SMBs yet to make right IT investments

Failure to invest correctly in areas such as security, storage and process applications can impede growth of smaller businesses, warn observers.
Written by Sol E. Solomon, Contributor

The ability to make calculated decisions on how to invest IT infrastructure dollars is imperative, amid the economic downturn, for the survival of small and midsize businesses (SMBs), observers say.

Lloyd Parata, Asia-Pacific vice president of Global 360, noted that owners of typical small businesses mainly worry about customers and cashflow, rather than IT system upgrades. In fact, SMBs across the Asia-Pacific region fall short when it comes to investing in IT security, storage and process applications. Global 360 is a provider of process and document management applications.

As a result, issues start to appear when these companies grow, Parata said in an e-mail. "The more customers they have, the more administration work is created, so they need more staff," he said, adding that maintaining the growing customer database chalks up more operational expenses.

At this stage, Albert Koh, Asia-Pacific general manager of InfoPrint Solutions Company, said decisions take longer to make and this impedes the SMB from growing not only in the region, but even within a single country.

Ross Hammond, managing director for Emerson Network Power Singapore, said investing wisely in IT is as much of a returns on investment (ROI) issue, as it is of affordability.

"Like many large companies, SMBs depend heavily on IT," Hammond said in an e-mail. "Where they differ from large businesses is their reluctance to recognize the potential impact of IT infrastructure failure on their core business service."

For an SMB to understand what is required, specifically for its IT infrastructure, it must first determine its core operational values, service levels required and the potential impact of downtime, he said.

"This is followed by a discussion that connects Capex (capital expenditure) and Opex (operating expenditure) for a total cost of ownership that delivers the IT services the business requires, and that the business can afford over the duration of the service," Hammond said.

Global360 observes that SMBs are often in "constant struggle with cash flow", according to Parata. "Implementing effective cash flow management strategies is important to protect their bottom line," he said. "They have to set goal-oriented budgets and proactively manage them, and have to look into improving and creating a stream of cashflow to protect themselves against foreseen and unforeseen impacts of the downturn."

SMBs find these requirements difficult to address because they lack the automated processes to help them manage their business, he said. Instead, they rely on spreadsheets or paper-and-pen to manage their accounting, Parata said.

InfoPrint's Koh added that the manual paper-based processes SMBs are accustomed to also get in the way of information-sharing, making it difficult for these businesses to expand. The absence of a computerized common information platform makes it tough for SMBs to execute both local and regional business strategies, he said.

"Employees may find it hard to access information when the company is in the expansion phase, as knowledge is stored in files chucked away in cabinets," he noted.

A computerized document management system can facilitate an SMB's expansion by allowing the company to leverage automated information and document workflow across its entities in the region. "Hence, for staff, information is readily available and decision-making is greatly accelerated through a workflow solution," Koh said.

Some vendor help
According to Hammond, many SMBs today demand the same level of availability as large enterprises. This presents an opportunity for vendors to work closely with channel partners to ensure their product and solutions portfolio is geared to meet an SMB's challenges, he said. This can also ensure their approach to solving the SMB's problems is in tune with its scale and specific business challenges, he added.

Koh noted that since SMBs do not have large sums of capital to make huge IT investments, vendors should work together to provide managed services that can drive ROI and business value, thus, enabling SMBs to ease into the use of various IT applications.

"The business case should involve cost-saving solutions and a business transformation to allow SMBs to justify going into a long-term contract with a service provider," he said.

Fundamentally, said Sean Browning, Asia-Pacific partner sales director of Webtrends, IT vendors need to be more transparent about their capabilities and position within their customers' ecosystem.

"The position of an all-in-one suite of products that serves all your needs as a buyer is a farce," Browning said in an e-mail. "Two businesses operating in the same industry, creating similar products, will most likely have unique business processes that are unique to their operations."

As such, the IT vendor community "has the burden-of-proof to explain and show how their solutions contribute to their customers' business practices, as opposed to injecting unnecessary and unwanted change on their customers", he said.

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