It’s generally agreed upon that the SMB market is made up of organizations with 1,000 employees or less. In total, the Canadian IT market is valued at $35 billion, according to recent figures from Toronto-based research firm IDC Canada Ltd. Of that, 26 per cent are Canadian SMBs, which spend approximately $8.96 billion annually on software, hardware and IT services. It’s a significant slice of the IT pie.
Over the next five years, the SMB market is expected to grow at a 3.4-per cent compound annual growth rate, compared with 2.5 per cent CAGR for the broader market. But within that scope, the diversity and makeup of these businesses are as deep as they are varied. ComputerWorld Canada spoke with three SMB companies (Sodisco-Howden Group Inc., Clodhoppers and Total Care Pharmacy Ltd.), and found that while the nature of their businesses may vary, the concerns and challenges are often the same.
SODISCO-HOWDEN GROUP INC.
Sodisco-Howden, based near Montreal, is a hardware products distributor for the home improvement industry. With a staff of roughly 550, it represents a network of six cities, more than 55,000 products, and 1,800 retail hardware stores and renovation centres. According to Normand Houle, vice-president of technology, integration is the biggest challenge facing the SMB.
The company’s IT environment is a mix of WAN (which connects each city with a T1), legacy applications, a local area network (LAN) running Novell and recently deployed Microsoft Servers (2000, 2003) and PeopleSoft Enterprise One. The company is currently in the final stages of integrating two legacy systems, the last components of an acquisition from more than a decade ago. Sodisco-Howden is not in the technology business, but IT is a valuable tool and asset.
“Having two legacy systems (is a challenge); every time you have to change the system [you have to] understand the impact and interaction on the two,” Houle says. While being on the cutting edge isn’t a priority, Houle said, “we need in place something that’s up to snuff but proven and very stable.”
Software vendors are slowly realizing that SMBs aren’t just mini versions of their large enterprise brethren, Houle says. Vendors need to understand that the pricing has to be adjusted accordingly. “We’re significant but don’t have the (same) power as the bigger companies. They have to adjust their solutions to the SMB reality.” While some of the organizational and technological complexities are the same, SMBs often don’t have the same spending power.
“With IT spending, there is a strong focus on ROI but we’re not blinded by hard to measure benefits out there like increase on the top line,” Houle said. The strategy is clear, Houle said: continue to focus on streamlining internal processes and continue to bolster the ERP architecture. Sodisco-Howden is currently in the middle of implementing a financials ERP solution from Peoplesoft Inc. “After that we have two phases that will cover the implementation of the supply chain.”
This is all designed to create a rock solid foundation to be in a better position to grow faster, Houle said.
CLODHOPPERS
Starting out in a garage with one inkjet printer and one PC, Winnipeg-based candy maker Clodhoppers has learned that investing in high-end IT pays off in the long run. Founded by Canadian entrepreneurs Chris Emery and Larry Finnson, the makers of a graham wafer and fudge confection (which has $12 to $15 million in revenues) has grown from multiple site production to one 2,500-pound-per hour manufacturing facility in Winnipeg.
“We try to keep IT as simple as possible,” says Jason Tucker, logistics and export manager at Clodhoppers. The company often grows in spurts so “we have to have the ability to grow into something and be really flexible.” Expansion meant that more (HP) workstations had to be connected. The challenge was in linking the IT systems without spending a huge amount of money. “We knew that we were going to be under one roof one day so we couldn’t go into a big investment to link workstations together,” Tucker said.
The SMB’s staff varies from 30 to 40, depending on the season. Clodhoppers doesn’t have dedicated IT staff, which makes it important that the technology used is not only reliable but worry-free.
“Reliability is huge. We need staff to not notice the equipment. It’s got to be there, fire up and work; we don’t even want to hear about it…it just works and that’s it,” Tucker said.
In terms of IT spending, Tucker notes that IT has become a lot more important. Previously, Clodhoppers was running three to four parallel systems, including an accounting system that was working part-time as a manufacturing system with Excel for shipping. The company recently implemented an SAP Business One ERP solution specifically designed for the mid market. Big vendors are definitely paying more attention to the SMB space, Tucker said. But the bottom line is simple — so long as the technology does what the firm needs it to do, who the vendor is ultimately doesn’t matter, he added.
Looking forward, the company has its eye to trends such as RFID and business intelligence. Clodhoppers is also looking to boost its tracking and tracing capabilities. Logistics is becoming a lot more about Web-based systems; it’s not a guy in a truck anymore, Tucker said.
TOTAL CARE PHARMACY LTD.
Calgary-based mail order pharmacy firm Total Care Pharmacy is among the largest International Prescription Service (IPS) pharmacy operations in Canada. The firm provides prescription drugs to the U.S. and internationally.
Like many SMBs, noted Dennis Cabel, IT manager for TotalCarePharmacy.com (TCP), the biggest challenge is deciding on an IT system and keeping within the current architecture.
For SMBs, IT often drives the business opportunities, Cabel said. The company always has to be on the lookout for new or better systems and ways to apply the technology to capitalize on opportunities. “Our business grows so fast…we go through major configurations every few months…We’re constantly moving applications from one server to another to make the most of what we have,” Cabel said.
The company of 200 (16 IT staff) started out with clone server hardware and recently migrated to IBM Corp. xSeries servers along with a tape library to automate backups. “Before we could manually handle the problem [but now] we have so much going through the system we have to automate pretty much everything that we can. If there’s a problem, there has to be an automated fix,” Cabel said.
Cabel also has noticed the vendor push into the SMB space. He noted that most large vendors haven’t yet figured out that SMBs really can’t afford a large cash outlay for software. “While they might be targeting us, perhaps they could also be trimming down,” Cabel said. While the company could afford it, it’s hard to swallow a $1 million piece of software. “We could develop in-house for half the cost…also licensing is so restrictive that in order to license it to do what we needed it to do…it blows away all the ROI.”
To that end, Total Care Pharmacy recently completed the development and installation of proprietary workflow management software to track (in real time) the progress of prescriptions throughout the fulfillment process, designed to improve efficiencies in the steps to prescription fulfillment.
But that doesn’t mean SMBs don’t need to work with vendor partners. The key is to forge a strong relationship with a vendor, one that understands the specific requirements of the company, Cabel said.
