E-Business for Small and Mid-Sized Businesses

Small and mid-size businesses (SMB) are everywhere:

• Plastics industry - over 5,000 plastics suppliers and 18,000 plastic processors who trade in 30,000 grades of materials
• Food Services industry - over 2,000 producers; 20,000 distributors, and 750,000 restaurants/operators
• Chemicals industry - over 500 global producers of thousands of complex products; complicated distribution through over 50,000 intermediaries
• Healthcare industry - over 7,500 distributors selling complex, regulated products to 275,000 hospitals; fragmented, inefficient industry
• Printing industry - hundreds of national printers and over 50,000 regional printers in the US alone

The pressure to adopt e-business apps and digitize business processes is growing steadily in the fragmented SMB segment. However, SMB firms have unique needs:

• Limited IT resources and sophistication
• Continuous cost pressures
• Limited discretionary capital for any long-term IT investments
• Constant competitive threats that threaten their survival

That's the reality for SMB enterprises. They require cost-effective solutions that can be up and running quickly -- and that will continue to meet their needs as the business grows.


SMB Market Segmentation




Packaged Solutions for SMB Market
The shift away from building custom applications toward buying off-the-shelf is a long-term trend that is picking up steam in the SMB segment. The replacement of legacy applications slowed with the downturn in the economy as SMB enterprises locked down all discretionary spending. New applications typically are good investments over the long term especially to maintain competitiveness and facilitate growth.

That's why several vendors are creating customized e-business solutions specifically designed for companies in the small and mid-size business marketplace. Mid-size e-business solutions sets give smaller enterprises (with employees greater than 250 and typically revenues between $50 million and $500 million) access to functionality similar to what their Fortune 500 counterparts have had for years. Small business solutions are aimed at the emerging multibillion-dollar market: supplying potent software to companies with 50 to 250 employees.

One of the biggest difference between traditional and SMB ERP implementations is customization or the lack thereof. Traditional ERP packages are heavily customized, requiring hundreds of consultants and millions of dollars. By contrast, most mid-size implementations range between $300,000 - $500,000. The small business solutions tend to average around the $75,000 - $200,000 range.
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Why is SMB Participation in E-business a Big Deal?
B2B e-business has stalled in the last 18-24 months due to the lack of SMB participation. Take for instance, B2B exchanges/consortiums. Many exchanges are being used only for basic information not transactions. Supplier transaction enablement is a huge problem that is only recently getting the attention it deserves. Without small and mid-size distributors and suppliers participating, e-business investments for large firms are going to show negative paybacks.

The first step towards B2C or B2B e-business is automating internal processes via enterprise applications. While most large firms have robust enterprise application strategies, the SMB firms are struggling with complexity and cost. The SMB challenge: how to configure and deploy big-company technology-specifically, ERP, Procurement and CRM applications-without spending millions. When all goes well, SMB e-business implementations are measured in thousands of dollars instead of millions, and months instead of years. The vendors promise up-front, guaranteed agreements on schedule and price, fully functioning applications and a lot fewer headaches than traditional ERP.

These vendors - SAP, IBM, Microsoft Oracle and others - are all aiming to provide integrated enterprise application suites (much like what Microsoft did with Office). These prepackaged solutions provide out-of-the-box functionality that enables SMB's to quickly and easily manage financials, human resources, supply chain, customer relationships, and other key business processes.

The rationale is simple: SMB enterprises can't afford to implement piecemeal technology -- and then incur costly migrations as the business expands. The SMB market segment wants to focus on running their business, not on developing and implementing enterprise applications.
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Research Program
The key to succeeding in the SMB market is understanding the company -- its industry, its specific needs, its plans and its users. This is not easy. High-end vendors historically have a poor history of selling packaged applications to low-end businesses of under $200 million in annual revenue.

ebs research takes a pragmatic and business-case driven view of how SMB e-business can reduce costs and build enhanced customer relationships. Some topics covered in this research program include:

• SMB Market Segmentation
• The State of SMB e-business: Past, Present, and Future
• SMB Business Needs
• SMB e-business Solution Sets
• Serving the Customer: The Important Role of Resellers and Partners
• SAP Smart Business Solutions Program for Small and Medium Businesses (SMBs)
• IBM Start Now Program for Small and Medium Businesses (SMBs)
• Microsoft Great Plains Solutions for Small and Medium Businesses (SMBs)
• Oracle Solutions for Small Businesses

Need help with complex projects or highly customized research? ebs research team stands ready to help you apply the research. For more information on SMB e-business research, e-mail us.

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