The Small and Medium Business (SMB) market, once a sleeping giant, is gradually waking up to technology, and creating a vast potential for the IT-BPO industry. Falling prices of IT hardware, proliferation of the Internet, availability of cheaper bandwidth and specially tailored solutions for smaller companies, growing awareness among them about the benefits of IT, are all factors driving this trend.

According to the NASSCOM-McKinsey Study 2009, consumerisation of technology is one of the biggest drivers of global sourcing by SMBs and individual customers. The analyst firm estimates that the global sourcing addressable market for SMBs in core geographies is likely to be around USD 230 billion to USD 250 billion in 2020, with banking and manufacturing being the biggest vertical opportunities.

Around 28 per cent of the total banking revenues and 40 per cent of the manufacturing revenues in the developed countries are likely to be realised from SMBs, the Study states. The technology and business services opportunity in these two verticals will be around USD 120 billion to USD 130 billion, accounting for almost half of the total SMB opportunity.

In order to tap into this potential, however, vendors will have to understand the pain points of SMBs, as their requirements are different from those of enterprise customers. Today, while there is a growing reliance on IT among SMBs, there are only certain vertical industries such as financial services that are actively deploying technology solutions. Small and medium companies are also beginning to leverage the IP and Cloud Computing models to procure IT as a service, cut costs on infrastructure investments and increase flexibility.

Winning formula for the SMB market

In order to cater to the SMB market, service providers will also have to focus on the following:

• SMB needs assessment in order to gain insights into their highly fragmented and heterogeneous requirements, purchasing behaviour and product preferences
• Creation of SMB-specific, tailored offerings, instead of providing them scaled down versions of products developed for the enterprise segment
• Development of products which have configurable features, are flexible, reliable and easy-to-service
• Creation of profitable sales models (direct sales, sales through partners or sales through distributors) that are aligned to fragmented customer spend of SMBs
• Provision of lean infrastructure to drive down interaction costs by up to 30 per cent and enhance the quality of interaction with customers
• Provide scalable lead generation, since marketing plays a much larger role in SMB purchases and the brand is very important for them. Providers use scalable methods to generate demand and build their brand to influence customers
• Build a distinct organisational structure to drive focus and better sales and marketing execution

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