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A Happy Medium?

A Happy Medium?

In Australia and throughout the Asia-Pacific region the SME focus is intensified simply because more of the national economy is made up of SMEs than is, say, the European or US economy.

Getting to First Base

Five years ago IT vendors were routinely enjoying growth rates as high as 50 per cent, with relatively high margins. There was plenty of large enterprise and government business to support those high margins, and there was little need to grub for sales in the more difficult SME space. Now, though, says McMurchy, there has been a period of "economic normalisation" where "the margins come back to a more realistic level; and now the SMEs offer more normalised margins".

Vendors will not find even these "normal" margins easy, however, as SMEs remain reluctant to budget for services. So while it might be possible for software companies simply to scale back the cost of a product, there are still the services, training, implementation and change management to be conducted and paid for.

And, as McMurchy notes: "Architecturally, solutions designed for enterprises with thousands of transactions will have overheads built in. You can dumb down to a degree; but if you look at what organisations want to do it's to simplify their structure. Complex applications might mitigate against simplicity."

What suppliers need to do is learn more about their customer. "The smarter vendors focus on that. What are [the customer's investment plans? The more you understand that, the more you understand the customer beyond the superficial issues of features and functions. In a long-term sense it's a healthy move," McMurchy says.

Some vendors, however, do not seem to get to first base on that issue. Eduarda de Gouveia is CIO of property trust Stockland, which has around 200 people in its Sydney operations. She says IT vendors can be "quite aggressive" in their approach. "I seem to get bombarded by vendors trying to sell their wares. To be constantly cold called by vendors totally out of the blue is a little distracting.

"I'm quite rude," de Gouveia says. "I have to dispense with them because they eat up my time which is valuable. I tell them that we have a number of initiatives in place and we have suppliers, and say goodbye and that 'no' means 'no'. But there have been a few that continue to ring and send information, and that I find quite unacceptable. I understand that they get a marketing company to work for them and those people don't understand your business. They have a quota to fill and it's a real irritation."

De Gouveia is particularly scathing about those suppliers who call without doing basic homework about what the company does, or how it works. "They need to understand their audience and the business we are in. Their counter-argument will be that they have to meet us to know that, but there is some research they can do before they come to us. We have a Web site and the assumption that I have an hour to spare for them is really quite amazing."

What distinguishes these cold callers from the suppliers de Gouveia does work with is that her suppliers have developed deep relationships with Stockland, they strive to understand its business and strategies and "pre-empt our needs". Her suppliers then work with Stockland to provide the skills required to implement a solution, gradually transferring the skills and knowledge to Stockland staff.

It is a refreshing approach from both sides. According to Gartner's McMurchy, although many IT vendors can be accused of not understanding how to sell systems to SMEs, many SMEs do not actually know how to buy technology. "They have a tendency to go down the RFT process," says McMurchy. "They survey the market and find 48 possible solutions, then down to 10 then five and at the end they have no idea of what they have seen.

"They tend to buy badly and focus on feature/function versus price. Instead they should be asking: 'Can I implement this in my organisation? Can my organisation deal with the process changes that need to happen to implement this properly?' SMEs also tend to be very wary about spending on services and need some level of outside help. Even then the advice tends to focus on the feature/function comparison and with insufficient attention to what will deliver real benefits.

"Vendors know that it is in their interest to win good business, not any business. A small, badly implemented customer can be a real drain on the service side of the vendor," McMurchy says.

Time to Grow Up

One SME that knew it needed more than features and functions and a good price is Melbourne-based accounting practice Gaddie Metz Kahn. With just over 50 people, the firm is growing fast and had a computer platform that was inadequate for its needs.

Sydney Kahn, the partner in the firm with technology oversight, says the firm went through the typical growing pains of a small business becoming a medium enterprise. "The growing pains through technology were not easy. We had no IT staff, we had administration people and one vendor - Solution 6 - and they had gone through their ups and downs.

"I was extremely uncomfortable with the hardware and strategy," says Kahn, who admits to being no IT expert and "entirely incapable of plotting" an IT strategic plan. By 2002 the firm had a patchwork of different computer hardware, loading software had become a nightmare, and monitoring licence agreements and interacting with clients was particularly difficult.

"This happened to be when we were having discussions with Ipex Technologies [one of Gaddie Metz Kahn's clients] and they were interested to explore how scalable the outsourcing model was," says Kahn. "We started the analysis in July of last year and in November we refreshed the entire office" - with new technology providing the platform for an outsourced model.

From Kahn's point of view, IT is now easier as he has one supplier to deal with and fewer IT staffing issues to tackle. Ipex remotely monitors the installation and provides reports to Kahn on what he describes as a "need to know" basis. "It's a relief that we can focus on our business rather than worrying about whether 60 people can get on to their computers this morning. To the extent that there is a premium built in, then in my mind it's insurance."

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