The proportion of smaller businesses with an in-house IT
manager is becoming smaller. The IT function is often now run by
the marketing manager or even the director, and they have a pretty
good idea of what they want IT to do for their business. Helen
Beckett examines the trend
Small and medium-sized enterprises are smarter and better
informed about their IT decisions than ever before. SMEs have
higher expectations of their suppliers, on whom they are
increasingly relying to provide robust, out-of the-box solutions
that work 24x7 on behalf of their business.
"Small companies have exactly the same demands as larger ones -
they just have less money to spend," says Phil Garvey, chairman of
the IT in the Boardroom group of Intellect, the trade association
for the UK IT industry. Most SMEs have come through the technology
spending frenzy of the dotcom boom and are the wiser for it. "The
key thing today is that SMEs want everything out of the box," he
says.
This is no surprise given most SMEs' attitude that IT is a tool
that makes operations run more efficiently. According to Gerard
Burke, programme leader for the Cranfield School of Management's
business growth programme, companies are interested in standard
functions that can be fulfilled by packages that are ideally
industry-specific.
"IT is rarely significant and there are usually three more
important things on the agenda. These are marketing, money and
people," says Burke. Garvey confirms this when speaking about his
own business. "I have a network of 10 PCs and it was a hassle
setting them up, but now they just do not hit the radar. If the
network goes down, it is an inconvenience but not a disaster," he
says.
The latest Computer Weekly/BT SME ICT Audit confirms this
hard-nosed attitude towards IT. It found that companies were less
likely to invest in IT than last year to increase revenue, customer
base or fend off competition. The biggest driver by far remains
efficiency, which scored 75% among the sample compared to 77% in
2003.
By contrast, SMEs appear disillusioned with IT's ability to make a
difference to grow customer base, increase revenues or open new
channels to market: the rating of these drivers fell by 8%, 7% and
4% respectively. However, a big drop in cost cutting as a driver
would imply that maximum cost has already been stripped out of the
business.
Instead, IT becomes important to a company when it is the engine
delivering the end product or when a company is going through a
period of growth. And when small companies are dynamic they can
grow very fast indeed: as fast as 100% a year, says Graham Oakes,
founder of consultancy Fairknowledge. Even then it is hard for
companies to think strategically. "Typically they are
undercapitalised and relying on next month's income to make an
investment," he says.
SMEs are most likely to shop for a point solution to solve their
problems. Most SMEs reason along the lines of "so long as this pays
for itself over the next 12 months, never mind that it needs to be
replaced in another 18 months", says Oakes. When growth slows down
to about the 10% mark, that is when they start to gain efficiency
through consolidation and integration of existing systems.
Second-generation IT users are pretty clued up about the technology
they require and make demanding customers. Dean Styger, finance
director with overall responsibility for IT at caravan sales
company Talacre, recently upgraded his company's financial systems.
"We whittled it down to a shortlist of four. I looked at trade
magazines, went to fairs and spoke to colleagues, and by the time
we looked at products we knew what we wanted it to do, rather than
being guided by hearsay," he says (see box).
This pursuit of knowledge and resolve to get the right product is
echoed by Matt Joutsikoski, managing director of shoe-maker Zebra
Footwear. Joutsikoski is hunting for scanning and Cad/Cam
technology that will enable him to create shoes for a niche market.
"There are suppliers scattered all over the globe - we have been
looking for the right one for two and a half years," he says (see
box).
These examples are typical in that the finance director and the
managing director take charge of product evaluations and
procurement decisions. Peter Scargill, national IT chairman of the
Federation for Small Businesses, says very few micro-businesses can
afford to have a dedicated IT manager. Joutsikoski confirms this.
"I run the classic small business where I am the IT director, the
sales and marketing director and the manufacturing manager," he
says.
However, it is a trend that is spreading across all sizes of
company, according to Computer Weekly/BT SME ICT Audit. The study
revealed a diminishing role for the IT department within the UK's
small businesses with just 61% of SMEs running an IT department
compared to 72% this time last year. The decision-making power of
IT managers and directors is also being eroded, and is now almost
matched by owners and proprietors in the realm of IT.
Most commentators agree that business-led IT is a good thing. With
the handover of decision-making power has come a change in
emphasis, says Garvey. "Once upon a time, the discussion would have
revolved around the architecture and technology underpinning a
product. Nowadays, the conversation is more likely to be about
business benefits and seeing a list of customer reference sites
before making the final decision," he says.
With the falling levels of internal IT support, external suppliers
are stepping into the breach. "SMEs are pretty dependent on
external advisers because they do not have application expertise
in-house," says Oakes. Among smaller companies there is more
outsourcing to plug these knowledge gaps and third-party suppliers
are being viewed across the SME spectrum as a more economical way
of provisioning infrastructure. "Many have got rid of [in-house]
IT," says Ben Booth, chairman of BCS IT directors' group
Elite.
Business owners and managers are becoming more confident procurers
of IT, not least because they are getting more IT-savvy through
their use of devices in the home. This greater confidence means
they make different demands on suppliers and second-generation
business users' appetite for information is becoming more focused.
"Everyone has the basics and so questions are not about technology
performance but how to get from one generation of a product to the
next," says Garvey.
National resellers are still the favoured suppliers for most of the
UK's SMEs (see box) because they offer the level of customisation
smaller companies need. "Although the big enterprises are happy
with a 90% fit, mid-tier or smaller cannot accept any compromise on
functionality," says Garvey. With IT managers and techies less
prominent during evaluation, it is often down to the finance
director to look at return on investment and study costs, leaving
managing directors to explore how resilient and flexible a supplier
will perform as a partner.
Another positive consequence of business-led IT is the level of
transparent communication across different disciplines that larger
enterprises would envy. "In a small company people work in an ad
hoc way and everyone knows everyone else. This happens by hook or
by crook," says Oakes.
Styger agrees, "We all speak to each other. The business has a
fortnightly meeting where the IT manager contributes to financial
procedures as much as other people are encouraged to give their
opinion about IT."
Although managers are more hard-nosed about purchases and less
likely to invest in IT to achieve ill-defined business objectives,
they are more responsive to external and regulatory drivers than
last year. Twenty-eight per cent of those surveyed considered the
Data Protection Act to be a necessary call to IT action, compared
to 24% last year. Dealing with spam and the EC Waste Electrical and
Electronic Equipment Directive were on the agenda for 14% and 12%
of respondents respectively, up from 13% and 8% last year.
Curiously, the presence - or not - of a dedicated IT department and
strategy appears to have made a difference to the feel-good factor
of SMEs: 36% of those winging it thought they had done "very well"
opposed to the 23% that had a strategy they were measuring
against.
As more of the IT function is hived off to specialist providers and
managed by the business, one of the benchmarks for performance
could include how able the supplier is to instill a positive view
of the role of IT.
Case study: Zebra Footwear
Zebra Footwear's business is based on scanning people's feet and
then producing made-to-measure shoes on a just-in-time basis.
Technology is thus the lynchpin for the business.
"The scanner is basically a glorified tape measure, and used in
conjunction with a Cad/Cam system, the result is a
three-dimensional image that we can rotate," says Zebra managing
director Matt Joutsikoski.
Such 3D scanning technology is standard in the aerospace and
automotive industries, but as Joutsikoski has learned, there are
not many suppliers that have a knowledge or interest in
footwear.
Finding the right supplier has been a nightmare, says
Joutsikoski. "We have been searching two and a half years through
every Tom, Dick and Harry in the footwear industry." Zebra tried a
Finnish supplier originally and now it is piloting a UK/Japanese
supplier.
Joutsikoski finds that he spends a disproportionate amount of
time on IT. He says he has an advantage in that he is more educated
in IT than many of his peers because his background is in the
supply chain business. The Warwick Manufacturing Group, part of the
university, has also been a useful source of research.
His best insights, however, come from networking with IT senior
executives. "I have a brilliant IT contact who has become a
non-executive director in the company. Sometimes we have a half a
minute conversation to get a heads-up on a piece of hardware or
software," says Joutsikoski.
Case study: Talacre Beach Caravan Sales
The £80m Talacre Beach Caravan Sales business was set up 30
years ago and has four sites with 150 permanent staff and 100
seasonal staff. "Everything ran on Sage and was fairly
bullet-proof," says Dean Styger, the company's finance
director.
He wanted to improve the quality of management information and
increase flexibility and so installed nvision, a suite comprising
databases and workflow. Budget holders can access their data
whenever they need, rather than be sent statements each month.
Styger managed the evaluation and roll-out but employed a full-time
IT manager last year.
"At first I was concerned there would not be enough to keep him
fully occupied, but since then we have taken on an IT junior too,"
he says.
The next project entails joining four sites on a common platform
with a shared network and servers. The IT manager has identified
how installing a satellite link to connect a site in Snowdonia
could save the business up to £10,000 a year.
Purchasing patterns in SMEs
Software
- When buying software, 62% of SMEs look to a national reseller,
with a supplier or manufacturer as the second choice
- About 33% of SMEs buy software from a local
supplier.
Hardware
- For hardware purchases, most companies buy first from national
resellers (55%) with the rest divided between local suppliers (38%)
and national suppliers (42%).
Services
- For services, a bigger percentage prefer to buy local (38%),
although the lion's share still goes to national resellers
(48%)
- The preference to buy locally is shared by all types of SMEs
except the largest, of whom 54% choose to buy from national
suppliers.
Computer Weekly/BT SME ICT Audit