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M'sian small businesses targets for tech vendors

IT shops can grab a piece of this growing pie by targeting specific segments of the SMB market, says an industry analyst.

Malaysia's small and midsize business (SMB) market is growing faster than the wider enterprise segment, and IT vendors would do well to tap into the potential. But they cannot do so by simply lowering their prices, says an industry analyst.

The lower PC penetration among SMBs, compared to the larger enterprise sector, translates into vast opportunities for the vendors, explained Deepinder Sahni, AMI-Partners's senior vice president, during an interview with ZDNet Asia.

In an earlier study, the research firm found that PC penetration for small businesses in Malaysia was 66 percent, behind Singapore's 82 percent and Hong Kong's 70 percent. In contrast, PC penetration for Malaysian companies with 100 to 999 employees is likely to be 100 percent, according to estimates from AMI-Partners.

SMBs currently make up at least 90 percent of the enterprise market in the country, contributing between 40 to 50 percent of the economy, he said.

Sahni advised vendors to target certain segments of the SMB market, rather than the entire market. "The goal for these vendors should be to reach out to the different segments of the SMB market that need their domain expertise, and then develop products that cater specifically to the SMB's needs," said Sahni.

For example, he said, at merely 20 percent, the PC penetration rate of SMBs in the retail and wholesale industry is very low. It is a figure he finds "surprising", given that this segment has "plenty of room for growth".

These companies, he explained, are ideal candidates for vendors peddling enterprise resource planning and supply chain management software, as many of these SMBs are still "sticking to just a cash register".

However, he pointed out that more needs to be done before small businesses which are typically price sensitive, are convinced that technology will make their business processes more efficient.

Many are wary of the costs involved in purchasing and maintaining an IT infrastructure, he added. And although the cost of broadband Internet access has been decreasing, small businesses still do not find it low enough to justify its deployment.

Improving the SMB's awareness of benefits that technology can bring to their business is "critical" to encourage non-PC companies to adopt IT, said Sahni,

"The government, together with the vendors and Internet service providers, need to spread the message that technology brings benefits and incentives to them," he urged.

Small businesses that already possess PCs, a majority of them are still in the "first wave of IT adoption", where they are equipped only with basic computing hardware such as PCs, printers, desktop software applications and Internet access, Sahni explained.

It would take them between three to five years to move from the first wave into the second, where companies deploy communications and networking technologies such as local area networks, he added. However, most small businesses would "find it tough" to move into the third and final wave, where the company begins adopting technologies and business applications such as customer relationship management.

To enable these businesses to move beyond the first wave, vendors should develop SMB versions of their current products to suit the company's needs, rather than simply removing a few features and lowering the price of the full product, Sahni suggested.

Looking forward, he is optimistic that the PC penetration of small businesses in Malaysia, especially family-owned shops, will increase as new generations of tech-savvy owners take over the reins.

"These new owners have different mindsets about technology from the previous owners," he said. "And they believe that technology will help create more inroads for them."