Wanda Matandela, Vodacom

How can smaller South African companies deal with today’s increased financial risk climate?

Despite the IDC’s claim that IT vendors and local governments will be focusing on growing small-to-medium enterprises (SMEs) this year, smaller companies are still faced with many risks in today’s financial climate.

According to an IDC study, the largest SME technology pain points include systems and applications reliability, networking and systems management, security issues across the infrastructure, and PCs and printers at different software release “levels”. How can local SMEs ensure financial success despite all these challenges?

According to Tracey Newman, SME lead at Microsoft South Africa, small businesses have to do more with less. “It’s about staying close to your customers, focusing on your business differentiators, and being more agile than competitors. SME owners are recognising that technology is a critical pathway to expanding their business, as it brings so many opportunities to extend their reach to new customers and incomes. However, young businesses rarely have the money or resources to spend on IT infrastructure.”

Nomalanga Nkosi, GM business at MTN Business, believes the opposite. She says today’s market is still faced with the situation that most SMEs do not think about technology when looking at the bigger business model, and therefore, often do not understand the phenomenal impact technology can have on their business. “This has resulted in inadequate budget/funds being provisioned for IT investment in many SMEs’ environments. SMEs are still ‘afraid’ of technology investment, especially because technology changes and advances at such a rapid pace – making it difficult for SMEs to keep up.”

Dawie Bloomberg, MD at Green Apple IT, says SMEs face the unique challenge of having to manage not only their core business, but also many of the other facets of running a business, such as HR, finance and IT. “Furthermore, they do not have extensive IT skills and even if they have some knowledge, a bit of knowledge can be dangerous. It is far better to leave IT up to the experts. Having a full-time IT resource might seem like the answer, but another unique challenge to SMEs is that they more than often cannot justify the cost of a full-time IT person,” he explains.

Gareth Tudor, CEO of Altonet, concurs: “One of the biggest challenges for local SMEs, and something which is unique to this market, is a lack of expertise in managing the basics on their own, and in knowing when to call in an expert. Secondly, when calling in the services of an expert, SMEs are faced with the challenge of knowing whether or not the service provider actually has the skills to solve the problem. The end result is often that problems are not resolved, because the SMEs do not have the knowledge or skills necessary to recognise whether the job is being done correctly or not.”

Wanda Matandela, managing executive: small medium enterprise at Vodacom, says the local ICT sector is still going through a growth phase in the SME segment, when compared with its overseas counterparts. “The lack of scalable broadband infrastructure spurred on by a weak regulatory body has seen SA lag by up to three years, in some cases, when compared internationally. This means SMEs have been lacking in choice around IT, and are reluctant to embrace new technologies when it comes to their IT requirements, and specifically their communications partner.”

OVERCOMING CHALLENGES

However, all is not lost for smaller companies, and many believe them to have a rather bright future. Newman says unlike older IT systems, which took up a lot of time and effort, modern technology actually frees up time for the small business owner to pursue growth opportunities. “Technologies such as cloud computing help SME owners to focus more on business opportunities and less on IT infrastructure,” she explains.

Nomalanga Nkosi, <a href=

MTN Business" />According to Bloomberg, outsourcing can assist SMEs greatly, as it eliminates the need for dedicated resources to handle the various aspects of business, such as HR, finance and IT. “This option provides SMEs with an affordable solution without the associated costs of a full-time resource.”

Matandela explains government and ICT vendors alike are focusing on building scalable and robust infrastructure, solutions, channels and support environments to meet SME requirements. “The advent of cloud technology means that SMEs now have the option to consume services in an opex manner, meaning they don’t have to fork out large capex amounts for their IT. Furthermore, the broadband Internet space is undergoing a pricing revolution, not only in the mobile space but also in the fixed-line space,” he says.

He adds the initiatives under way are being driven by bodies such as DTI, SEDA, NSBC and their communications partners, such as Vodacom and Microsoft, to address these challenges and ultimately deliver the customer experience that SMEs demand.

Newman agrees that the cloud is the big technology opportunity for the SME. “By hosting their IT solutions – like e-mail, business applications and backups – in the cloud, SME owners can manage their IT processes in a more streamlined, cheaper, and less timeconsuming way. They also don’t need to build and maintain a server infrastructure: no need to worry about purchasing server hardware, having the right OS licences, installing and configuring each server – and on top of all that, designing a secure infrastructure. All they need is a browser.”

BIGGER ADVANTAGES

According to Nkosi, the main advantage SMEs have in SA is that the fi nancial crisis of a few years ago is still impacting most of the European and US markets – and bigger corporations are still burdened with this. “As a result, SA and indeed much of the African continent are experiencing stronger growth – specifically within the SME sector, given that their exposure to these markets is far more limited.”

Furthermore, she says, given that the local SME sector is able to be more flexible to market demands and changes, SMEs have been quicker to develop more tailored services at competitive prices for their customers – which have added to their growth potential. “In fact, the small business sector is continually growing and should take advantage of the current financial climate and keep their costs down while staying ahead of the game,” she says.

Another advantage, Bloomberg believes, is that SMEs are able to offer services and products that are costcompetitive as their overheads are generally not as high as larger organisations.

Tudor believes the SME market is the fastest growing segment in the country, and as a result there are a lot of opportunities around, even in difficult financial times. “SMEs also typically have lower overheads, enabling them to be more agile and survive in the challenging economic climate. However, these lower overheads are often as a result of fewer formalities, which is both an opportunity and a threat. Because of the lack of formal processes and procedures, as well as the untested nature of many SMEs, large businesses are reluctant to deal with them. This means the majority of opportunities for the SME are among their peer group of SME companies.”

According to Matandela, SA is in the midst of an SME boom, as many individuals are carving out their niche by focusing on what their core competencies are, and leveraging off that to build businesses and ultimately drive employment in SA. “Our government is fostering a culture of entrepreneurship through the establishment of developmental agencies targeted at funding and encouraging South Africans to start their businesses. In the current economic climate, people are finding ways to supplement their incomes – this is being driven purely by innovative entrepreneurs. With the focus the government and vendors alike are showing in the SME space, this is the prime opportunity for SMEs to step up to the plate and deliver,” he concludes.