For advanced economies SMBs are the engines of growth. It is more relevant with the adoption of IT services by SMBs. It is difficult to compete with Fortune 500 companies if the company is a small IT service provider. But SMBs make things happening and small companies can work with them to remain profitable.

Guidelines on how to successfully conduct IT service business with SMBs.

Look for Smaller projects

When working with SMBs look for smaller and longer projects rather than big projects and short engagements. There is no need to do a large fixed cost project with SMBs. Instead break up the big projects into smaller assignments. Take one project at a time, deploy it, finish it, get payment and then go for the next project.

Change Management

Changes are inevitable for any project and while working with SMBs you have to be comfortable with rapid changes. It is not possible to nickel-and-dime small change requests. But then it is possible to convince the customer of cost and time implications related to a change. The principle of ‘collaboration over contract’ can work good. It is also good practice to record small changes even if you are not charging the customer. What is important is to be flexible and not to raise hue-and-cry for every change request. But at the same it is vital to make the customer understand that changes cost money and time. So, working in short sprints and not making major changes during the sprint can be a good method to execute projects.

Provide solutions Iteratively

While executing a project maintain constant contacts with the client and develop software iteratively. The iteration or sprint should last for 2 to 3 weeks. At the end of an iteration spell deliver working software for the end user and get their feedback. Never impose solutions to clients as they are domain experts though you may be an IT expert.

Hiring developers

While working with SMBs you have to be very judgmental about hiring developers. Hiring developers from big organization may not work as they work in silo environments with analysts documenting requirements, architects designing solutions, and QA team validating results.

In SMBs developers have a greater role to play than just making codes. Direct customer interaction, being a solution architect, business analyst and usability experts are expected from developers.

Reduce Total Cost of Ownership

It is important to make short term sacrifices in order to make long term gains. Trust of clients deepens and it becomes possible to do continuous business by not becoming concerned about immediate cost to the company but concentrating on long term savings. For example, purchasing a commercial database may be more expensive for a company due to the license costs and other future costs involved as the system grows. So, clients need to be educated about the pros and cons of commercial database. Open source can be a good alternative.

Mobile Phone Access

Dependence on Application Programming Interfaces (APIs) is essential as most SMB owners and employers remain on a move and they make use of mobile phones and desktop browsers to receive alerts, realtime data and reports. This helps them to take quick decisions.

Cloud computing Dependence

Investing in capital items like servers and firewalls may not be all that fruitful for SMBs and startups. It is an expensive proposition as they have to employ people for running it effectively. Instead signing with cloud computing service providers may be much more beneficial as they offer a pay-as- you-go-model. There is zero upfront capital investment and there is the option to scale higher with the business development.

Open Systems

To build a subsystem can be necessary for making an integrated system. Software as a Service (SaaS) application that provide project management, document management, timesheets, expense tracking, accounting, and payroll services can be ideal. This will help speed up the system development process and help to create integrated system experience for your client.

Tags: APIs, Change Management, Cloud computing Dependence, collaboration over contract, constant contacts with client, engines of growth, Hiring developers, Mobile Phone Access, Open Systems, small companies, Smaller projects, SMBs
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Seeing the capability of SME in executing projects, the Union ministry is considering reserving 10 percent of IT enabled projects for Small and Medium Enterprises (SMEs). The proposal is being circulated among the state governments to get a better response and to receive recommendations from stake holders. It is expected that the companies will get direct orders and even if the projects are given to big companies there will be provision for outsourcing 10 percent of the orders to SMEs.

The focus of the IT policy 2010-15 is on start up companies, IT products, SMEs and women entrepreneurs. Promoting women’s participation in the ICT sector is also its objective. More e-governance projects in local languages are also on its agenda.

At present there are 1,200-odd IT and IT-enabled Service (ITeS) companies. Out of these, 70-75 percent belongs to the SME category earning annual revenues not exceeding Rs 100 crores. A company is considered a start up if its annual return is between 50 lakh and 10 crore, with 50 employees and operating for less than five years.

The government has made provisions to grant incentives in the form of 25 per cent power subsidy to start-up companies, 25 percent reimbursement for premises rental expenses and recruitment assistance of 2.5 lakh per 50 persons recruited.

L Suresh, president IT and IT-enabled Service Industry Association of Andhra Pradesh (ITsAP) says, “Usually, SMEs are good at executing projects. But because of their size, they are disqualified from participating in large projects. Earmarking about 10 per cent of e-governance tenders for SMEs will ensure that companies will have a level playing field.”

To market intelligence, prepare research reports & analysis for SMEs, understand new trends in technology, the Andhra Pradesh government will create libraries with support from NASSCOM, IT Exporters Association, Software Technology Parks of India, ITsAP and Institute of Electronic Governance. For the libraries, Rs 10 lakh fund will be facilitated so that the SME sector can grow. In order to evaluate the strengths of SMEs, the government shall tie up with business analyst firms. This will enable smaller ICTs to establish linkages with bigger firms and help SMEs to find international markets.

Andhra Pradesh has set a target to raise its export value to Rs 70,000 crore by 2015. The current value is 32,000 crore. The state provided 2.51 lakh employment in 2009. New employment for 125,000 people is being targeted. IT sector’s export is 50 percent of the total exports from other sectors in the state.

Tags: e-governance, ITsAP, NASSCOM, SMEs, stake holders, start up companies, state governments, Union ministry, women entrepreneurs
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With economies of Europe and US are hard-hit by recession, SMEs in India has also witnessed decline in the last three quarters of 2008. The strong linkage with agricultural sector is one reason for micro, small and medium enterprises’’ (MSMEs) economic recession. But it would be wrong to conclude that this sector will not withstand the crisis as Indian SMEs are resilient lot.

There are sectors and business places in India that are hard-hit and are struggling in the aftermath of the recession.

1. Decline in IT and ITeS sectors (IT enabled services) have curved the graph of negative consequences on industries like Tourism and consumer durables.
2. Moradabad, famous in the entire world for its handicraft industry is now witnessing closing of its workshops due to price rise of raw materials like brass. The artisans are left unemployed.
3. Kanpur, the Manchester of India, is neglected, has a poor infrastructure and its industries are closing down.
4. The famous Tussar silk fabric of Bhagalpur, exported to places like US, Europe, West Asia and Japan, is jeopardized by competition from new silk manufacturing centres like Bangalore and Ahmedabad. Lack of credit and power shortage has added to the decline of this big trade centre of Eastern India.
5. Tirupur has serious infrastructural constraints, despite Union and State government’s support in the past. For past several months, the city is struggling with power cuts and poor transport system.

Neo Liberal policy

Neo liberal policies offer solutions to problems faced by SMEs. The policies offer reduction in taxes, credit guarantee and related measures.

The efficacy of such policies can be analyzed from the impacts on SMEs. The impact can be categorized as under:-

1. Shadow entrepreneurship where an individual is left with no other choice but to become an entrepreneur.
2. Pseudo entrepreneurship meaning the start up and sustenance of entrepreneurs who are lacking in the key elements of entrepreneurship like value creation and business ethics.

Recessionary Trend

The symptoms of recessionary trend spread from financial sector to real sector. Its effects on MSMEs follow this pattern. Recessionary trend shows up in the economy in terms of effects like ‘Sentiment’ and ‘Expenditure’. The sentiment effect results from signals received from financial system. It may be failure of stock markets and crisis in leading sectors. In such a case, financial institutions become more cautious about their lending policies. The expenditure effect is a curb on expenditure by MSMEs as business orders start reducing due to recession. Postponement of payments to creditors and workforce also become common due to the expenditure effect.

Less Protection

Initiative taken to improve labor laws is half-way inspite of efforts to liberalise labor laws. Paradigms like ‘flexible specialisation’ and ‘global value chains’ as found in international level are absent in MSME sector in India as it functions as ‘Sweat shops’. Then ‘blanket freedom’ in some sectors is another key problem that has hidden the policy advantages related to MSMEs.

The interests of MSME sector is jeopardized by distortions in public policy. However, attempts are being made to bring about improvements. For example, the ‘MSME cluster development programme,’ enhances individual firm’s competitiveness on a ‘collective efficiency’ mode. The advantage of the Indian manufacturing sector is its highly distributed character. So, because of its distinct economics and sociology, any recessionary shock does not straightway percolate in the sector. To provides resistance to economic downturns and toendure upon this situation, public policy needs to amplify from its current neo-liberal approach. When policies are broad-based, it will be possible to distribute the loads of a recession in the entire economy.

Tags: blanket freedom, business, economies, financial system, global value chains, industry, linkage with agricultural sector, MSMEs, Neo Liberal policy, raw materials, Recessionary Trend
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The Indian information technology (IT) sector does not seem to be detached from the sanguine trends of the world market. The small and medium enterprises in the IT sector contribute 10 -15 percent of the output in India. This may seem to be insignificant but then it gains importance in the light that the overall Indian IT sector amounts to $50 billion (Rs 230,000 crore).

The Indian government’s extension of fiscal benefits offered under section 10A/10B supports the SMEs as the step mitigates recession aftereffects and the protectionist measures of the US, commented Som Mittal, Nasscom’s president. This would help SMEs grow, bring parity in the SEZ scheme and guide industries to move in smaller cities.

Though the downturn made things difficult for the IT industry but many companies providing baseline services glided unscathed. Companies like Connectiva Systems that had been receiving two to three requests for proposals (RFPs) per month are now receiving five-to-seven RFPs in a month. However, there are far greater challenges faced by smaller players than the downturn offers. “Small players can survive only when they are able to carve out a niche for themselves. This they can achieve by focusing on specialised models and products tailored for specific markets. The idea, therefore, is to be as cost-effective as possible.” says Kalyan Kar, managing director, Acclaris.

Tags: IT Industry, SEZ, SMEs grow
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“Software as a Service (SaaS)” has been growing exponentially in recent times due to the trend that companies are now opting for low cost alternatives. The SaaS platform is considered to be an important milestone of internet services. The viability of SaaS to propel us into the next level of growth should not be underestimated. Though this view is fervently supported by many research firms and SMEs, there are inherent security concerns around the SaaS model. It is debatable whether data can be hacked into while in transmission, though most data providers say it is unlikely. While this is still in question, it is important that both vendor and client work together to develop security protocols so that the client’s data is always safe both onsite and offsite.

The benefit of using a SaaS model is that it provides manufacturers an easy way to upgrade their functionality as well as the ability to reach out to their clients easily. Because SaaS is just a model for the delivery of technology solutions, it is important that templates be created according to industry specifications in order to boost security and achieve optimum services. This is why it is vital for every company to develop their SaaS business application to run on the web. SMEs are increasingly growing conscious of the advantages of “Software as a Service” as this is undoubtedly a direct and affordable means to reach out to millions of customers.

The adoption rate of SaaS is not dependent on the firm size. SMEs have similar adoption rates as large enterprises but adoption is more dependent on the security aspect of the service. Vendors who invest on best practice technologies and ensure that the client data is sacrosanct are normally trusted by SMEs. Providers that rely on more suite-oriented application software that can confirm the clients’ data is secure are most approached by SMEs. In summary, though there are perceived security issues with the SaaS model, there are ways to circumvent these potential security breaches.

Tags: inherent security, internet services, SaaS model, security, software-as-a-service, technology solutions, underestimated
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With big players like Google and now even Microsoft promoting Cloud computing technology, it is the next big thing which will transform the way enterprises and individual access IT services. The key question is the way it is going to effect the small and medium enterprises (SMEs) . In all key areas, whether it be IT infrastructure costs, real time collaboration or efficient utilization of the technology manpower cloud computing technology have proved itself useful for the enterprises. But most important contribution of cloud computing lies in the business focus improvement for the enterprise by liberating financial and human resources invested in the IT support and management. This will increase the adoption of cloud computing manifold times in the SME space thus changing the business landscape.

Defining Cloud Computing

Before analyzing the benefits of cloud computing for enterprises and SMEs, , it would be good to know what cloud is computing all about.

Cloud hosting services is a platform formed by the juxtaposition of technologies like virtual computing, distributed computing, and flexible networking processes. Thus IT cloud is better conceptualized as a service architecture where in IT infrastructure, software and even application platforms are offered as an on-demand always on available service. Two core features are: the services can be accessed over the internet and second the client or the end user access the IT infrastructure as a service and pays a small monthly amount to use with no need to sign any long term contracts.

Key benefits of the cloud services are:

Mobility: Cloud hosting enables anywhere accessibility to the application which helps real time collaboration within the enterprise.

Scalibility: IT resources can be increased at short notice to ensure that the time to the market for a business process is very less and there is no risk of IT infrastructure investment for the SMEs. This also enables the SMEs toto adopt the pay as you go model thus lowering the pressure on cash flows.

Maintenance and reliability: Since the SMEs do not have to deal with IT infrastructure maintenance as the process is automated and it is the responsibility of the cloud hosting provider. This leads to lower manpower and training costs as well as higher redundancy ensuring that the network reliability is guaranteed and assured.

How and Why SMEs should use cloud hosting services

Any SME can benefit from the cloud hosting services in the following way:

Local IT infrastructure costs eliminated: SMEs do not need top mainatin any local or onsite IT infrastructure equipment and software as well as personals as the application delivery network comes ready made and always on available service. Hence there is no need install Local Area Network (LAN) as well as Wide Area Network (WAN). Thus there are no huge upfront costs in buying servers, system upgrades or providing for backup and security tools. Since the cloud services are platform independent and it is on the cloud servers that the software is installed and run, the system requirement on the clients side are minimal. This eliminates the need for system upgrades, local backup facility or even network security and monitoring tools.

Outsourced IT management: The cloud hosting services comes with full features IT infrastructure management for the client thus SMEs do not need to have local IT support and management personnel. This helps them to focus better on their core business as well as cut down on their capital as well as working capital costs.

Real Time Collaboration: The cloud computing ensures that the enterprise application are accessible from anyplace anytime on the web from any browser. Further the multi-user real time means that businesses can work from multi locational units without a need to invest in the office infrastaructure.

Market the business process in shortest possible time: SMEs have scsre capital and human resources. During the start up stage being focussed on core business, conserving capital while being able to market the business effectively in a low cost manner is key for business survival. Thus one needs to adopt clould serives where user feedback can be attained quickly and time to marekt is very little.

Thus SMEs should start using some of cloud hosting services like virtual document management services, promoting businesses through social network sites as well as virtual email hostimg services.

In my next article I will talk about issue and challenges for SMEs using cloud computing specially in a country like India.

Tags: Cloud Computing, cloud hosting services, IT services
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