SMB Handbook

ZDNet Asia turns the spotlight on small and midsize businesses to look at where they might encounter hidden IT costs and how a lack of security focus might stretch what is already a tight budget, and suggest tips to avoid these money traps. We also consider ways to make SMBs more attractive in the labor market against more established players, and reveal how India's smaller companies are growing in their IT savviness.

 

5 tips for SMBs to eliminate hidden IT costs

 

With today's evolving IT environment, there are many things small and midsize businesses (SMBs) can no longer ignore in terms of their IT investments and plans. Trends such as bring-your-own-device (BYOD) and basic IT hygiene such as data backup and document management may not appear as immediate priorities but, if ignored, can have long-term financial impact.

Bastiaan Toeset, director of partner-led sales in Asia-Pacific, Japan and Greater China at Cisco Systems, said companies that ignore security threats, for example, could experience network downtime or even see their entire IT infrastructure brought down. Such losses involving data, revenue or productivity--and often it is a combination of these--can be "catastrophic" for smaller businesses.

Additionally Toeset noted, SMBs now also have to cope with the BYOD trend as younger generation workers bring their own devices and use them to do work within the corporate IT environment.

"The highly distributed nature of these Internet-connected devices and diversity of these devices, in terms of the hardware or operating systems, drive up management and maintenance costs and can impact productivity and increase security risks if not properly integrated," he stated.

With these challenges in mind, the Cisco executive, together with other industry players and one SMB, highlighted some top IT hidden cost areas and offered tips on how small businesses can avoid unnecessary financial outlay.

Take long-term view
Lim Kok Hin, vice president and COO at Canon Singapore, said SMBs often underestimate the hidden costs of new technology offerings and the resulting consequences. The root problem here is the lack of understanding about business activities, employees' tech usage patterns, and implications of the new IT product.

Lim said: "More often than not, these costs arise when SMBs purchase solutions that do not accurately align to their business needs and requirements, and invest in systems that they do not need or take full advantage of."

Without accurate, long-term assessment of business and IT needs, these smaller companies end up spending more for deploying and maintaining short-term IT products that need to be upgraded, or in some cases completely overhauled, as the market evolves, he warned.

To avoid these unbudgeted costs, SMBs should first identify where new systems will connect to within their existing setup and which platforms they can collaborate with. Lim said: "In a fast evolving market, SMBs need to plan for long-term needs in order to sustain their agility and competitive edge as they grow."

Scalability is key
On a related note, companies should also plan to scale up their IT spend as their businesses grow.

Eric Goh, managing director of Singapore at EMC, citing the example of storage, said scalability is essential as requirements in this area can be rather unpredictable.

For SMBs, in particular, capacity expansion is a typical upgrade they encounter. Goh added it is important to implement products that will support and keep pace with the business growth while providing cost efficiency.

Creating a virtualized environment, for example, can help smaller businesses boost their ability and agility in responding to the needs of the business environment as well as improve server utilization, thereby, increasing their operational efficiency, he stated.

Use tech wisely
Lim also called on SMBs to use tech to leverage their key advantages of agility and adaptability, thus, lowering IT expenditure.

One startup agreed. Shivanu Shukla, co-founder of Teamie, a social collaboration service provider specializing in the education sector, pointed out that most of its IT systems are cloud-based. These include services such as Google Apps, Amazon Web Services to host its customer relationship management (CRM) system and EC2 server to power its Web applications.

"Cloud services are typically very transparent with their pricing," he explained. "The hidden costs are more a function of how well the company plans its IT resources versus its needs. For example, if you planned to reserve two large EC2 instances, but realize you need three or four instances, then your IT budget will begin to balloon."

Shukla said cloud computing gives Teamie the flexibility to grow its business and scale its IT resources accordingly. Noting that defining an IT budget for an on-premise infrastructure is different compared with one based on cloud services, he said the company chose to attribute a percentage of its revenue as its IT budget rather than fixing on an absolute amount.

Futureproof IT investments
Toeset added that SMBs should choose IT infrastructure options that address both the challenges of today and tomorrow.

Taking IPv6 as an example, the Cisco director pointed out it is important to architect an IPv6-ready network infrastructure to meet the new application and operating system requirements over the next few years. This would prevent wasting money on short-term IT measures.

Develop good IT support ecosystem
Small and midsize businesses also tend to rely on only one employee or a small team of IT staff to manage the tech aspects of the company, Lim noted. One IT manager may be all it can afford to support the implementation and maintenance of desktop, server, network and other core business applications.

Since multiple roles or functions are served by the same staff, SMBs should identify and focus on their core business and engage reputable and responsible vendors to assist in the management of IT systems, he suggested.

Toeset agreed services such as software-as-a-service (SaaS) and other cloud-based managed services do provide the ongoing management, protection and maintenance of network infrastructure and the diverse array of endpoints, operating systems and mobile devices that increasingly populate the workplace today.

Thus, Lim said, by outsourcing tracking, management and maintenance of IT systems, SMBs can more efficiently prioritize their efforts and translate it into sales revenues. This would also enable them to spend on tech that addresses critical business needs and reduce unnecessary expenditure, he said.

Tips for SMBs to avoid hidden costs in cloud

Cloud computing has been touted as way for companies to become more cost efficient by making it easier to scale resources.

The benefits include access to software and hardware, on a pay as you use basis. However, observers note that small and midsize businesses (SMBs) should watch out for hidden costs--both tangible and intangible.

According to Mayur Sahni, senior market analyst for IT services research at IDC, SMBs should consider factors such as cost of bandwidth, migration and customization. He noted that cost savings that an bigger company might achieve might not be reached in a smaller firm due to a different scale and cost metrics.

Daniel Soh, managing director of training, consultancy and services firm SD Group, agreed and added that in order to have a effective cloud strategy, it would be important to look at how offerings fit into the workflow.

"You have to see whether you need to change any of your current processes, and plan for training for your employees," he added.
 

India SMBs growing savvier in IT

India's small and midsize business (SMB) demographic is evolving with the times as cloud computing, smartphones and social media contribute to rising IT adoption rates. There's still room for growth though as SMBs IT spend form only 30 percent of total expenditure, and there's a lack of trained IT professionals.

According to a recent study by management consulting firm Zinnov, India has the second-largest population of SMBs among BRIC (Brazil, Russia, India, and China) countries and the United States and this group contribute more than 60 percent to India's GDP (gross domestic product). IT adoption is growing at 15 percent in this segment and is expected to reach US$15 billion by 2015, it added.

Delving deeper into the composition of SMBs, Zinnov stated that these organizations have up to 999 employees. Around 96 percent, or 33.8 million, of these businesses have between 1 and 10 employees, while 1.3 million other companies have between 11 and 999 employees, it added.

Complex SMB environment
Kishan Bhat, engagement manager at Zinnov, went on to point out that there are four broad categories of SMBs based on IT adoption characteristics: unorganized; traditional; savvy; and sophisticated. The first group refers to companies that are unfamiliar and apprehensive about IT adoption and do not have well-defined business processes that affects uptake.

Traditional SMBs are those that have business processes passed on from generations and are rigid and averse to technology adoption, while savvy companies have well-defined business processes and understand the benefits that IT bring. Lastly, sophisticated SMBs have best-in-class business processes and are leaders in IT adoption, he elaborated.

Gartner's research director Biswajit Mahapatra added that IT adoption among SMBs varies with verticals and geographies. "In metros like Chennai, Mumbai, and Bengaluru, we find more IT savvy SMBs than other cities and small towns," he elaborated.

As for industry segments, there has been growth across all, asserted Priyadarshi Mohapatra, vice president of emerging business at SAP India. "There has been traction in organized sectors including retail, manufacturing, consumer products, automotive, engineering and construction, professional services, mining, education, biotechnology, etc," he said.

Even unorganized sectors such as poultry, gems and jewelry, dairy, plantation, city gas distribution, among others, have also seen substantial IT adoption, the executive noted.

It is the market potential and growth of this market that has spurred IT vendors to actively developing and pushing their wares out to this demographic, Bhat said.

Smartphones, social media on the rise
Zinnov's study did note that despite the size of India's SMB market, its IT spend constitutes only 30 percent of the country's overall tech expenditure. But this is set to rise with the growing demand for mobile devices, social media and cloud computing, the market players noted.

Sunil Bhave, vice president of application services at Fujitsu Consulting India, noted that with the growth in 3G services and an increasing number of business IT applications on smartphones utilizing cloud technology, the expenditure for mobile devices is increasing.

Companies, particularly those in the knowledge sector, also offer employees the option of working from home while many of their other employees are mobile workers, the executive added.

"[These working arrangements] require people to stay updated with the latest information and data along with access to key systems like CRM (customer relationship management) and SCM (supply chain management) via the Web. Smartphones and tablets are greatly helping in this," Bhave said.

Bhat did point out that the use of smartphones and tablets is a recent trend among savvy and sophisticated SMBs, which form only about 20 percent of India's overall SMB landscape.

AMI-Partners had earlier reported that India's smaller establishments spent US$173 million on smartphones in 2011. A separate report from the research firm in February showed that about 67 percent of SMBs owned at least one smartphone or tablet, and almost half planned to purchase more devices in the year ahead.

Social media is another tech trend that local businesses is growing to embrace, sometimes more than the big and established companies, as they use it to acquire new customers, Bhave pointed. "Today, SMBs cannot neglect social sites, especially if they want their products to go global and reach millions of people in no time."

Earlier in March, the Federation of Indian Chambers of Commerce and Industry (FICCI) and Facebook announced a partnership to educate Indian SMBs on how to better use the Internet as a tool to develop their businesses.

Beating cash crunch with cloud
Cloud computing is another IT enabler helping Indian businesses work around their limited financial budgets. Gartner's Mahapatra said that there are a range of cloud-based applications such as Microsoft's Office 365 that offer "affordability, scalability, flexibility and mobility" for them to consider.

Software-as-a-service (SaaS), especially, have been increasingly gaining acceptance among this demographic, indicating a shift in their thought process, Bhave said, adding that vertical-specific products will drive the adoption of SaaS within SMBs.

The Fujitsu executive added that SaaS-based business intelligence (BI) services are expected to grow too, as companies move away from gathering basic information in simple Excel tables or pivots and adopt sophisticated applications.

Bhat did say that this trend of BI and analytics adoption is limited to SMBs that already have IT infrastructure in place and are actively collecting digital data.

Lack of trained IT professionals problematic
While the growth in IT adoption is heartening, the Gartner research director warned that India's SMBs faced several challenges such as lack of funds, lack of localized and customizable IT products, and shortage of trained IT manpower.

"A large chunk of SMBs have still not looked at IT as an enabler [because] skillset availability in IT is a huge challenge," Mahapatra added.

Bhave pointed out that the use of pirated, unlicensed software is also rampant among SMBs, and they often end up risking the security and integrity of vital business data and applications. With work moving away from the traditional boundaries of the office toward laptops and smartphones, data security is another key challenge for SMBs, he stated.

10 things SMBs can do to recruit top IT talent

Salary packages and brand prestige are usually the reasons why top IT talent decides to join larger organizations over small and midsize businesses (SMBs), but the latter can be more competitive in the labor market by playing up job advancement prospects and flexible working arrangements, market insiders say.

Singapore startup iTwin's co-founder and COO Kal Takru highlighted the difficulties SMBs here face when he said it was "definitely hard" for them to attract top IT talent due to their limited resources and lack of a recognizable brand name. iTwin currently has 27 employees on its books, he revealed.

This sentiment was echoed by Ryan Lim, business director of Blugrapes, which has 20 employees. He said the small manpower size of these companies is often perceived by potential hires as representing limited future prospects and career paths.

"This perception hinders the acceptance of a job offer made by SMBs when compared to bigger companies where there seems to be more room and opportunities for career growth by virtue of its size," he elaborated.

Michelle Lim, COO of jobs portal JobsCentral, added that big companies, particularly global multinational corporations (MNCs), generally have an advantage in terms of branding because most people would already know what they do. Some job seekers would also find it more prestigious to work for a bigger name.

Furthermore, these larger companies have more resources in terms of bigger recruitment, training, and welfare budgets that help with staff retention, she added.

Advantages to exploit
Despite these hurdles in recruitment, the market players highlighted that other work-related attributes such as ownership and career progression opportunities and flexible work arrangements can help sway the situation in SMBs' favor.

Citing a JobsCentral Work Happiness Indicator survey, COO Lim said for the 218 IT respondents among the 2,385 professionals polled advancement opportunities and acceptable work demands were the top two factors identified. Salary came in at third place.

Lim said: "It is not all just about pay. SMBs have a shot at hiring top talent, even if they find it hard to match the higher salaries offered by larger companies."

Peter Noblet, senior regional director of Hays Information Technology, concurred. He observed that SMBs and job candidates both rate cultural and fitting in with the team as the most important criteria when it comes to hiring or joining a company over salary.

"We've seen cases of candidates turning down jobs when they didn't think there was a cultural link between them and the company, be it an entrepreneurial attitude, proper work-life balance, creativity, or how they communicate with others," he explained.

"We've also seen many cases where a SMB will train a candidate in the necessary technical skills if they deem the person a right cultural fit for the business. These candidates usually go on to enjoy long-term tenure with the employer."

With these positives in mind, these market players offer up 10 ways smaller companies can make themselves more attractive to top IT professionals without breaking the bank.

1. Speed up recruitment process
One major advantage an SMB has over bigger corporations is that the latter usually has several layers of approvals to go through in their recruitment process, Noblet pointed out. "IT candidates work in a fast-paced industry and expect a quick response, otherwise they'll look elsewhere."

As such, smaller companies should implement a succinct hiring process and reduce the interview-to-job-offer timeframe. This could be done by limiting interview to no more than two, for example, he said.

2. Tailor job offers
The Hays executive added that flexibility is another plus. Tailoring a job offer to suit the candidate's needs and wants, such as flexible work options, can help secure the hire ahead of offers from other potential employers, he noted.

3. Use social media
In terms of widening their recruitment network, Noblet said SMBs can use social media to enhance and expand their manpower search.

Blugrapes, for example, sources for relevant talent using targeted ads and connections via social media networks such as LinkedIn, its business director revealed.

4. Career path needs clarity, articulation
Pri Sandhu, manager of the IT division at Robert Walters, pointed out that IT professionals feel motivated when they can see they have a good career plan marked out for them. "If the employee can provide a clear career map of where they can expect to be within the next few years, there will be something to look forward to and staff often feel more engaged," he explained.

JobsCentral's Lim added that articulated plans or goals help candidates know exactly what is expected of them if they join the company and, from the SMB's point of view, it helps build a manpower structure that can grow in tandem with the company.

"If you hire the right type of people who want to achieve certain things in their life, giving them a target to work toward and aligning their interests with that target [may result in] a lot of great things being done," she said.

5. Build a strong core
iTwin's Takru noted that likeminded talent enjoy working with each other, and this can be another pull factor for SMBs.

"Good engineers enjoy working with other good engineers, so getting a great core team together can attract better staff," he said. "It takes time and effort, but this is the best leverage a small company has."

6. Branding matters
Similarly, Takru pointed out that if the SMB's work is interesting or the product it is developing is innovative and unique, it will attract good talent.

Blugrapes' Lim said this is what the company has done, as it positions itself as a high-growth entity playing in the exciting social media industry.

7. Have flexible work schemes
Given that IT professionals are generally quite connected, these workers should be allowed to participate in flexible work schemes rather than be chained at their desks all the time, said Sandhu.

Noblet also noted that by embracing flexibility, an organization can not only retain critical skills but widen the pool of potential talent to include candidates that expect such flexibility to remain in their jobs.

8. Telecommuting for family-oriented workers
As an extension of flexible work arrangements, JobsCentral's Lim said many aspects of IT work can be done remotely anyway. So, as long as clear deliverables can be measured and achieved by workers, schemes such as telecommuting should be actively promoted, she suggested.

This also gives a chance for employees, particular for those with families, to better manage their time and this is a strong incentive for them, the COO added.

9. Build a fun, positive workplace
Ultimately, creating a positive work environment "makes all the difference" for any employee. This is because people would be drawn to and stay with a company that cares for their wellbeing, Sadhu stated.

10. Don't burn bridges
Should an existing employee decide to resign, Noblet urged SMBs not to view the act as a personal rejection of the company. He said the "sensible strategic move" would be to maintain contact with these ex-workers, particularly those they value, as they remain potential "boomerang employees".

This can be done through setting an online alumni forum on platforms such as Facebook, he suggested.

Tight budgets no excuse for SMBs' poor security readiness

The tough economic climate and general lack of capital mean small and midsize businesses (SMBs) are more focused on business survival than investing in security measures. However, security vendors say being ill-prepared in this area might hasten the company's demise due to potential financial and reputational losses.

Ngair Teow Hin, CEO of SecureAge, noted that smaller companies tend to be "hard-pressed" to invest or focus on IT-related resources such as security tools due to the lack of capital. This financial situation is further worsened by the tightening global and local economic climates, which has forced SMBs to focus on surviving above everything else, he added.

As such, IT security may be seen as a secondary concern relegated behind more pressing concerns such as finding new business, growing and sustaining operations, maintaining human resources, and financial control, the executive noted.

Additionally, security implementations are not easy to design, implement and sustain without having a dedicated budget and skilled internal resources as it is not a singular project but a sustained program, Ngair pointed out.

No company's too small
Beyond financial constraints, many SMBs continue to have the misconception that they are too small in scale or importance to be targeted by cybercriminals, said Tan Yuh Woei, country director for Symantec Singapore. Citing the company's 2011 Threat Awareness Survey, he noted that these companies do not consider themselves targets of cyberattacks and are not implementing the proper safeguards to protect their information.

For this reason, they are not prepared to deal with disasters when these occur, he added, citing the company's 2012 SMB disaster preparedness survey which found 74 percent of respondents not having a formal disaster recovery plan in place.

"Being ill-prepared can render a company's critical information lost or inaccessible, and the cost incurred for SMBs in terms of financial loss and reputation will be [higher] than the costs used to implement IT Security," Tan said.

He added that cybercriminals are not just targeting executives with deep access to confidential information. In fact, anyone in the position to provide them with corporate information and "open the door to more attacks" will be targeted, he warned.

Start forming a plan
Ngair noted that there are ways around SMBs' financial budget though, saying that service providers that offer a "cost-effective bundle deal" of tools and management services are one recourse for cash-strapped companies. Since SMBs typically have light IT security needs, they should find a good partner which can manage these and negotiate a long-term contract, he added.

David Maman, CTO of GreenSQL, an database security vendor, agreed. He said small companies should prioritize protecting weak spots in its IT infrastructure, including every PC, server, switch, and router.

Besides, many security vendors provide a free version of security tools with limited features, and these might be sufficient for the average SMB, he added.

That said, insufficient product or market knowledge may mean companies sign up for bundled deals that do not address their security issues or be misled that a simple implementation of antivirus or firewall is all that is needed to safeguard their entire business, Ngair warned.

On a broader level, SMBs should develop a disaster preparedness plan that evaluates how IT technologies such as mobile, virtualization and cloud computing can help in security efforts, Tan urged.

"Just because a business is small does not make it immune to security concerns. Developing an effective defense strategy can help these companies improve their security posture and keep their networks and businesses running," he said.

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