Gauteng Business News

Send  Share  RSS  Twitter  29 Oct 2008

IT and Telecoms: Small business has a big secret – IT dependence


Recent Gauteng Business News

Recent trends are laying bare a big secret common to many small and medium-size enterprises (SMEs) – creeping IT dependence. Growing vulnerability is confirmed by managed IT service providers (MSPs) to a sector that draws continued benefit from sustained GDP growth of 3-5% a year and government’s pro-small business stance.

Trouble is, the bigger SMEs grow the bigger their IT dependence is likely to be.

The risk is so secret even the organisation itself might be unaware of it … until a crisis occurs and a big export order is lost or a major client left in the lurch.

On other occasions the secret comes out when an SME pitches for a major tender only to find it is up against competitors who can assure big corporates or government departments that they manage IT systems to world best practice.

The big IT spender offers peace of mind that delivery reliability won’t be affected by system problems. The SME finds its ad-hoc method of break-fix maintenance won’t cut it.

The SME has a choice: put up (in the form of much bigger IT budgets) or wise up (through smarter solutions).

The bad news is that break-fix is less and less credible as a sustainable solution. IT skills are scarce. Hourly rates for on-site IT response rise continually. The best guess by a specialist provider of IT services to SMEs like Omniholdings is that labour rate inflation north of 20% p.a. can be expected for rapid physical response.

SMEs that suffer unexpected breakdown must also factor in lost opportunity and downtime costs, compounding call-out fees by a factor of 5, 10 or more. As SMEs take on bigger orders for bigger clients, that compounding factor will rise.

The good news is that international developments create affordable alternatives. The key is an IT automation framework that enables efficient remote management of IT infrastructure, network components, servers and desktop PCs.

Software platforms for Network System Management (NSM) have been around for years, but until recently had a sketchy record among SMEs. Traditional NSM platforms were expensive for smaller companies on a per-PC basis. They were also complex and demanded considerable manual effort if all maintenance tasks were to be covered.

What was needed was an automated maintenance package that could be customised by specialist SME-focused managed service providers into a reliable remote offering. This is now beginning to happen.

Another positive in our market is Africa’s new status in the debt-forgiveness era as a region offering long-term growth prospects to major NSM players.

These companies estimate that South Africa accounts for 49% of Africa’s total GDP while one NSM leader puts the value of our IT services market at $4-$6 billion a year, or R32 billion at the low end.

About half of that demand is accounted for by listed companies, large operations and the few SMEs that make significant IT investment.

This means that R16 billion a year in service work is just not done or is tackled on the old as-and-when model. Almost all the pent-up demand resides in the SME sector.

This suggests a new wave of SME-focused MSPs on the pioneering Omniholdings model can be expected to customise solutions for entrepreneurs who are averse to investing in their own IT department and regard IT as a non-core function to be ‘out-tasked’.

Even SMEs with an internal IT capability report that in-house staff can’t help the business achieve key objectives because they spend too much time resolving problems (80% of their time is allocated to these issues, according to international research by Gartner).

Entrepreneurs are good at sweating assets, not fretting about IT. Their preferred management solution is:

Prophylactic, able to run audits for incipient faults and correct them before they happen;
Proactive, engaging in patch management to ensure all missing patches and updates are installed on time every time;
Unobtrusive, not only remote and automated, but scheduled for minimum interference with company operations
Secure, optimising a key benefit of automated systems, zero human intervention, obviating security breaches through human error;
Scalable, growing as the company grows;
Predictable, replacing variable costs (inherent with break-fix) with fixed costs, with a set fee per PC;
Built-in best practice, enabling SMEs to challenge bigger competitors whose compliance with international protocols gives them a lock on procurement and tender business.

Omniholdings, one of the few companies with in-depth specialist experience of the SME IT services market, says a properly customised package deploying the latest NSM platforms can deliver all of the above.

A US leader in this field reports that American SMEs can achieve a $3 600 maintenance saving per PC every five years by optimum use of remote automation while Gartner Research estimates that enterprises that “systematically manage the lifecycle of IT assets” will reduce cost per asset by up to 30% in the first year and between 5% and 10% annually for the next five years.

Locally, Omniholdings says savings of up to 57.3% versus the break-fix alternative are possible by some clients. In its experience, ‘come-fix’ call-outs are occasioned by:

Application errors (in 36% of cases)
Viruses and spam attacks (49-51%)
Problems associated with lack of user knowledge (10-12%)
Hard drive problems (less than 5%).

Whatever the cause, the remote solution either fixes the problem before it occurs or sends an early alert, enabling fast, cost-effective manual intervention.

IT dependence may be with SMEs for a while, but smart early adopters of automated solutions can mitigate the risk. In this case, a ‘remote possibility’ looks like the best possibility.


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