SMEs must tread warily in e-commerce minefield

It's a much riskier business getting into e-commerce if you're an SME. Financial outlay, poor supplier service and the daunting...

It's a much riskier business getting into e-commerce if you're an SME. Financial outlay, poor supplier service and the daunting prospect of hiring a consultancy are just some of the hazards, says Julia Vowler.

Does size matter? When it comes to doing electronic commerce the answer is both yes and no. Whether you're a major blue-chip corporation with a cast of thousands or a small- to medium sized enterprise (SME) with a dozen or 100 employees, e-commerce presents the same core challenges: how to offer a new business opportunity (requiring a new business model), and how to reconcile that with the existing model.

But, says consultant Monica Seeley, whose e-commerce leadership masterclass series starts this week at Imperial College, London, the e-experience for SMEs is a scaled-down version of their bigger brethren's - not an exact replica.

"Major corporations and SMEs both need to use the same principles, such as understanding the importance of making the business case for doing e-commerce, or appreciating how the Web front-end will tie in with the back office and fulfilment," Seeley says. But beyond that the experience will not be the same.

That is because every SME is considerably closer to the coal face than the average blue-chip. For an SME, every risk is riskier than for a blue-chip, and e-commerce is definitely risky. If an SME gets its e-commerce initiative wrong, then unlike a major company, there's nowhere to hide.

"For an SME, all change has a far higher risk," she points out. "SMEs need to be more thorough [in e-commerce] because if it goes wrong it's far more difficult to cover up, write off or bury."

An e-commerce initiative will represent a much larger slice of the overall pie for an SME. "It's a much bigger gamble," says Seeley. "SMEs don't want to keep restarting. If they buy software and the market moves on they can't afford to write it off."

That should make the idea of using an application service provider (ASP) to deliver e-commerce platforms attractive. But there isn't a great deal of uptake yet.

The reasons are twofold, says Seeley. "ASPs haven't yet worked out the business models [that SMEs need for e-commerce], and SMEs are far more cynical about IT suppliers in general and will tolerate far less fuzziness and hype from them."

On the other hand, unlike large firms, SMEs do tend to be far more reliant on their technology suppliers for input on IT strategy. So there is an opportunity for the SME's key suppliers to influence significantly the way the SME is going to approach its e-commerce initiatives.

But Seeley points out that an SME needs to understand whether its IT suppliers regard e-commerce as a core market. If, for example, SMEs are only on the fringe of a supplier's radar, and the supplier is really focusing on the big-ticket corporate accounts, then an SME may not get the kind of personalised, customised attention it needs.

Some suppliers, says Seeley, are only offering SMEs "sheep-dipping" when it comes to e-commerce provision - dunking them all in the same e-cocktail without any individual treatment.

To discover how each SME could best exploit the opportunities e-commerce presents, while minimising the risks, suppliers will have to bite the bullet and seek consultation.

This, Seeley says, is another differentiation between the giants and the SMEs. Whereas the former will think nothing of forking out for consultants, SMEs are far more tight-fisted. But, warns Seeley, this attitude could be more a case of penny-foolish than penny-wise.

"SMEs need to appreciate more about buying in consultancy," she says.

Nor is the cheapest consultancy always the best. In the end, an SME, with every penny to be accounted for, may yet find that it can't afford to buy cheap consultancy. However, SMEs can turn to other sources of guidance on tackling e-commerce. Guidelines, checklists and starter packs are beginning to emerge from the likes of the Department of Trade & Industry which, although hardly providing a customised e-strategy tailored to any one SME, do cover the general issues.

An SME's smaller size and greater exposure to the coal face does, however, give it an advantage when it comes to e-commerce. As Seeley points out, an SME's IT function will inevitably be smaller, and IT staff more general purpose than in a major organisation.

"In an SME, IT has to be many things to many people," says Seeley.

Because SMEs do not regard IT as rarefied their IT staff must be more open-minded about shouldering more specialisation.

Even better, she points out, because SMEs are smaller, the IT function is less likely to become insulated from the real world than in a major corporation. This means that the IT staff are far more exposed to the business potential of e-commerce.

The drawback is that the smaller size of an SME means there is less flexibility available when it comes to the culture-change issues that e-commerce inevitably brings in its wake.

"What does an SME do with staff who find IT very difficult but who really understand the business? They may be valuable to the business but very reluctant to change what they do [for the sake of e-commerce]," says Seeley.

"In a big organisation you can make them redundant or move them, but in an SME there aren't too many places you can use for relocation."

Is e-commerce different for SMEs?

The principles of doing e-commerce are the same whatever the size of organisation, but there are still important differences when comparing with the attitude of major corporations. SMEs

  • Live closer to the edge. Failures are less easy to absorb and recover from

  • Are simultaneously more dependent on, yet more cynical about, their IT suppliers for strategy and advice

  • Are more conservative about technology investment

  • Are traditionally highly reluctant to buy-in consultancy

  • IT staff tend to be multipurpose and flexible

  • IT staff tend to be less insulated from the business world as a whole.
  • Read more on IT for small and medium-sized enterprises (SME)