March 15, 2007
IDC: SMBs in Asia Present Opportunities for Information and Communications Technology Vendors
By Mae Kowalke, TMCnet Contributor
Sometimes, smaller is better. In some parts of the world, for example, companies marketing information and communications technology (ICT) products and services, the most lucrative channels are turning out to be those that leverage the small and medium-sized business (SMB) market.
One such area, according to a new report out this week from IDC (News - Alert), is Asia/Pacific excluding Japan. In this region there exists a highly diverse and complex SMB market of great interest to ICT vendors—an opportunity that, of course, comes with some challenges.
Specifically, although SMBs make up a large portion of the market in this region, the diversity of the customer base means it that vendors must coordinate strategies involving localized products and positioning. Deploying such strategies can be daunting. IDC predicts that, toward this end, ICT vendors in the near future will be devoting resources into establishing networks of channel partners and independent software vendor solution providers to expand their reach into the SMB market.
“The smallest firms have the greatest technology needs, the lowest spending levels, and the lowest brand loyalty, giving rise to an SMB market that is colorful, multi-faceted and dynamic,” IDC analyst Walter Lee noted. “An effective channels strategy is therefore key to successfully penetrate the vast SMB sector.”
Lee added that the kaleidoscope of SMBs—representing multiple dimensions, industry verticals, geographies, and sub-segments—is poised to drive innovation and feed on the growth momentum of China, India and other emerging Asian countries (EACs)—including Malaysia, Indonesia, the Philippines, Thailand, Vietnam, Pakistan, Sri Lanka, Bangladesh, India, and China.
In its report, IDC outlined the following 2007 predictions for ICT vendor initiatives targeting SMBs in Asia:
1. Vendors will ramp up recruiting efforts for channel partners in EACs.
This trend is driven by significant increases in infrastructure development and IT spending power in Asia. ITC vendors have a chance to get in early at the ground level and establish themselves as industry leaders, but only with the help of suitable channel partners.
2. China and India will be battlefields for channel partners.
Effective route-to-market strategies are vital in these two areas, given their geographical size and diversity of sub-regions. Channel partners will therefore battle it out for selection by ITC vendors.
3. Vendors will increase investments in channels that target the SMB sector.
For both vendors and channels, the SMB market in Asia offers significant growth potential. Targeting this market will involve the release of customized product and services, software-as-a-service (SaaS (News - Alert)) solutions, and offerings designed to address SMB needs for affordable applications that are easy to install and well-supported.
4. Market penetration will be achieved through alliances among channels.
Networks of partners will be necessary to capture business opportunities and maximize market reach. Deals therefore will be forged between service providers and value-added resellers.
5. Channel space consolidations via mergers and acquisitions will accelerate.
Partner alliances, coupled with economic forces, will create an increasing number of consolidations. This trend will attract larger partner companies, resulting an in urgent need for smaller partners to enhance their networks.
6. Necessity of vendor-channel collaborations will increase.
More and more, vendors will be looking for channel partners that offer specific industry solutions. The focus will be on building vertical expertise to achieve expansion into other product areas.
7. Vendors will be reviewing and revamping partner compensation plans.
New compensation strategies will be developed to reward and help retain preferred channel partners. In many cases, this will involve establishing mid- to long-term commitments. Maintaining partner loyalty also will necessitate activity-based compensation schemes rather than those based on sales.
8. SaaS will gain momentum in the SMB market—impacting channels.
SaaS challenges traditional software firms to seek new revenue streams, and pressures service providers to get creative with their delivery models. During 2007, this will force traditional firms to focus on the creation of new programs and deliverables, along with channel and SMB strategies, focused on SaaS.
9. Investments in a broader base of lower-tier channels will increase.
Vendors looking to expand their market coverage will be adding new channel partners. The focus will be on both breadth and depth of partner support.
10. Growth opportunities in the SMB business hardware market will set the stage for increased software and service spending.
Many of the SMBs being targeted in Asia do not even have basic technology in place. This limits the sale of other hardware, software, and services. On the upside, there is a real opportunity for vendors who can provide affordable IT infrastructure building blocks.
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Mae Kowalke previously wrote for Cleveland Magazine in Ohio and The Burlington Free Press in Vermont. To see more of her articles, please visit Mae Kowalke’s columnist page. Also check out her Wireless Mobility blog.
