Philippine SMBs concern over software cost

PHILIPPINES--Cost remains the top concern of Philippine small and midsize businesses (SMBs) when it comes to adopting technology, particularly enterprise software, in their operations.

The Philippine SMB sector is highly untapped and very lucrative as SMBs comprise more than 90 percent of all businesses in the country, according to Philippines-based XMG.

The research house noted that cost has been the predominant factor for SMBs with regards to investing in software, as applications for human resource management and customer resource management--among others--may come with a price tag of between 500,000 peso (US$10,900) to several millions peso.

Benedict Ferrer, a senior analyst at XMG, said in an e-mail interview: "IT spending among Philippine SMBs is also heavily influenced by macro factors, such as economic and political uncertainty, resulting in [SMBs] shifting [their] priorities, extending technology lifecycles and refraining from investing in new management practices and paradigms and unproven models, when the old ones still work."

However, the research firm said "branded" software is still attractive to local SMBs.

The appeal is further driven by traditional software companies such as Oracle and SAP, that offer versions of their products designed for and targeted specifically at SMBs, Ferrer said.

"We are seeing highly discounted, value pricing from branded tier-1 vendors," he said, noting that this presents a challenge for local software companies to push their own products to the SMB market.

Ferrer also said there are distinct advantages of using "branded" software over homegrown applications.

"The main advantage of branded software over software from local companies, is the depth and coverage in architecture evolution, research and development, customer support and [availability of] software upgrades," he said.

Case for local software
However, Philippine retail giant Olympic Village Group said it is sticking with locally-developed software, particularly to address its in-house applications needs.

The company, which carries some of the world's most-well known brands in sports and athletic supplies, said it has tapped a local software developer to provide tools that meet its requirements, particularly for its numerous "theme" stores located across Metro Manila.

Olympic Village Group COO Roberto Abesamis disclosed, in an interview with ZDNet Asia, that it is currently installing customized software that will link store facilities such as LCD displays, POS (point of sales) machines and audio systems, to one central computer system.

Abesamis declined to divulge the identity of the local developer because the project has yet to be completed.

But despite SMBs' concern over cost, multinational software vendors remain unperturbed and are continuously releasing otherwise expensive products and services, that they deemed affordable to price-conscious companies.

Redwood, U.S.-based Oracle offers products that target SMBs, and recently unveiled its latest salvo of products and services in a piecemeal approach.

The vendor said it is offering software packages that are specially designed, packaged and priced for local SMBs.

According to Francis Ong, Oracle Philippines managing director, cost is not the only issue that hinders SMBs from investing in technology.

The complexity of setting up a simple information system, for example, a basic CRM (customer relationship management) application, is also a major issue for smaller companies, Ong said, in an e-mail interview.

"What Oracle does is come up with custom-made software that will cater to the needs of these smaller firms," he said. He added that Oracle will implement an SMB-specific pricing scheme but he did not disclose any details.

The company is also working closely with local software partners, through its Accelrate program, that it hopes will be able to customize and streamline Oracle's million-dollar software so its products can be more affordable for SMBs, Ong said.

Oracle is touting Accelrate as its initiative to allow smaller companies to acquire its software portfolio, including Oracle E-Business Suite, PeopleSoft Enterprise, JD Edwards EnterpriseOne, and Siebel.

Oracle Philippines has partnership agreements with local systems integrators, namely Active Business Solutions, Beacon Frontline Solutions, and Satyam Computer Services, and according to Ong, will sign more partners "as the need arises".

Joel D. Pinaroc is a freelance IT writer based in the Philippines.