Big IT suppliers should come out the closet about SMEs

The recent recession has left its mark on the IT supplies sector and companies that provide IT services face fundamental change.

Revenues have dipped as a result of customers holding off from spending money. The customers themselves are also looking at new ways to buy technology to cut costs.

Analyst firm Forrester recently said suppliers will have to change their business models with cloud computing and software as a service, undermining traditional packages.

But perhaps the most significant change that could come out of the economic doldrums, could be that big suppliers build packages for SME’s.

What a way to increase your margins. According to the UK department for Business, Enterprise and Regulatory Reform (BERR), in 2008, SMEs together accounted for 99.9% of all enterprises, 59.2% of private sector employment and 51.5% of private sector turnover.

SAP is a company associated with serving the biggest companies in the world but it has launched SME packages. It realised if it wants to grow it needs the SME as it has saturated the large enterprise sector. SAP has had some success as well, particularly in its native Germany.

I was with Cognizant’s UK head yesterday and he said the company is looking at the SME. Cognizant is a major service provider to blue chip companies.

The problem with serving the SME sector is that it is highly fragmented. As a result it costs a lot more to service it. But cloud computing changes it. We reported on how SMEs are using virtualisation technology, which is normally the domain of big companies.

Imagine the IT supplies majors building software packages in the cloud that SME’s could tap into and pay rent for the privilege.

Tata Consultancy Services (TCS), which is the biggest Indian IT firm, is actually trialling such services in India. If successful this could be introduced in the UK also.

A.S Lakshmi, the company’s European head, said they have the same requirements as large companies but it is difficult because they are very fragmented. We reported yesterday how SMEs are using virtualisation technology.

But cloud computing will reduce the overheads of serving a fragmented market, with specially designed SME business services in the cloud.

This could be really good for SMEs. The big service providers would probably have to partner smaller resellers to penetrate this market because it is these people the SMEs often know and trust. It would also mean they would not have to hire thousands of salespeople.

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