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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.

Although the deal with Ipex is working well thus far, Kahn confirms that there were some issues as the IT vendor learned more about doing business with an SME. "There is a difference between a large 2000-seat and a 60-seat outsourcing contract," he says. "In our application I most felt it in the very detailed documentation and specifications. The contract was quite weighty and we worked to cut it down and make it more appropriate to us. It was a very professional rollout but it was quite daunting for an SME."

Having the leverage to get alterations from a supplier is something that large enterprises take for granted - not so SMEs, which rarely have the same clout.

However, McMurchy says that in Australia SMEs are routinely able to punch above their weight because the Australian market has traditionally been over-serviced by suppliers. Australia, he says, represents about 2 per cent of the global IT market, which makes it a good test-bed. It is considered a possible entry point to the far larger Asia-Pacific markets and has a relatively stable economic and political landscape, so most IT suppliers sell product here - and fight over a finite marketplace.

McMurchy says this has allowed SMEs to demand more of their suppliers, especially with regard to product customisation. For the vendors, he says, that means Australian SME sales have traditionally been expensive, and also put the brakes on the development of the application services processing (ASP) model, which is predicated on standardisation. The ASP model has been more successful with SMEs internationally, he says.

Hey, Good Looking

Wizard Home Loans has about 100 people in its corporate team and CIO Peter Harvey has noted an increase in the calls coming from the big end of town. "Before six months ago there were no calls from the likes of Oracle and PeopleSoft," he says. "Now I've had a couple of calls - soft cold calls. I've noticed that there has been a bit more interest, although it's not a major shift in attention.

"I'm not sure why. Perhaps as the company grows and its profile builds we're a bit bigger and uglier than we were. But then for the [vendor] companies the times are tough and business is having to get new sales."

Harvey's concern is that if he were to deal with the large suppliers he might have less leverage than he does with the smaller suppliers. "When you deal with a 1000-pound gorilla or a 500-pound gorilla - however bloody heavy they are - your leverage with that organisation is much reduced," he says. "When you scream and shout at a smaller organisation things happen, but with the big companies you get lost in the corporate hierarchy."

Harvey is not intimidated by the sophistication of the big-end-of-town products on offer to him, but he is floored by the prices. "For Oracle you have to pay a large premium for what they have to offer. They sell to a lot of massive companies and those companies' pockets are a lot deeper than ours where every dollar counts," he says.

"Some vendors are making changes - for example Siebel has a mid-market offering. There's a bit of that happening, but it's a question of the price tag. There's a premium to pay to get that industrial strength application. No one minds having a Ferrari or a Mercedes if you can get that for the same price as the VW."

What Harvey demonstrates clearly is that while the SMEs may be smaller in stature, they are savvy, and no IT vendor can expect to bluster their way into a deal with an SME.

SME snapshot

Small business: 1-19 employees*

Medium business: 20-200 employees*

SMEs: 95 per cent of all businesses by numbe r SMEs: more than 50 per cent of corporate turnover

* Australian Bureau of Statistics definition

Making the Connection

More than 90 per cent of all SMEs now have computers installed (small business at 91 per cent and medium at the almost saturation point of 97 per cent, according to Sensis's chief economist Steven Shepherd). As well as measuring technology penetration, Sensis (a division of Telstra) also plots what Shepherd refers to as SMEs' online journey. These days 51 per cent of all SMEs get at least 5 per cent of their revenues via the Internet, and 68 per cent say they are satisfied by their e-commerce activities (up from 50 per cent in 2001).

And it's gone beyond experimentation stage: Sensis found that by 2002, 56 per cent of all SMEs had already recouped the cost of their e-commerce investment, with a further 31 per cent expecting to recover their investment within the next two years. "The further they were on the online journey the more they had recovered their investment," Shepherd says.

While small and medium enterprises were always expected to participate in the online economy, some smaller companies are finding the going tougher than their mid-size brethren. A survey released earlier this year by the European Commission explores the opportunities and barriers for SMEs as regards business-to-business e-commerce. The findings were based on a European survey but identify issues that are also pertinent to Australian SMEs.

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