IDC: Channel crucial for SME success

IDC: Channel crucial for SME success

Small business technology spending is set to grow, but vendors can only get a slice of the new money by building strong partner networks; according to analysts speaking at IDC’s annual Directions conference earlier this week.

New Zealand and global small and medium enterprises (SMEs) are growing, are increasingly solutions oriented and partners are an important conduit for solutions aimed at specific markets, analyst Liam Gunson told vendors and others at the conference.

While three verticals account for the most big-business IT spend — banking, finance and insurance — vertical-segment spending among SMEs is far more diverse.

“That means you have to look at focusing on key segments that match up best with your key products and what you have to offer,” says Gunson. “The channel is extremely important in targeting specific verticals and will become more important with this move to solutions.”

Statistics New Zealand figures show an opportunity for vendors and the channel to tap into the growing SME market (small businesses are defined as those with up to 100 employees, with medium businesses from 100 to 499), as the sector employs about 75% of the national workforce but accounts for only a quarter of IT spending.

“Large businesses spend more on IT but there is such an opportunity for growth in the SME market,” Gunson says.

IDC research shows the SME sector has been growing 4% annually and IDC predicts it will have an annual growth rate of 5.6% by 2010.

SMEs use many sources of media for their IT information, however the internet has become a leading method in the last five years. Eighty percent of SMEs surveyed by IDG in February said the internet was important to their revenue generation, while half had their own home page.

Fifteen percent were using VoIP.

Out-of-office work is also on the rise, and the demands of the mobile SME workforce has resulted in key trends. Cheaper notebooks are more prevalent, while the growth of LANs among small businesses was also a feature of IDG’s research — 65% of businesses with one to nine employees were using a LAN, with most run by dedicated servers.

Gunson says SMEs have moved through the PC and internet eras of the mid 1980s and 1990s to one centred on networks, as they aim to efficiently share work among staff.

“It’s about trying to bring together islands of productivity where everyone has access to resources. That will cause this shift to solutions and transform the way SMEs use and purchase technology.”

Along with price, past experience of a brand and product capability, SMEs are motivated by the value added to products, and vendors must meet these needs.

IDC country manager Graeme Muller says there are also significant opportunities for vendors to develop partner networks in IT services, particularly selective outsourcing.

He says the top New Zealand services solutions companies account for over half of IT services spending, but there are a plethora of small companies (up to 192) and frequent mergers and acquisitions.

“It’s a very positive sign that mergers and acquisitions are creating gaps in the market for New Zealand providers to fill niche roles. Because of this, I want companies to think about having a strong partner network.”

Muller says IDC’s survey participants were evenly divided on their preference for a one stop shop over a best-of-breed specialist, and partners could help develop relationships in both of these areas.

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