Small business opportunity there for the taking

Small business opportunity there for the taking

Despite a history of misunderstanding and antagonism between the channel and small business, resellers are finally starting to gain dividends in this market by carving a niche in the service end of the sector.

Rebecca Munro investigates.

Over 800,000 companies in Australia can be classified as small businesses, com- prising between one and 100 employees. Yet, according to analyst BIS Shrapnel, this market is being largely ignored by the IT industry. Furthermore, small business is becoming emotionally discouraged and financially alienated from entering the 21st century in line with the technology boom going on around it.

Blame for this supposed state of affairs does not rest clearly upon any one culprits' shoulders. In fact, resellers, many of them small businesses themselves, vehemently deny that this is in fact the real scenario behind IT industry and small business relations.

Small businesses have traditionally been attracted by big brand names that give the security that many of these vulnerable organisations crave, especially when entering new waters such as technology. However, the attraction is not necessarily mutual, with many big organisations unable to justify the resources and comparative lack of return that is equated with small businesses.

That is not to say that vendors are unwilling to deal with low-end users, they are certainly prepared to sell hardware and software to small business. But that tends to be where the "service" ends.

Resellers that simply follow that lead and "move boxes" are exacerbating the problem, according to David Brent, managing director of ADB Computer Systems.

Not only do they not do themselves any favours, but they also contaminate the market for those genuinely interested and reliant on small businesses for their own survival. "Box movers merely walk in, dump the hardware and walk out again, killing the market for everyone else in the process," claims Brent.

Cost doesn't end

Furthermore, not only is this harmful to the market in general, it is, according to Bill Singleton, sales and marketing manager of Academic Computer Services, "just plain dumb, because cost doesn't end with putting a box on the desk. Value-added services are where the money is and those who don't recognise this are doing themselves out of revenue."

However, contrary to the BIS Shrapnel report, many small resellers deny making these mistakes or ignoring the small business sector. According to Arthur Haddad, sales and marketing manager of Sydney developer Turbosoft, small businesses are the backbone of his business. Resellers are reliant upon providing a high level of service to compensate for the lack of volume- driven sales that are generated by small businesses. "We rely on small businesses and their recommendations. We have some larger clients but they are just the icing on the cake, so our after-sales service is just as important as the actual sale."

The challenge for resellers who are of a like mind to Haddad will be to overcome the initial hostility of the small business sector and prove that parts of the IT industry are genuinely concerned with ensuring an effective service and total solution for small business.

A priority to resellers should be cost, an issue that greatly concerns and thus influences the decisions of the small business technology user. BIS Shrapnel's report suggested that one issue small businesses perceived as discouraging was that a customer's initial investment, which averages $4500, expands to $7500 due to the often hidden service, maintenance and upgrade costs. In response to this, Haddad stipulates that "manufacturers and big businesses are focused on marketing, not services and support. Turbosoft aims to focus on customers and technology and to this end customise smaller systems in cheaper packs so that small businesses can connect."

Haddad also asserts that most small businesses don't mind paying a bit extra for good service. "Small businesses pay a higher premium than large volume-driven companies, but they get a better quality and customised service."

Yet it is not just monetary outlays that concern small businesses, it is the total amount of resources they are willing to dedicate to the implementation of technology, including time and energy. The perception of a total solution, where all costs and resource outlays are up front, is dramatically different in a small business than it is in larger organisations.

According to Academic's Singleton, small businesses rely on resellers to act as IT departments by providing initial advice on what is necessary, affordable and most appropriate for each business. "Resellers have to make sure that small businesses have solutions that fit what they need, because they are not worried about the big picture - they leave that job up to us."

Practical constraints

Yet the reseller must also acknowledge the practical constraints that bind them when operating with small businesses. Warren Macdonald, managing director of Sydney reseller Barmac, stresses that service is an extremely important part of his business, but it cannot be free. Macdonald recognises the attitude of price wariness and unrealistic service expectations but believes that it is not as prevalent in his dealings with small businesses as the BIS Shrapnel survey implies. In fact, the perception that small businesses have of resellers as their technological saviours can be beneficial to resellers in terms of potential involvement in the small business sector.

"Some small businesses expect you to do everything, but it really depends on the manager. Sometimes the business really takes an interest in technology and its applications, but often people just don't have the time to learn. It is a matter of discovering the fine balance between what small businesses need, what they want and what they can afford, time wise and financially."

Turbosoft's Haddad reiterates the point that small businesses are becoming more comfortable with the idea of technology as an effective strategy to develop a company's scope. However, he also recognises that this is still hampered by the attitude that there are limited resources to be spent upon the implementation of technology. "Small businesses want to be competitive with the big guys as quickly as possible, but they are still not willing or able to spend a lot of time on technology. In general they are willing to buy on our recommendations and make the decision a lot more quickly than big businesses. However, they are not investing enough time in technology, the reseller is the one who has to chase them down and develop the system further."

The relationship between the small business and the IT industry falls down when the continually changing balance between price, service and expectations cannot be met.

The results from the BIS Shrapnel survey support this conclusion as it continues to show a divergence between small business and resellers, suggesting that there is still a large proportion of the small business market that is discouraged from purchasing, or even using, already purchased technology. The report suggested that the problem with this approach is that if the technology is not used optimally, the desire to regularly update and maintain a system is reduced. This was the domain created by vendor apathy and, according to Brent, the misplaced reliance that small businesses had on box movers and manufacturers. Resellers have to invest a lot more energy and use a more service-orientated approach in order to conceive a different synergy between small businesses and themselves. Resellers find that they have to compensate for previous dealings by actively approaching and becoming involved in the detailed aspects of selecting and providing support for small systems. Without this pre- and after-sales service, Macdonald believes resellers would soon become obsolete in the technological advancements of the small business sector and small businesses would be left to rely on the mercy of big brother companies and their profit margins.

Despite these challenges, there is now a greater awareness by the IT channel of the specific needs and restraints of small business. The search for a balance between the small businesses' demands and the resellers bottom line is still creating tension, but indications from the low end of the channel and analysts' research suggest that this is dissipating and being replaced with the increasing trend of small business becoming more directly involved in selecting and operating the technology in their businesses. Brent claims small business owners are realising that "computers are the life blood of their businesses. If they don't devote enough energy to IT, they will be let down."

Additional to the increased familiarity that small businesses are showing towards technology is the increased simplicity of relevant products. Companies like networking vendor NETGEAR are beginning to cash in on the newly acquired, yet not quite fully developed, small business computer savvy.

User-friendly design

According to Ian McLean, NETGEAR's sales and marketing manager, the products that it sells are designed to be user-friendly, especially for the small business market. Contributing to ease of use is the fact that networking has become inherently more simple and affordable, making it more available to the small end of the market.

McLean states that the packages that NETGEAR sells include an instruction kit that should enable businesses to assemble and operate a system without any assistance. However, he recognises the essential component of dealing with a small business is instilling a sense of security, thus the creation of a 24-hour hot line and the training programs for mass retailers like Harvey Norman who sell NETGEAR's products.

"If we make it simple and integrate a total solution, have a good return policy and the option of after-sales service, small businesses can feel secure."

The products and the market is there. Resellers must now take advantage of the opportunities small businesses create and become involved in the integration of total, long-term solutions.

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