Being a small business is not easy. As many as eighty percent of new businesses in South Africa fail within the first two years, according to the Global Entrepreneurship Monitor. The combined effects of this are being felt: according to the latest GEM report on South Africa, entrepreneurial activity has dropped by 37% in 2014.
While this stat is alarming, there are several simple reasons why small companies fail and surprisingly the more common scenario is not of a lack of customers. More of these companies succumb to suicide than to murder. Indeed, SMEs are more likely to fail owing bad planning, especially around growth, than a lack of business coming in.
Yet the will is there. According to an article by Paula Nagler and Wim Naudé called The Birth, Life and Death of SMEs in Rural Africa, almost one out of every two rural households in Africa operate a small business. The question is: how does one nurture African SMEs to grow effectively?
The answer is technology. Large companies know this and have been effectively deploying technology towards realising their business goals for decades. In technology circles the hallmark of a mature company is when it has a proactive attitude towards embracing appropriate and innovative tech. Cost is only part of the consideration in determining what ROI the technology could provide for the future.
But small businesses do not have the luxury of large ICT budgets and in the past that presented a major stumbling block. Luckily the technology landscape of today is perfect for the small player and some of the answer lies around the buzzword ‘XaaS.’
XaaS means ‘everything as a service’ and is a catch-all for a revolution in business ICT, sometimes also referred to as ‘hosted services’. It defines technology services that are delivered to a customer on a measured scale. Instead of buying the whole office suite and the kitchen sink, you pay only for the services you need – and when you need them.
To understand XaaS, begin with the Cloud. What is the Cloud? It’s really just remote servers – usually a datacentre – connected to users via the Internet. Everything lives on these servers, but they breathe only when they are pushed to a user’s device. When you access Gmail, for example, you’re using the Cloud: your email and the software that manages it all live somewhere else, but you orchestrate it locally through a browser or app. This specific example is called SaaS or Software as a Service – a part of the XaaS world.
“SMEs can benefit most from XaaS,” explains Chris Willcocks, director: General Business and Partner Operations at SAP Africa. “Large companies can afford the infrastructure required for serious business services, while SMEs
simply cannot. It’s not just about their size: hardware refresh cycles, administration and other factors make technology complicated. XaaS is defined by its appetite to get rid of that complexity for the customer. It’s perfect for the fasting-moving world of SMEs, where agility is very important.”
Thanks to XaaS anything from software to backup services to server space for data mining live online and are available at fractions of what they used to cost. For example, getting a top-of-the-line accountancy or enterprise resource planning (ERP) solution is affordable to small companies and can be fine-tuned to their needs.
One example is SAP’s Business One product. Traditionally known for its corporate-grade software and infrastructure, SAP has adopted XaaS to help deliver its industry-leading solutions to the SME market. It’s a full business suite, complete with customer management tools, data collection and more: a one stop business software environment, tailored according to what a company requires.
Yet surely small companies have gotten along fine before they could afford such high-end services? That may have been true once, but the modern business world is married to technology. A simple example is data: every company, big or small, generates tons of information that could be used to predict new trends, establish future sales and take care of existing customers. Predictive analytics already play a big role at many major corporations – why should the small business be left out?
“Big data is not just for large enterprises. There are huge benefits to be had from better understanding of a company’s data and capitalising on it. But many companies don’t have solid data repositories or lack the software to make sense of it. Yet how to harness company data is not something that should be left for later, because that volume of data never stops growing. It’s a bit like a retirement policy: the longer you wait, the harder it will be to get what you want,” says Willcocks.
For example, any company with customers and workflow can make use of a Customer Relationship Management (CRM) solution. Even if they are too small yet to see the benefits, those will manifest soon. As mentioned earlier, SMEs are most likely to die from implosion due to growth. Technology is the bulwark against biting off more than an SME can chew or, when it does that, to learn how to chew more.
Many local SMEs count among the converted. According to SME Survey 2014, 27 percent of local SMEs use the Cloud in some form, up from 19 percent in 2012. The paradigm is already shifting, so to mangle John F. Kennedy’s
famous quote: ask not if you need hosted services, but what hosted services can do for you.
Yet this movement goes beyond delivering software and cutting down on technology costs. The XaaS concept ties into the networked and digital economy, which defines the emerging business opportunities created by our ever-more connected world. One example is Ariba, the global business commerce network that connects appropriate companies. Through this any business across the world can be introduced to and work with new clients located elsewhere. It is often asked how local small businesses can reach out to international countries? The networked economy, powered through affordable services such as Ariba, is the answer. It already processed over $700 billion in transactions and is highly effective in helping companies locate suppliers and other partners.
All of the above does not even touch on how well XaaS works with mobile devices in todays’ ever more complicated digital environment. Smart phones are increasingly at the centre of small company operations and SMEs are considered ahead of their corporate peers when it comes to mobile adoption. XaaS conforms beautifully with a smart device lifestyle – just look at how often mail is checked on a phone. An entire article could be written just about that. But suffice to say, hosted services seem born to serve the mobile warrior.
Being an SME is hard in the digital economy, but XaaS can make it easier. Properly leveraged, it enables modern SMEs stand toe to toe with larger companies in technology, business networks and getting the job done.