The recent marketing push to integrate both small and medium sized businesses by large IT hardware and software vendors makes strategic sense. Both business groups are plagued with similar issues including small IT budgets and limited technical resources. Frequently SMBs target their IT acquisitions either in the hope of lowering costs or solving problems. These ad hoc solutions are often strained to capacity as companies increase in sales and in size and the marketplace places larger expectations on the organization and in turn that is reflected upon the IT departments infrastucture. In the SMB IT marketplace IT managers often times wear many hats they are usually involved in Strategic Planning, Acquisition and Decommissioning of both hardware and software, troubleshooting existing applications, running the standard company applications which can be everything that an operation needs to serve their customers and run thoperation. There’s no question that the job of an IT professional in a small firm is a world apart from that of his colleague in a big corporation. But small business IT can be just as rewarding, if not more so, since you’re likely to have more responsibility and the opportunity to handle a wide range of tasks.
Types of Challenges In the SMB Business
• Short Time to Market Product and serve customers
• Reorganizations, Globalization Price Cutting
• Attracting and Retaining Personnel
• Budget Limitations
Types of SMB IT Department Challenges
Lack of a Stable Environment
• Network Security
• Data Storage
• System Architecture Obsolescent
• Database Management
• Budget Constraints
• Limited Technical Resources
• Limited Strategic IT Planning
• Limited Understanding IT Applications
To counter some of the challenges at the SMB level IT managers have seen that both hardware and software vendors have made an aggressive attempt to enter SMB marketplace. Below are some of the concerns that IT Managers in the SMB marketplace are experiencing.
IT Vendors Embracing SMB Marketplace
Recently IBM introduced an entire product group specifically designed for the SMB world and marketed it under the banner Express. Another vendor Symantec in attempt to address the IT security issues plagued by SMB introduced a division to just develop products for the SMB marketplace. Whether it is due to rumors of an impending economic slowdown or a general saturation of the IT marketplace, many of the traditional ERP software vendors like SAP and Oracle are increasing their service offerings to include the SMB marketplace. As software vendors realize the SMB marketplace is reluctant to embrace the cost of integration , they have designed their service offerings with this in mind. Oracle’s E-Business Suite (SENA) contains many of the same business applications that it’s higher-end ERP suite offers .Those applications were pre-configured across Oracle Financials, Oracle Inventory, Oracle Discrete Manufacturing, Oracle Order Management, Oracle Purchasing, Oracle Field Sales and Oracle Daily Business Intelligence applications. Recently I attended a demonstration of Fujitsu Glovia ERP system which was developed for high volume manufacturing operations such as Avery Dennison, Xerox in order to allow SMB users flexibility and limit integration costs. Does the rare thing of providing the Vendor Source Code to the customer. One of the issues to examine when deploying Enterprise Wide Software is scalability of the software and what may be a cost effective solution at the outset may become costly to support and maintain if it is not scalable
SMB IT Options
Many IT departments in the SMB marketplace have looked to hosted or outsourced solutions as a way to acquire resources and technical expertise that they otherwise would be unable to afford. In a recent survey Gartner Group estimated 90% of new businesses created were in the SMB category .In the same survey it was noted that there is a small but growing number of SMB venturing into outsourcing as a way of supporting their IT department. Although the current method to deploy software is still to use in-house resources in the SMB marketplace There are many factors which govern why a SMB would choose to support an outsourcing model
1. The fear of losing critical support should an in-house SME become unavailable
2. TCO (Total Cost of Ownership ) Model determines it is cost effective to outsource IT applications
3. Technical Support and Subject Expertise
4. Ability to expense this as opposed to finance as capital purchase.
The SMB IT manager and Business Owners and Management have now a wide variety of choices on how they wish to manage their IT infrastructure Outsourcing may be an option or not but in closing it is always to consider your IT department alongside of your business growth and acquisition strategy.
This is a really good post. But the one thing I’d add:
A lot of the issues you raise tend to me more applicable to the MB’s (medium-sized businesses) among SMBs… or at the very high-end of small businesses (50-100 employees).
Below 50 workstations and 50 employees, it’s rare to find an in-house IT manager. While there are certain industries that raise exceptions, in most cases below 50 workstations there simply is not enough of a budget and not enough of a need to have a full-time IT manager on payroll for 40 hours/week.
At this size (10-50 workstations), small businesses typically turn to a consultant, consulting firm, integrator, VAR, or solution provider
Below 10 workstations, in peer-to-peer land, most of those small businesses don’t have the budget to afford $5,000+/year for a more formal outsourced IT relationship.
Among these micro small businesses, they’ll typically lean on
a) moonlighters who’re generally willing to work for much lower hourly billing rates (usually because they’re clueless about their real expenses)
b) volunteers (someone’s son, daughter, niece, nephew, cousin, etc.)… who works even cheaper than the moonlighter… for donuts and pizza
The downside with both a) and b)… availability.
The network goes down and no one can get there until a week from Saturday.
The advice and scenarios that you discuss start to become MUCH more relevant when a full-time IT manager is hired… typically at 50+ workstations
…and when a small IT “department” actually emerges… typically somewhere between 100-250 workstations.
Thanks for helping to raise awareness of the challenges for IT managers in SMBs.
Thanks for the positive feedback ,you have raised a number of good points certainly.The hosted ,ASP solutions become viable for some small sized businesses ,as the larger Vendors as I outlined in this article have adjusted their marketing and pricing model to support the SMB as a way to grow their user and revenue base. In the micro business environment it may make sense to hire external service providers to support their business as you have so aptly indicated. It will be interesting to see how the market reacts to these product offerings.Joshua what model do you have in your Business IT infrastucture?
Thanks for your feedback.
I tend to think that some of the problem can be ascribed to IT managers worried about cost of the solution rather than its value. Especially for small businesses, systems must payback their cost to the owners. Are IT managers approaching owners or management with a hesitant “this is the best I could get for $X” vs ” here is a solution that can generate $y in benefits against a cost of $x”? Because if they do, the boss will sense hesitancy and that will increase the risk of saying “no”.
Thanks for your feedback as you make a number of valid points.Certainly the IT Manager within thE SMB marketplaces works uner a number of constraints and budget is certainly one of many.
In some cases the size of the organization can also be an advantage as there is an immeadiate impact to decisions undertaken.With a fewer number of individuals to seek out approval on a given set of issues can also mean decisions are rendered in a shorter time interval.Naturally IT Managers have to be able to justify decisions within the context of budget and TCO and ROI not unlike their peers in larger organizations.
Can i know the benefits of SaaS ERP when compared to Server based ERP????
Some tools do offer a good bang for the buck for small and mid sized enterprises. I think salesforce.com is a great example of a well thought out product that can equally benefit large and small players and re-energize the market. Google Analytics is another — offering a tool anyone can use, instead of implementation sensitive tools. At SiSense, we offer a Business Intelligence tool that requires no IT — just like salesforce and google analytics rid SMBs from requiring IT support to get their solutions going.