South Korean] officials realized that one group — the country’s nearly 3 million small businesses — remained thoroughly low tech.

Those companies employ two-thirds of the workforce and generate 30% of gross domestic product. So Seoul is spending $75 million over three years to give small businesses online access to the same kind of planning, management, and accounting tools that big companies use. Officials hope the program will not only make small companies more efficient but will also let them more easily hook into bigger companies’ supply chains, which are largely powered by the Internet. “On a national scale, the synergies will be enormous,” says Thomas Yoon, senior vice-president of the state-run National Computerization Agency.

To carry out this ambitious program without breaking the bank, Yoon’s agency has recruited the nation’s telecom companies. They are making room on their computer servers for small-business owners. Software and technology consulting companies then load the telcos’ computers with programs catering to the needs of small companies. The government subsidy pays for development of the programs and for training the small-business owners in using the software. The small businesses have to buy their own PCs and broadband connections to reach the programs on the telecom companies’ servers. “Unless small suppliers become part of the networked systems, you can’t expect industrywide electronic transactions or efficient supply chains,” says Paek Ki Hun, director in charge of Internet policies at the Ministry of Information & Communication. The goal: making 30% of all business transactions electronic by 2005, up from 12% now.

[Small businesses] can buy access to the computer network and basic business-management programs for an average of $15 to $25 per month. More robust software for bigger companies costs $75. The computerization agency has put together customized packages of software for 22 business lines, including real estate brokers, eyeglass shops, beauty parlors, sports clubs, and restaurants. Programs for an additional 36 business types are being developed.

Around 150,000 of South Korean business are connected, and the aim is to reach 500,000 by end of 2004.

In the context of SMEs, the three big technology impacts they are seeing (all pretty much at the same time) are mobiles/wireless, broadband and affordable business applications. A potent combination, indeed.

The Economist discusses a lecture by Stanley Fischer (ex-MIT,IMF and now with Citigroup) and summarises that “if you consider people, not countries, global inequality is falling rapidly.” One of the reasons: “Two of the poorest countries in the worldChina and Indiahave both (a) enormous populations and (b) rapid growth in incomes per head in the years in question.”

McKinsey Quarterly writes:

business and IT managers are starting to gather IT systems into “domains”sets of applications and databases that are managed as units for business reasonsinstead of managing them on the applications level or organizing them by the types of computers and operating systems on which applications run. A company might, for example, bring together the systems that contain customer information and rethink the links among them; in this way, it streamlines the tangle of interconnected systems, roots out duplication, and retires unneeded applications, thereby slashing its maintenance and development costs. IT employees find it easier to change or scale such systems and can thus support business changes more rapidly and less expensively. Moreover, the new approach eliminates a source of tension between the two cultures, business and IT.

By transforming the IT architecture in this evolutionary wayrather than tackling change by patching in systems individually or replacing whole areas in “big bangs”companies make it possible for IT and the businesses it serves to learn how to work together through a series of small, clearly defined projects. These companies can also apply the savings they gain from one project to finance the next. A team of business and IT executives, basing its decisions on the companys current business needs and future strategy, defines the domains, identifies the systems to be grouped together, and specifies how they should communicate with one another. IT experts then deploy an integration backbone based on middleware technologies to establish the necessary connections. The goal is to turn something that resembles a plate of cooked spaghettiwith innumerable applications and databases dispersed across the architectureinto a system of modular and logical blocks with a minimum of interconnecting wires.

We need to think how we can apply these ideas to small businesses.

The Register has an article on some ideas from microsoft to small businesses on their marketing efforts:

Maintain a consistent identity communicate your corporate identity consistently throughout all printed material, whether it is letterheads, brochures or business cards.

Check the style ensure all promotional material reflects your business. Dont limit yourself to black and white incorporate colour, graphics and fonts which are representative of your companys personality.

Proof read check and double-check the content for spelling and grammar mistakes. Make sure it is factually up to date and correct.

Use clear messages Choose short, powerful words to make sure your customers understand exactly what your business offers.

Keep it simple use the tools available to present a professional image but be careful not to over-use graphics as this can give a mixed message and confuse your audience.

Good Maintain a consistent identity communicate your corporate identity consistently throughout all printed material, whether it is letterheads, brochures or business cards.

Check the style ensure all promotional material reflects your business. Dont limit yourself to black and white incorporate colour, graphics and fonts which are representative of your companys personality.

Proof read check and double-check the content for spelling and grammar mistakes. Make sure it is factually up to date and correct.

Use clear messages Choose short, powerful words to make sure your customers understand exactly what your business offers.

Keep it simple use the tools available to present a professional image but be careful not to over-use graphics as this can give a mixed message and confuse your audience.

Useful suggestions which all SMEs should keep in mind.

I have logn felt that the work being done by Dan Bricklin on defining the SMBmeta spec is very useful. Some time ago, Dan released a sample directory and sample code.

A Burton Group article gives the wider context:

SMBmeta is a very simple set of XML tags that allow a business to describe itself. Using the tags, a Web site can provide a structured XML document that includes basic information like the business name, address, phone number, industry type, and so on. The structured XML document, which is very short and simple, lives a the root of the Web server, which makes it easy to find, parse, and process. Bricklin, who came up with the idea as a way to create value-added services for small businesses in his hosting business, thought that search engines could pick up the SMBmeta data, building a directory simply by retrieving and indexing the SMBmeta data.

In other words, SMBmeta is a self-organizing directory. In contrast with X.500 and its descendants, SMBmeta is very decentralized, pushing responsibility and data ownership all the way out to the edge. It makes data aggregation a loosely coupled operation that anyone can perform. Pretty cool.

What needs to happen is that the SMBmeta interface and directories need to be combined with an RSS-based publish-subscribe mechanism to create an information marketplace. SMBmeta is too static; it needs a dynamic mechanism (which can be built via RSS publishing) to enable SMEs to find each other and do business.

Continue reading SMBmeta