For SMEs, cost is all that matters
Frances Chan
CMPNet.Asia-08/10/01
“Benefits of the Web and the Web-based shopfront are extremely beneficial for SMEs. But many SMEs are facing connectivity problems,” said Shane Hodge, COO of Cordoda, a licensed application service provider and network service company.
Every time software vendors are asked what e-business means for small- and medium-sized enterprises (SMEs), they often come up with a cliché: “it can help them to increase revenue, rationalise costs and enhance competitiveness”.
It is true that the Internet can deliver on these promises, but many SMEs, which are known to be cost-sensitive, have yet to adopt technology solutions in the region.
A limited budget for the high costs of the solutions as well as lack of skilled expertise top the list of SMEs’ concerns, even though they recognise the benefits of putting their operations online.
According to Charles Kiang, executive, Global Mid- market Business, IBM China/Hong Kong, a good IT business solution can vary from HK$100,000 (US$12,853) to over HK$1 million (US$128,534), depending on the scale, hardware processors and nature of the business.
But industry experts pinpoint that maintenance and system customisation costs are so high that smaller companies have trouble going online.
For instance, the cost of hiring one SAP e-business technical consultant to carry out onsite configuration or maintenance can be up to US$1000 per day, said Jin Wen, IT manager at Eakan Pharmacy which recently deployed mid-range enterprise resource planning system with a 32-user licence in Guiyang, China.
“We are only a mid-sized company. We cannot afford very high consultancy fees,” Jin said.
Despite this, a number of financing campaigns were initiated in a bid to boost technology uptake in the region.
The Hong Kong Productivity Council and the Hong Kong government co-organised the SME Finance Net Exhibition and Seminar to provide SMEs with up-dated information and advice on financial management, as well as collaboration opportunities between SMEs and professional bodies.
On the vendor side, IBM introduced a No Payment Until 2002 financing package for companies in Singapore until the end of September to lure them to embrace new solutions or upgrade their existing systems. Deferred payment was allowed for a range of IBM products such as servers, storage systems, networking hardware and printers.
“SMEs are looking for a more flexible payment that fits their revenue stream and budget,” said Ou Shian Waei, director, Small and Medium Business, ASEAN/South Asia, IBM.
The situation in Malaysia is not as promising. Vendors find that many smaller companies are still battling with fundamental communications and Internet issues.
“Benefits of the Web and the Web-based shopfront are extremely beneficial for SMEs. But many SMEs are facing connectivity problems,” said Shane Hodge, COO of Cordoda, a licensed application service provider and network service company.
Hodge noted that the company’s network service can provide a range of connectivity solutions, managed network services and e-business capabilities. It costs around RM500 (US$131) per month for 64 Kbps ISDN Internet service.
Application service provision on a rental basis has been recognised as the panacea for many SMEs. One of the areas that would yield “compelling” return on investment is to provide customer relationship management (CRM) capabilities through an ASP model, such as sales and finance analysis, content creation, management and hosting, said Eddie Leung, director, Professional Services Division, SAS Institute.
But very few SMEs, especially in the retail industry, are doing in-depth analysis of their customer information or transaction data even though they have a customer base of around 10,000 or more, with 10–15% of them being active customers, Leung said.
The reason goes back to cost. “Not many SMEs would be able to afford the price of world-class data mining software. In addition, they would not have the expertise to make use of the software.”
According to Leung, outsourced CRM can help companies build and host their data warehouse, provide them with analytical CRM services such as building various selling models, and campaign management capability via the Internet so that they can launch and monitor the marketing campaign.
The requirements for such kinds of solutions to be up and running are very basic. All a company needs is several workstations and connection to the Web. Some companies can choose to set up a small LAN workgroup so that they can share the same broadband connection.
Leung said the hardware cost of a typical e-business-ready environment is around HK$15,000 (US$1928) per workstation, plus HK$10,000 (US$1285) for the network that can hook up to 10 workstations. Hosting and Web connection fees vary widely depending on bandwidth and services, from HK$1000 (US$128) to HK$15,000 (US$1928) per month. For the CRM and campaign management solutions, the fixed charge would be around HK$5000 (US$642) to HK$10,000 (US$1285), plus additional charges would depend on the number of customers.
However, this kind of solution has yet to be popular in Asia-Pacific. “I think SMEs are still very worried about giving their internal data to another company. Traditionally, they are also very cost-sensitive and very reluctant to make any investment that is not essential for immediate operations,” Leung said.
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