IT and communications suppliers realise that there is value in the SME market and have begun to produce cut-down versions of corporate systems. In this overview of the main issues and technologies, Jane Dudman looks at how SMEs can get the most out the options available
Statistics show that 99.7% of all employees in Europe work for small and medium-sized companies. But it would be a mistake to see such firms as a homogenous group, particularly in their approach to IT. Some are innovative; others stick to tried and trusted technologies.
"We approach things piecemeal, targeted to a particular need, rather than try to revolutionise our business processes," says Jacques Rene, head of projects at insurance specialist Airclaims, and this is typical of many medium-sized companies.
The lack of IT resources makes SMEs more likely to implement systems that need less in-house support and makes them more reliant on their relationships with external providers.
Those relationships may not always be straightforward. "When a company gets beyond about 50 staff, it generally employs a dedicated IT person and, by that point, the situation is already relatively complex, with multiple departments running multiple applications," says Neil Ward-Dutton, director of technology practices at research firm Ovum.
Ward-Dutton believes many medium-sized firms have a problem maximising their use of IT. "Companies like this are doing something right and they understand their own business," he says. "That often feeds back into the IT. They bring in an IT person who may be very technical and do a good job keeping everything running, but they tend to think they know what is best and are very bad at taking advice. Firms like this need to work with a channel partner that talks their language and understands their niche in the market."
Desktops and laptops
The price of desktop systems is falling and yet many mid-sized firms find themselves trapped with older systems that do not really do what they need. The clich' is that staff in such firms often have better systems at home than on their desks at work.
IT managers in firms of all sizes would love to upgrade their desktop and laptop systems regularly, but justifying the expense can be difficult and in smaller firms, where IT resources are always stretched, other things are top of the agenda.
Here, too, getting the right technology partner is crucial. "Most suppliers are getting bigger," says Ward-Dutton. "They cannot scale down to address the needs of the smaller customers, so it is being done through the channel, and sometimes that is difficult."
Resellers working with smaller firms need to understand how much their customers will invest in regular upgrades. One of the reasons leasing is not used as much in the UK as in the US to finance technology deals is because the contracts often commit customers to regular upgrades, and they find that too inflexible.
This is beginning to change. Finance houses and technology suppliers with leasing options now recognise the need for a more flexible approach, so mid-sized firms wanting to upgrade, but not wanting to get locked in, now have more options.
Networking is one area in which smaller organisations find it easier to be innovative. Two technologies have made a huge impact in networking: converged, IP-based networks, able to run both voice and data, and broadband.
Broadband, in the form of ADSL, has brought higher-speed networking to companies of all sizes, providing a backbone from which they can transform the way they do business, and IP-based networking provides a cost-effective alternative to expensive leased lines. IP virtual private networks, in particular, give almost all the advantages of private networks at a fraction of the cost.
The drawback with both technologies is that they are not based on service level agreements and so service is not guaranteed. But this is not deterring firms from making the switch to newer networks.
"These companies have less invested in the older technologies such as X25 and are able to get into newer technologies, such as voice over IP and IP VPNs," says Ward-Dutton.
Wireless networking is also taking off. Earlier this year, BT launched two wireless broadband products, including its Openzone software and a subscription service. BT Indirect Channels is also running a training programme to help resellers understand the needs of users in the mobility market.
Brigitte Bell, IT manager at logistics specialist Cert, which employs 500 staff, says partnership is vital. Cert has recently moved from Frame Relay to an IP network, supplied by BT, to support a new thin client Citrix infrastructure. "On the Wan/Lan side, there are just two of us, so my role is very much project management," says Bell. "We considered a third-party partner, but BT did a good job of persuading me that was not necessary."
Most smaller firms rely on simple file servers to provide direct attached storage, but this is limited, particularly in terms of data retrieval. Many are now looking at other options to streamline data storage and make it more manageable.
Until recently, storage area networks or network attached storage were beyond the reach of smaller firms, but prices are falling, making it feasible for SMEs to centralise their storage management. Suppliers are now producing cut-down versions of their top-end products, using cheaper serial ATA drives. This is also making it easier for firms to back up their data onto low-cost hard discs.
"There is growing demand here for storage, not just because of database, but because we are expanding into photographic services," says Dave Oakley, IT manager at London art group and frame manufacturer John Jones, which has 80 staff. "We have made a lot of effort in the way we organise our data and we are doing OK now, but we will have to put in some sort of storage system soon." The most likely option, says Oakley, will be to look at network attached storage.
How independent-minded should small and medium-sized firms be when it comes to applications? They face a huge and daunting range of choices when it comes to software, particularly now suppliers of large-scale software products, such as enterprise resource planning and customer relationship management are fighting one another to get into this mid-range market with cut-down versions of their systems.
"A lot of companies in this space could stay as they are quite comfortably, so we have to convince them they will be able to improve on what they are already doing," says Barbara Weiner, head of small and medium-sized businesses at SAP UK & Ireland. "Having a clear return on investment is almost more important to these companies in many ways, because the money really matters."
As well as general applications, firms also have a good choice of more specialised applications, usually from smaller, more specialised suppliers, in almost all vertical sectors, such as retail and manufacturing.
Smaller firms can also now decide whether they really want to run their own applications. The market for various forms of outsourcing, of all kinds of applications, from e-mail to call centre systems, is growing rapidly and has many advantages, the chief one of which is financial. By opting for a service, rather than buying product, firms are able to switch away from capital expenditure. Instead, they pay a set monthly fee, agreed in advance, making it easier to budget. They also get regular software upgrades.
Just to round off the choices, there is no need to be limited to the current market favourites. Microsoft is not the only fruit and a growing number of mid-sized firms are opting not just for commercial alternatives, but also for open source software, based on openly-available source code. The big advantage of this approach is the community of developers able to provide support.
Although most medium-sized businesses realise the importance of investing in IT, not all approach that investment in the same structured way as larger corporates.
"I look at ROI, but the company doesn't," says Oakley, whose firm has implemented a system to improve its order-taking and sales processes. "The technology has made a massive difference to our business. That is easy to see, because the company has increased in size. We can now take orders for thousands of frames and turn them out in a couple of weeks."
Like many other firms of its size, John Jones opted to work closely with a technology partner. It chose Anglia Business Computers on more than just just technical grounds. "The ABC staff are able to talk in a normal language to our people, which is important, and they also give our directors the feeling that we are an important client, regardless of the size of the business," says Oakley.
Technical knowledge is important, but most SMEs put a premium on personal relationships with their suppliers.
IT security for SMEs
The biggest security headache for most medium-sized businesses is finding the time and resources to deal with the issues. Everyone knows IT security is important, but it can be tough to get the right balance between security that will protect vital systems and not over-protecting so that no one can get into any of the applications.
It is easier to get security right if it is built in at the time of purchase, rather than having to be bolted on as an afterthought. Tips on IT security on the Department of Trade & Industry's best practice website include:
- Have a clear security policy
- Build security requirements into the design of IT systems and outsourcing arrangements
- Keep security systems up to date
- Have contingency plans to deal with a serious security breach
Most medium-sized businesses have to manage without full-time security staff, so it is important to work closely with trusted partners that can fill in the gaps. Automate security processes wherever possible and ensure the weakest points in the network are covered.
Pay particular attention to laptops and ensure all remote access into the company network is secure, using firewalls, password protection, and regularly updated anti-virus software.
Top tips for SMEs
- Build up a relationship with a trusted partner
- Many SMEs prefer to take a cautious approach to implementing new systems, rolling them out gradually, but sometimes a big-bang approach works, such as switching networks
- Smaller companies do not always have to justify their IT spending: if it looks right and feels right, they can sometimes run with that feeling, rather than having to spend a lot of time on a business case
- Risk-taking is more natural in smaller companies and they do not always have to follow the flow when it comes to IT. But it is still a good idea to make sure any new system will do the job it is supposed to.