Small and medium businesses (SMBs) in the UK have increased their spending on IT to £22bn this year, creating a great opportunity for IT companies.
However, while that might look like nothing but good news, most of these SMBs expect their own sales growth to be flat, or less than 5%, which means they will not be throwing their money around. As such, IT businesses have to deliver very strong financial and return on investment (RoI) arguments if they are to secure any technology and service sales, writes Sue Hogg, director, information worker business group, Microsoft UK.
Companies must therefore understand the needs and language of business decision makers. They are much more interested in the arguments around cash flow, customer retention and the case for driving revenues than bits and bytes. To this end, companies should come up with practical solutions that, for example, manage customers' cash flow and help staff be as productive as possible, while making the most of their employees, reducing capital expenditure and helping them to retain their customer base. But it is critical that these solutions are communicated in the language of business if they are to be understood and accepted.
Get this right and the opportunity is significant. AMI-Partners, a research and consulting firm, was commissioned by Microsoft to provide insight into the needs of the UK's SMBs. It estimates that UK SMBs spent £21bn in 2007 on IT/telecom products and services. This is expected to grow by less than 5% in 2008, to that £22bn figure mentioned above. AMI's research has also identified the top business concerns of the UK's SMBs: competition, profitability, finding/retaining talented employees and increasing customer satisfaction.
Supporting this, their fast IT goals are: hosted applications, Voice over Internet Protocol (VoIP), and increased communication and collaboration, both within and between office locations.
These findings are a powerful checklist to help IT companies exploit the SMB opportunity. SMBs can use their investment as a recruiting tool, to attract and retain talented employees, and fight their corner against multinationals. However, such an approach needs an enlightened view on the use of IT.
IT companies can help their customers to understand how they can take advantage of recently launched offerings, including those technologies that were once out of reach of SMBs but have now become widely available and have evolved specifically in response to SMB needs. For example, VoIP is a technology that was once the exclusive domain of the enterprise, but it now offers a significant opportunity for SMBs to reduce communications costs, and is very easy for small businesses to set up.
Moreover, collaboration and communication between offices is going to be a key issue for the IT industry to solve effectively in 2008. According to AMI, 21 per cent of SMBs with between five and 250 employees are looking to add branch offices in the next year. This concept of communication between offices can be viewed as a classic cost containment issue, and it can be very revealing to look at what choices and what decisions and trade-offs customers have to make with their investments. Research by Microsoft and Durham University has revealed that SMB firms that have grown and focused on growth make use of IT to a much broader extent than companies that are not experiencing growth. However, it is clear that while many non-growth companies would like to spend more on technology, a narrow focus on cost control and internal challenges, such as compliance, are not enough to deliver business growth. Understanding these financial and organisational constraints can help 'switched on' IT businesses sell to SMB customers, and an exciting opportunity exists for those businesses that are willing to help SMBs grow and succeed through a consultancy-based approach.
This was first published in November 2008