The Bloor Perspective: knowing you knowing SME, euro costs, and what marketers do

In this week's look at three big issues, Robin Bloor and his colleagues consider whether small businesses were mistakenly the ASPs' great hope, euro conversion and crime, and the black art of marketing...

The small to medium-sized (SME) enterprise market has long been a missed opportunity for IT vendors. With minimal budgets, SMEs do not present major revenue streams on their own but when added together it is the sheer number of such organisations that makes them worth the effort. The ASP model was supposedly tailor made for SMEs' requirements. Access to leading edge applications for a monthly fee and the opportunity to play with big boys' toys at SME prices were touted. Such access depended on a high-speed comms line. This all sounds very impressive. You can just imagine the start-up ASP's pitch to the VCs - every SME must need SAP and Siebel, how can they possibly operate without these packages and all for the bargain price of £19.99 per user per month? What the start-ups didn't realise is that SMEs have been operating very nicely without such monolithic software packages and most of them have been doing so for many years. The SME market is a very lucrative one. Vendors just need to get their pitches right. IBM is taking a run at the market with a couple of recent announcements. First, there was the announcement of a dedicated SME distribution arm. The Partner Choice programme targets resellers that supply organisations with less than 100 PCs and gives 'second tier partners' the chance to buy IBM kit direct. The new programme delivers a bundle of products imaginatively entitled Topseller, including a range of equipment aimed specifically at the needs of the SME. The programme also provides financing for small resellers through IBM Global Finance. With the hardware side of things dealt with, IBM moved on to software with its Top Contributor Initiative. This programme brings together 65 of IBM's 300 UK software partners with the aim of generating over £500,000 in revenue over the next year. As the hardware market continues to slow down vendors are looking for somewhere new to sell and the as yet untapped SME market provides a golden opportunity. IBM has made its move and others are likely to follow. The winner will be the one that understands the needs of the customer, but that is just what any good vendors would do. Isn't it? *Euro costs - and here's where you start to pay* In Europe last week the euro took centre stage as bank notes and coins were unveiled - and that revived the debate over UK conversion costs. It's easy to gauge the cost of delivering the new notes to banks, etc. Obviously, there's a cost simply in terms of transportation (of 2.5 billion notes and 7.5 billion coins in France alone, according to The Times). But the security cost (and the cost of any failures) is more interesting. Think of it as a business proposition for the Mafia, drug cartels and so on to put forward to a meeting of Godfathers. According to The Times, the French Government has given security firms E2m (£1.2m) to buy extra bulletproof vests, armoured vans and guns. The Italian Government has contracted 50 armoured trains and 200 armoured trucks. Belgium has cut police leave. German police say they are too stretched to cope and other countries have put troops on standby. Major football games and other events that require heavy policing during the period may be cancelled. Add up the cost of that lot! For the UK, in our 'out' position, the picture is rather different. Not only do we get free spectator seats for Rambo-style action on the Continent, we appear to be lowering estimates of UK conversion costs, whether we're 'in' or 'out'. The key IT cost would be that associated with base currency conversion, which of course we don't incur unless we join. Other costs, while we're 'out', all have corresponding savings. For international operations, some database fields and the programs that access them may have to be changed but will result in overall simplification. Moreover, netting and pooling activity in the treasury departments of international operations will be simpler and produce more accurate net borrowing requirements or loan possibilities. You might be surprised what the odd few million pounds on the money market overnight can do for your bank account. *And you thought marketing was a lot of hot air...* Marketing is not simply selling services or products - it is about putting consumer considerations at the heart of a business, and allowing them to drive everything that an organisation does. Marketing really is fundamental to business success. By considering factors such as price, promotion, place and product (the 4Ps) - marketers make decisions about how best to present their product or service to their audience. This conventional 4Ps model has been supplemented in recent years as marketers focus on a further 3Ps - personnel, physical evidence and process. Marketers consider all seven of these in doing their jobs. Within the marketing function, several factors have to be considered. Branding is one of the most important. Branding - the presentation of your product and the image that surrounds it - is though, only one part of generating customer loyalty. Customer relationship management (CRM) is based on a recognition that it is several times more expensive to recruit a new customer than it is to maintain an existing one. Marketers therefore become involved in database management - without databases CRM is impossible. The most important customers, once identified, are often serviced by Key Account Managers. Increasingly recognised now is the importance of internal marketing - people are fundamental to your offering - they are the business. Marketers are spending an increasing proportion of their time ensuring that the people P is right. Analysis of performance is also important (proving effectiveness is currently a major preoccupation). This is carried out using methods such as SWOT analysis - strengths, weaknesses, opportunities and threats are identified. By marrying your biggest strengths and opportunities you can identify good opportunities. The main activities carried out by marketers are therefore: strategy, branding, database management, communications (through above-the-line (eg advertising) and below-the-line means), market research, internal marketing and performance reviews.