Small and Midsized Companies Have Big Company Needs
on Dec 18, 2013
Small and midsized businesses (SMBs) have many of the same complexities as large corporations, but with a very different set of constraints. As a result, in the past SMBs did not have access to the same depth of solution functionality available to large enterprises. Increasingly that picture is changing.
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There is a common understanding that the business system needs of small and midsized businesses (SMBs) are a good deal simpler than those of large enterprises. The reality is that SMBs' operations and needs are often as complex as their larger brethren. This complexity exists on many dimensions:
Complex Regulatory/Legal/Taxation Requirements
Legislators may exempt truly tiny businesses, but in general SMBs are subject to many of the same arduous and complex regulations, tax codes, labor laws, health safety and environmental requirements, and on and on, as larger enterprises. This includes local, state, national, and international variations.
Extensive, Very Prescriptive Mandates from Large Customers
Regardless of their size, suppliers to large OEMs and retailers must meet the requirements spelled out in painstaking detail in each of their customer's Vendor Compliance Manuals, which typically run to many hundreds of pages. This includes things like detailed and precise specs on labeling, routing guides, EDI and IT integration, packaging, documentation, and much more. Furthermore, the penalties for non-compliance are often onerous (it is not uncommon for a supplier to pay more than 5% of their revenue in deductions for non-compliance). Often a supplier may have dozens of different large customers, necessitating the ability to do per-customer customization of many different processes and systems … a truly daunting endeavor.
Global Sourcing Challenges
It is hard to find a business that does not source some components or materials or products from overseas. They need to find, evaluate, negotiate, and manage the performance of suppliers on the other side of the globe, who speak a different language, operate within a different culture, and have different regulations and traditions.
Global Logistics and Trade Complexities Along with international sourcing come the complexities of dealing with customs, duties/tariffs, quotas, denied parties lists, and much more. Furthermore, complex, multi-mode, end-to-end shipments now must be managed. While these functions are often outsourced to a 3PL or broker, the business still bears the responsibilities and the legal and financial consequences of sloppy or inefficient trade management.
Supply Chain Risk Even if an SMB is not sourcing globally, their suppliers almost certainly are, introducing the challenges of managing the risks of global multi-tier supply chains and the threat of disruptions.
Automated Factories and Warehouses In order to compete in today’s world, even small factories have increasingly complex equipment and automation.1
Channel Management / Partner Management Some SMBs need to manage complex, multi-tier channels and service partner relationships.
Global Markets While many SMBs only sell within a specific region, many others sell globally. This brings the complexities of understanding and adjusting to local or regional unique requirements, channel partners, cultural norms and tastes, legal frameworks, and so forth.
SMBs Have Different Characteristics and Needs Than Large Companies
Solution providers are responding to these complex requirements of small and midsized companies. A number of enterprise solution companies that have traditionally focused on the large enterprise, such as SAP, have a long-term strategy to move into the mid-market. This transition has not always been smooth. Although SMBs face many of the challenges and complexities as large enterprises, they have very different characteristics and needs.
Figure 1 - Business Characteristics and Solution Needs of Small and Medium Businesses
Example of Successfully Meeting the Complex Needs of SMBs
Solution providers that have been set up to serve large enterprises often struggle to meet these needs of very rapid implementation, low price points, and the very different sales, service, and delivery models required to succeed in the mid-market. Of course there is a whole crop of solution providers that have ‘grown up’ focused on small and midsized companies. Prime examples are pure-SaaS2 players NetSuite and Plex Online. NetSuite’s approach is to provide end-to-end functionality through a solution that is easy to implement while being easy to customize via configuration. They also have been steadily building up capabilities to meet more complex needs both through numerous well-integrated partnerships (such as their partnership with IQity) to meet complex manufacturing needs and through their continual development of their own applications (see NetSuite's Commitment to Manufacturing).
PTC, one of the leading CAD/PLM/SLM vendors, is not a SaaS vendor, and while they have always sold to companies of all sizes, they are endeavoring presently to increase share and penetration in the mid-market. Their channel strategy is a key element. They recently hired Kerry Grimes3 as their SVP of worldwide channel sales. One significant change is how they manage channel conflict. Instead of a strict cutoff based on company size, they are moving to a named account model4 and an approach that does not mandate exclusivity. Giving channel partners the flexibility to sell to various size customers the best solution for each situation, rather than “it’s our solution or no one’s,” can be an uncomfortable change for the solution provider, but ultimately will strengthen the channel relationships and success of implementations. PTC has also made strides to make their service and support simpler and products easier to maintain. PTC’s new channel strategy and simplified service represent a path for complex solutions to become more accessible to the mid-market.
A Vibrant and Competitive Enterprise Solutions Market is Good for SMBs
The mid-market for enterprise solutions has been heating up for years, and is becoming hotly contested by both traditional mid-market players and large enterprise solution providers. Successful solution providers are combining depth of functionality with ease of implementation and pay-as-you-go pricing. All this attention and effort to woo small and medium businesses is great for SMBs, meaning they will have more and easier access to depth and sophistication of functionality they need to run their businesses and compete effectively with the largest of enterprises.
1I.e. Some vendors simply host single tenant applications and call it SaaS. By “Pure SaaS,” we mean vendors who only do multi-tenant, single instance deployment. -- Return to article text above
2Mr Grimes was previously the VP of Global Solution Partner Sales for Siemens PLM. While there he almost doubled their channel’s share of total revenue. -- Return to article text above 3Channel partners register with PTC to go after specific accounts. -- Return to article text above 4Warehouse automation is more common in Europe than the US; however, factory automation for manufacturers of all sizes is increasingly common in all developed countries. -- Return to article text above
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