IT companies – multinational giants and new entrants – are on a race to capture a greater slice of the rapidly growing small and medium business (SMB) market.
For years, software vendors such as SAP and Oracle confined their attention to the corporate and conglomerate world. But recently they have begun to court SMBs.
"If you print the Fortune top 500 companies, it will be difficult for you to know which one of them does not use SAP," Ayman Abouseif, Vice-President for SAP Mena told Emirates Business.
"These 500 companies were initially our key partners and they helped us learn innovation. But there has been a shift in the level and speed of adoption of IT within SMEs, which makes it the right time for us to put more effort into this segment."
About 60 per cent of SAP's customers worldwide are companies with $500 million or less in revenues and by 2005, 15 to 20 per cent of SAP's global software revenue will come from SMBs.
SAP's move to cater to SMBs is also an expected move to retain its dominance in the ERP business.
According to Karen Peterson, Research Vice-President at Gartner, Microsoft represents SAP's next competitive threat because it has bought a couple of ERP vendors – Great Plains and Navision – that serve SMBs.
She said if SAP wanted to maintain its dominance in the ERP market, it had no choice but to go after SMBs.
SAP's chances of survival in the midmarket are hurt by the fact that it has "never been viewed as being a vendor that provides solutions that are easy to use, easy to deploy or low in cost," she said.
Only time will tell if SAP can be successful in its quest for the midmarket, and that organisations will be watching closely to see if SAP will woo enough channel partners to allow them to penetrate the SMB space, she said.
Oracle, a fierce competitor of SAP, is also looking to widen its SMB customers' base. IT intelligence agent IT Business Edge says Oracle's acquisitions of PeopleSoft, JD Edwards and Siebel helped it gain a foothold in the SMB community.
But as Oracle is quick to point out, some 60 per cent of its SMB customers use Oracle's own E-Business Suite, while 40 per cent use the applications it purchased from the other three firms. And Oracle's recent expansion of its Accelerate program shows the software giant is serious about SMBs.
Oracle's new SMB strategy emphasises partnerships rather than purchases of other software companies. It plans to recruit service providers that work with SMBs and collaborate with them to create product sets geared toward SMB needs and budgets.
It's throwing in lots of benefits for these partners, including aggressive price discounts, a referral programme that offers compensation of up to $50,000 for successful leads and added perks like training, event funding and co-branded marketing campaigns.
So why is there such a rush to woo SMBs?
"SME is an unlimited market segment that everyone today wants to go after, meaning if you ask me how many SMEs companies are in here, nobody really knows. It's tens and hundreds of thousands," Abouseif said.
According to IDC, it is critical for IT vendors to understand the needs of this segment because SMBs will account for a third of all IT spending in the UAE by the end of 2008.
Sandeep Bose, regional head of Standard Chartered Bank's SME Banking – Middle East and South Asia said in both the emerging and developed markets, SMEs represent the vast majority of companies.
And while most SMEs have less than 20 employees, collectively they employ a majority percentage of the workforce. In the UAE, there are some 200,000 SMEs making up more than 90 per cent of total business entities participating across industries but predominately in general trading.
"With an annual growth of more than 15 per cent, SMEs are the backbone of the economy," Bose said. "SME market provides a revenue opportunity of over $1.2 billion in the UAE and globally, the SME segment generates above market returns when compared to other financial service product areas."
SMB is also a hit market for hardware and other IT products and services companies. HP Middle East has recently launched a new series of multifunction printers (MFP) that are ideal for small and medium-sized businesses looking for a high performance, reliable and easy-to-use printer.
The HP LaserJet M1522 MFP series offers high quality print, copy, scan and fax functionality in one space saving device. Developed especially for SMBs, the M1522 series provides fast print and copy speed and reduces power consumption with the help of the LED technology that does not require a warm up time.
"In a competitive market place it is critical for small businesses to derive optimal efficiency from technology investments. To this end, we continually harness our innovation to make industry-leading technologies available in affordable products," Asad Syed, SMB Business Manager, Imaging and Printing Group, HP Middle East, said.
HP's Japanese competitor, Oki Printing is also focusing on SMBs to attain higher goals of catering to corporates in the long-term.
"Since our core product line ups are in the range of $100 to $5,600, they do indeed cater to the SMBs," Terry Laidlaw, Eastern Region vice-president of the Oki Printing Solutions and ex-Xerox executive, told Emirates Business. "Also we are not yet as big as HP which dominates the corporates, so focusing on SMBs will give us a short cycle business growth which will, in the long term, make big business growth."
Oki's strategy has been banked on the growing areas of colour printers; MFP, which integrate print, scan, copy and fax functionality in one unit, monochrome printers; serial impact dot matrix (SIDM) which have peen popular for its reliability; and low cost per page, and fax machines.
According to IDC figures, SMBs are driving the energetic growth of the MFP market in a global toner based printer market worth $60bn.
IDC said the growth of MFP units is particularly strong at the entry level, or small office or home office area of the market, where inkjet printers have traditionally dominated.
Oki's expertise in providing solutions for the SMB businesses is further complemented by the aggressive growth in the Middle East's SMB market, John Ross, general manager for Oki Printing, Middle East, India and North Africa, said
"Oki's products have been targeting SMBs by encouraging them to go for the in-house printing option rather than outsourcing their printing needs," Ross said. "Our products are flexible, easy to use and are packed with a variety of bundled software applications that assist in managing colour, network, printer resources, and that make designing office documents as easy as possible."
"If you are an SMB or SME and you need to print business cards or banners, then you can just buy one of these printers and print only those that you need," Laidlaw said.
"It's not only affordable, it also makes sense to print only those that you need instead of printing hundreds but in the end just throw some of them as you have to change the phone number or address or title."
"Therefore SMBs are finding that by purchasing a network capable Oki Printer or Multi Function Product, makes a great deal of sense over inkjet printers and provides better value than other office printers in the same class," Ross added.
Analysts say the SMB pond is big enough for more IT fish. In the last two months, the UAE has been flooded new products specifically targeting the SMBs and all promising easy-to-use control panels.
Avaya, a leading global provider of business communications applications, systems and services has made available its one-X Quick Edition solution through its distributor Prologix.
Avaya said the product is an easy to support and maintain peer-to-peer phone system which ideal for locations with 20 users or less.
"Avaya's one-X Quick Edition provides the regions SMB's with a broad set of choices to meet their particular branch requirements. With the availability of Avaya's one-X Quick Edition in Mena, banks and other financial institutions will be able to benefit from its simplicity, for it's an easy to order, install and manage solution," said Khalid Khan, channel manager – SME, Mena, Avaya.
UAE-based Raqmiyat, also a part of the booming SMB sector, has released its latest ERP software offering the new version of Global Enterprise Management System (Gems), software that manages customers, partners and employee relationships; financials, operations, logistics and eCommerce business activities in one single integrated solution.
"Recent trends towards larger deals, particularly from government modernisation initiatives, have encouraged us to continuously develop our robust solutions to address large scale projects, while advancing our brand of highly scalable offerings for small and medium-sized businesses," Navneet Tandon, Raqmiyat Vice President, told Emirates Business.
"Driven by the challenges of rising costs, management and operational efficiency, regional SMB's today are well aware of the importance of technology to streamline their business and improve their overall productivity," he said.