The SMB picture is one of challenges and opportunities. According to IDC’s Worldwide Services 2007 Top 10 Predictions: A Time for Business Model Change, a variety of evolutionary and even revolutionary changes will drive the world of the SMB for the near future. For example, IDC predicts that more SMBs will be enticed by the growing availability of hosted applications, which make enterprise-class performance available to smaller companies. Concurrently, particularly in North America, SMB IT organizations will also focus more spending on local networking and broadband to support anticipated business growth.
But whatever SMB leaders do to achieve competitiveness, it won’t be just “more of the same.” For instance, SMBs will increasingly share in many of the trends that characterize enterprise businesses. John Mahoney, vice president and distinguished analyst at Gartner, states that 2007 will see mounting demand for businesses to grow and become agile, while IT organizations will continue to evolve at a rapid pace (December 2006, Gartner Inc. annual CIO New Year Resolutions). This will lead to further needs for business and technical decision-makers to consider strategic investments in applications that can strengthen business performance and empower change.
But change isn’t easy.
Advocates for change in small and medium businesses will find that implementing changes and securing funding will remain difficult—though some will succeed. First and foremost, according to Gartner’s 2006 Worldwide IT Benchmark Mid-Year Review, IT must advocate more forcefully for its own needs. The reasoning is that IT budgets traditionally have reacted less positively to revenue increases and are usually more negatively affected by revenue declines. In other words, in bad times, budgets are slashed to the bone, and in good times, they don’t recover enough to make up the difference. So, even in organizations that experienced 10 percent revenue growth, Gartner found most did not show IT budget growth beyond five percent. To break out of this cycle, rather than only responding to demands to reduce IT costs, Gartner says leaders must think strategically and advocate spending that will produce business benefit over the long run.
The SMB picture is one of challenges and oppor-tunities. According to IDC s WorldwideServices 2007 Top 10 Predictions: A Time forBusiness Model Change, a variety of evolutionary andeven revolutionary changes will drive the world of theSMB for the near future. For example, IDC predicts thatmore SMBs will be enticed by the growing availability ofhosted applications, which make enterprise-class per-formance available to smaller companies. Concurrently,particularly in North America, SMB IT organizations willalso focus more spending on local networking andbroadband to support anticipated business growth. But whatever SMB leaders do to achieve competitive-ness, it won t be just more of the same. Forinstance, SMBs will increasingly share in many of thetrends that characterize enterprise businesses. JohnT Th he e S SM MB BC Ch ha al ll le en ng ge e: :SHARPENING YOUR COMPETITIVEEDGE THROUGH SMART USE OFTECHNOLOGYA W H I T E P A P E Rsponsored by:EXECUTIVE SUMMARY: SMBs face a challenging competitive environment.Sandwiched between the resource-richgiants of the industry and the scrappystartups, they must be agile, able todeliver value to their customers, andcapable of maximizing ROI at every step.This white paper focuses on the struc-tured decision-making that can enhanceROI while building and strengtheningcompetitiveness.SOME KEY TAKEAWAYS:>> The pressure is on to save costs and innovate.>> Selecting business application investments wisely should be a majorcomponent in your competitive strategy.>> Additional opportunities exist for thosebetter able to empower business users.>> Navigating this environment takes advocacy skills and a decision-makingstructure.w ww.virtualacademy-cio.comUntitled DocumentT HE SMB CHALLENGEMahoney, vice president and distinguished analyst atGartner, states that 2007 will see mounting demand forbusinesses to grow and become agile, while IT organi-zations will continue to evolve at a rapid pace(December 2006, Gartner Inc. annual CIO New YearResolutions). This will lead to further needs for businessand technical decision-makers to consider strategicinvestments in applications that can strengthen busi-ness performance and empower change. But change isn t easy. Advocates for change in small and medium business-es will find that implementing changes and securingfunding will remain difficult though some will suc-ceed. First and foremost, according to Gartner s 2006Worldwide IT Benchmark Mid-Year Review, IT mustadvocate more forcefully for its own needs. The rea-soning is that IT budgets traditionally have reactedless positively to revenue increases and are usuallymore negatively affected by revenue declines. In otherwords, in bad times, budgets are slashed to the bone,and in good times, they don t recover enough to makeup the difference. So, even in organizations that expe-rienced 10 percent revenue growth, Gartner foundmost did not show IT budget growth beyond five per-cent. To break out of this cycle, rather than onlyresponding to demands to reduce IT costs, Gartnersays leaders must think strategically and advocatespending that will produce business benefit over thelong run. According to the Gartner Review, for too many organi-zations, too much of IT spending does not contributedirectly to business growth. In fact, Gartner estimatesthat eight out of ten dollars companies spend on IT is dead money it is about keeping the lights on rather than directly contributing to business growth orenhancing competitive advantage. In other words, atleast two-thirds of all IT spending is used just to sus-tain existing business practices, not to implementchange or transformation. The investments allocated toactually do new things activities that can change thebusiness usually represent no more than 20 percentof the budget and often even less. As if that weren tenough, the same Gartner Reviewwarns that evenwithin these constraints, IT leaders are still beingtasked with providing higher-quality and more secureand cost-effective IT services. Clearly, IT leaders who are squeezed between demandsto boost performance while simultaneously being forcedto actually disinvest in capabilities are headed for trou-ble. Thus, Gartner sReviewadvises that they try to bet-ter establish their position and contributions to theorganization by taking leadership roles on key businessinitiatives. Indeed, more to the point, Gartner empha-sizes that IT organizations often have crucial skills andknowledge in areas that can vitally affect the business.So they shouldn t wait for tomorrow they should seizethe day. As a corollary, Gartner recommends that ITdepartments actually relinquish some of the control andresponsibilities they have accumulated over recentdecades for routine and low-level end-user activities tofree up time and resources to create business-enhanc-ing opportunities.* SMBs should consider a division ofstrategies and activities between the things that arecentrally determined and those that are left to the mar-ket, or the user. LEADING WITH AN INVESTMENTSTRATEGYOf course, turning the insights and suggestions of ana-lysts into a practicum for action is, in itself, a challenge,says Mark S. Johnson, Oracle Vice President for SMBProduct Marketing. Where you really want to focusdepends in part on your industry and on the major valuepropositions you provide to your customers, saysJohnson. Customers won t come to you because yourback office is operated more efficiently than the competi-tion s. They want to know what you can provide to them. Keeping that thought in mind, Johnson recommendsadopting a structured approach to IT decision-makingbased on the action principles outlined below.ACTION PRINCIPLES1 High ROI is a good starting point. Maximizing ROI is a great way to stretch the effective-ness of investments and to ensure that plans areapproved and supported by management. Think ROI,and you re already on solid ground. Many differentactivities can contribute to high ROI, including develop-ing a clear vision of what you need and how you willsuccessfully leverage an investment. It s also important to make ROI visible. Don t just dothe research make sure other stakeholders and deci-sion-makers understand it and share the logic, andthen be sure to share follow-up metrics so that sup-port continues.2 Understand, weigh, and communicate project risk.Every business activity has risk. Implementing new busi-ness systems and processes is certainly no exception.But the fact is that embracing or enabling new process-es and possibilities means more visible risk. This risk isnot only a product of the specific technologies andinvestments but also of the way in which those tech-2CONTINUED ON PAGE4*Gartner 2007 Gartner s Symposium/ITxpo in Cannes, Peter SondergaardUntitled Document3T H E S M B C H A L L E N G EWholesale changes to an applications portfolio arenot only expensive, but can be very disruptive tothe business. Transitions can be painful for employeesand sometimes result in customer alienation. Oracleapplications can help by providing a platform that cantransform business applications into a strategic enablerof success while making sure your technology invest-ment pays real dividends to both bottom-line and top-line growth. Oracle believes that information matters and thatorganizations can gain lower costs, improved deci-sion-making, and clear competitive advantages fromaccurate, consistent, and timely information that ismanaged centrally and embedded in the applicationsused at all levels of an organization. Oracle s informa-tion-driven applications are engineered to worktogether by using a single information repository thatgives you a clear, accurate picture of every customer,every product and service, and every transaction. It sinformation simplified and on demand when, where,and how you need it. In the real world, Oracle applications prove themselvesevery day. For example, Oracle partners with theworld s best retail companies to transform their supplychain, operations, merchandising, store systems, opti-mization and information technology solutions. Formore than 1,900 retailers, Oracle leads the way withvalue-based implementations. And those 1,900 cus-tomers boast average sales that are 72 percent higherthan those of their industry peers. Furthermore, lever-aging Oracle Retail profit optimization solutions, theyachieve up to a 15 percent increase in gross margindollars, sell-through, and inventory turns.Meanwhile, public sector organizations are also turn-ing to Oracle more than 1,400 worldwide. Oracleenables governments to coordinate, collaborate, andcommunicate across agencies and departments byunifying information across organizations, providingcitizens with access to timely information, and optimiz-ing ever-increasing workloads. Oracle also allows governments to manage criticaldata more effectively, integrate third-party and legacysystems, and ensure data security. Using Oracle tech-nology and applications, government agencies canalign human capital with their organizational missionsand manage financial performance more effectively. Oracle works closely with a variety of customergroups, including its CIO Council, Customer AdvisoryBoards, Industry and Product Strategy Councils, EarlyCustomer Adoption Programs and extensive UserGroup Communities, to understand customer require-ments and prioritize new functionality. The feedbackreceived from these user communities continues toproduce significantly updated new applications.Oracle has more than 19,000 small and medium busi-ness customers around the world. These firms useOracle applications to build their competitive edgethrough better information management, ultimatelyproviding more and better service offerings to theircustomers and more efficient, smarter managementfor their own organizations.ORACLE APPLICATIONS ROI STARS ON YOUR ROAD TO INNOVATIONFor more information on Oracle applications for small and medium businesses, go to http://www.oracle.com/solutions/midUntitled Document4T HE SMB CHALLENGEnologies and investments interact with the rest of theorganization. Therefore, it is crucial to think through andthoroughly understand the downside as well as theupside of innovation in particular the role that cus-tomers play in ensuring success. Then, you can be in a position to make well-informeddecisions and recommendations and, perhaps moreimportantly, you will be able to provide an organization-wide context for weighing risk and investment that canbe shared with others in management. Too often IT proj-ects fail because of organizational issues rather than thedirect actions of IT. They should instead be positioned as business projects through informed buy-in and ongoingdialog to help alleviate this important element of risk.This can also help clarify when, where, and how ROI will occur.3 Too many potential innovations too little money to fund them all.Even when budgets open up, there is always an ever-growing array of potential innovations to embrace, fromthe front office to the back and from the Web to the pro-duction floor. How do you choose?That s certainly one of the biggest ongoing challengesfacing any SMB decision-maker. And there s no magicformula. But there are some factors that crop up time andagain. For instance, it is important to consider softcosts those indirect additional expenses that oftenescape notice on the profit and loss statement and are,therefore, difficult to control. New investments can pro-vide an opportunity to identify, analyze and control softcosts. Even bigger than soft costs are the potentialstrategic advantages with win-win breakthroughs thatthese investments can yield.4 How else will you decide what to invest in?Other factors are also, of course, very important. Nearlyevery SMB has some classic low-hanging fruit forwhich modest investments can yield a clear and immedi-ate return. Sometimes one investment is simply a lot lessrisky than another. Furthermore, you can t operate in avacuum. If your boss, your company, or your businessunit is embarked on a particular direction and has made acommitment, it makes sense to align your own innovationleadership along the same axis. 5 ERP: An enabler of business changeAs more and more organizations look to streamline bothIT and business functionality, the importance ofEnterprise Resource Planning (ERP) systems grows. Astrong ERP implementation can provide strategic busi-ness insight through embedded analytics and the avail-ability of daily business intelligence. It can also supportcapabilities and provide customization that enshrines orcreates the kind of competitive advantage that producestop-line growth. For example, ERP systems are now cen-tral to launching innovative new business processes,implementing custom composite applications or ensuringcollaboration along a supply chain or throughout an entirebusiness ecosystem.More familiarly, ERP investments have proven bottom-line benefits, including enhanced user productivity,greater automation and standardization, shared servicesdelivery and better support for outsourcing, growth, andbusiness change.SUMMARY These action principles provide a framework, which youcan translate into top-line and bottom-line value, notesJohnson.When an SMB invests in new technology infrastructure, itexpects to recover the investment, preferably within a rel-atively short time. While ROI should be considered anddiscussed from the start, these discussions should neverbe allowed to become too narrowly focused. ROI mattersin the business context and that context indicatesnumerous challenges that can best be met by careful,intelligent investments. Change agents must break out ofthe bunker mentality and engage with stakeholders andmanagement at all levels to advocate for short-term fixesand strategic changes. When investments, ranging from the trivial to those, suchas ERP upgrades, that have the potential for broad trans-formation, are considered and communicated in this way,the likelihood of success for the whole organization issharply increased.VIRTUAL ACADEMY OF TECHNOLOGYContinuing Education for Small and MediumBusinessesThis case study is provided courtesy of IDG's VirtualAcademy of Technology, your online resource for thelatest information from industry experts and new ideasfrom your peers. The Virtual Academy of Technologyincludes:>>Topic-focused websites>>Focused and relevant videos>>Real-world case studies>>Carefully crafted tutorials>>Interactive webcastsV Viissiitt wwwwww..vviirrttuuaallaaccaaddeem myy--cciioo..ccoom m