SMB should leverage IT for biz productivity

Moving away from the conventional licensing system for software and services, Microsoft recently launched a subscription-based model targeting at the small and medium business (SMB) market in India. In an exclusive interview, Sushant Dwivedy, lead for Microsoft Business Solutions at Microsoft India told R Jai Krishna of CyberMedia News that the new initiative will de-risk the SMB from investing heavily upfront for IT infrastructure. According to him, the new system has had tremendous response from SMBs who want to leverage on IT for their business processes but are not restricted with the cost attached to it. Excerpts:

What is the market potential and targeted segment for the subscription-based model?

With the new model we are targeting the SMBs, as the new model will give the IT resources needed to make the changes in their business process. The subscription-based model also de-risks them from investing upfront on the IT infrastructure. The model is by far less risk and more aggressive, as the payment is broken into smaller components.

As for the market potential, our rough estimates show that 1.9 million SMBs in India use computers for their businesses, and in that more than half of them have broadband connections. All of these people need to mature for using IT for their business productivity. We will target at SMBs in textile and apparels, auto-ancillaries, Pharma and retail sectors.

What was the rationale behind such an initiative for the SMB in India?

The SMBs face the challenges to leverage IT for productivity and organizational performance. At present, they are now using and utilizing IT only for gathering information from the Internet for automation purposes and basic communication needs such as email. However, there is no organizational maturity to use IT from professional services as there is an IT vendor.

SMBs need to look at IT as a business application and productivity enhancing tool, especially in areas such as finance, supply chain management (SCM) and customer relationship management (CRM), and also in terms of manufacturing processes from a SMB point of view. These businesses lose an opportunity to close a prospective call due to the lack of information-enablement through IT.

How does the subscription-based model work, and what are the advantages for the SMB?

In the subscription-based model, the people who understand the business concepts host the service on the premise of the client. The costing will be as equivalent to that of hiring a CIO. The SMB need not spend time and energy on evaluating and retention of manpower, which is a major business constraint for them.

On the other hand, SMBs think that paying for an IT infrastructure is too expensive and comes with other operational expenses also. The USP is between the upfront cost and rental agreement, which actually makes the difference. Hence, we enable the SMB with ERP, what we call as ‘easy resource planning.’

With the model, the SMB gets working and get going quickly in their business processes. The model has been designed like using like MS office, as inherent and people can deploy and use it more profusely. In the new model, the SMB will be charged on ‘per-user-per-month.’ Thus it makes a huge difference in cost, as there is always a difference between owning and paying a rent for the IT infrastructure. There is no upfront investment, as we have cut-off one level of entry barrier for the SMB.

How has the market responded to the model and what is the go-to-market strategy?

The market response is overwhelming for the subscription-based ERP model and there is a significant amount of depth that we can penetrate with the offering.

We are equipping our channel partners to partner with other hosting service providers and offer the service on a subscription-based module. As a typical SMB will be spending one-third of their investment in hardware, another one-third in the software and the rest the implementation costs. The service will be offered as a combo between partners along with hosting service providers.

Our channel partners will put up the IT infrastructure, and the client does not even need an internal person to manage the operations. It is like having a remote CIO for the organization is made available all the time, who will look into low-risk IT infrastructure, at affordable costs, incremental time.

To out reach better with the new model, we intend to develop the partner ecosystem. Now the model is available through all our 60-plus partners in 16 cities and we aim to reach 100 partners covering 18-20 cities by year-end. We will get each and every partner get them focused on a specific vertical area, so that they can build incremental value and decrease the implementation time. In this model, the partners will also be able to offer better-tailored solutions, as they understand the business of the clients.