The Point: Beyond the Bottom Line

2007-11-14 17:23:39 The Strategy and Value of Application Outsourcing Source: http://www.accenture.com

Communications, electronics and high-tech companies face potential challenges and opportunities as they set out to capture part of the $1 trillion marketplace represented by small and medium enterprises. Companies that are accustomed to selling primarily to large, enterprise customers are finding it difficult to make the adjustment to the chaotic but high-potential world of 77 million smaller and mid-size customers. Accenture believes that a four-step process in strategy and offering development is the way to plan and execute a successful program to this important marketplace.

Today's communications, electronics and high-tech companies that are journeying toward high performance increasingly are targeting small and medium business routes to market. As traditional markets become increasingly competitive and over-saturated, companies are struggling to grow revenues from their enterprise customer base. To compensate, they are looking down market: to smaller and mid-size companies—those with anywhere from five to 1,000 employees. Annual revenues for such enterprises are generally in the range of $5 million to $500 million, though that number can go as high as $1 billion for some companies.

There is good news and bad news when it comes to developing a routes-to-market strategy for the small and medium business (SMB) marketplace. The good news is that a lot of these companies exist: more than 77 million of them globally, with estimated annual spending of over $1 trillion by 2009. The bad news: few communications and high-tech companies have the operational processes, sales capabilities, controls and analytics in place to cope with the more complex demands of the SMB marketplace. And without those capabilities, a foray into the mid-sized market wilderness could turn out to be only an expensive failure.

Understandably, companies are striving for first-mover advantage with SMB routes to market. The result of this accelerated push to sell in this fragmented space, however, is operational complexity and confusion, most often characterized by ineffective, inconsistent, non-scalable operating procedures and execution capabilities.

Consider how even an experienced incumbent company can fail to look before it leaps into the small and mid-sized market. One major US technology manufacturer, recognizing the enormous potential of mid-size companies, launched straight into a sales and marketing initiative to SMB companies. A couple of years into the strategy, it has created a $2 billion revenue stream. This is all positive news, yes? Well, maybe not: the problem is that the company does not know if that revenue figure represents 2 percent of a $100 billion potential market, or 100 percent of a $2 billion market. Who is buying and why? What kinds of offerings should ideally be designed for the highest-potential customers? The sales organization may well not know.

As a consequence, the company may need to rewind its SMB initiative all the way to the beginning to make sure it is targeting the right markets and customers. Such a delay might sink a lesser company. In the best of circumstances, companies are looking at five-year programs to get their SMB initiatives up and running. No one can afford to waste another five years backtracking on a false start.