Canadian SMEs need to go global

If you are a small-to-mid-size enterprise with revenues between $20 million and $99 million you’d better start thinking about expanding to other geography.

A new survey conducted by Oxford Economics of the U.K. found that SME businesses expect to generate as much as 40 per cent of their revenue internationally. And, nearly 60 per cent of the respondents say competition from companies in other countries has increased substantially in the past two years, while 59 per cent say they are competing more with larger companies now than in the past.

Edward Cone, managing editor and senior analyst at Oxford Economics, said the notion of SME businesses just supporting the global economy is a myth. More than 20 per cent of SMEs who operate in more than one country will grow by 90 per cent in the next three-years. If they operate in six they will grow by more than 130 per cent.
One of the bigger surprises from the study is that SMEs are more interested in business intelligence, mobility and social business than cloud computing.
This finding was a major surprised from the survey sponsored by SAP. Cone said the cloud was not widely adopted from the group of respondents of more than 2,100 executives in 21 countries.
“SMEs are using ERP business management to track business, but cloud computing is not widely adopted as expected, which is a surprise because the cloud does help SMEs to adopt other technology in a timely and less expensive way,” Cone said.
He added that it wasn’t a case where cloud was decreasing in importance but that other technologies such as business intelligence, mobility, and social business outpaced it.

Eric Duffaut, president, Global Ecosystem and Channels, SAP AG, said channel partners are needed by companies such as SAP for customers to leverage their own private cloud. SAP is not always able to deliver products as a cloud or it’s not cloud-ready. The channel partner has already made a cloud and it’s ready for the SME. “They package it up for fast deployment and can offer faster time to value in an opex model,” he added.
Duffault said that SAP rely on ecosystem of 13,000 channel partners all over the world.

Survey setup

The survey respondents came from C-suite level executives such as CEOs, CIOs, CFO, director of sales and director of marketing titles. The SME company size was based on revenue between $20 million to $750 million. Oxford then split it further into four groups starting with companies with revenues of $20 million to $99 million, which would be Canada’s mid-market. The other groups are: $100 million to $250 million, $251 million to $500 million and $501 million to $750 million.

Cone determined four key themes from the study:

1. SME must plan on operating on a global basis or face the fact that foreign-owned SME will enter their market space. “The percentage for revenue outside headquarters is growing rapidly and technology is woven throughout. Technology has become a necessity for globalization. SME’s can collaborate within a business network of channel partners, customers and suppliers,” Cone said.
2. Investing in new technologies appears to be a top strategic priority as SMEs remake their businesses for the global marketplace, including business management software, data analytics, mobile, social media, and cloud computing. Almost two-thirds strongly believe technology helps them achieve longevity and sustainable growth. Overall, 35 per cent of respondents identify themselves as early adopters; the figure rises to 42 per cent for discrete manufacturers and to 47 per cent for firms in North America. Additionally, less than one-third of respondents say their firm lacks the technology capabilities of larger competitors and only slightly more than one-quarter say they struggle to understand how technology can create measurable benefits for their firm. Duffault cited an example in Africa where the mobile phone is acting as a bank for many people who do not have a fixed address. “In the emerging markets mobility is the only way to do transactions. In Africa people are creating bank accounts in the streets on a mobile phone. They do this without proof of residence; just with a country card. They are making the unbankable – bankable,” Duffaut said.
3. There is also a human element that needs to be addressed, according to the Oxford study. Factors such as culture and skills are critical to SME, Cone said. “SME’s are having a hard time finding the right people and 40 per cent say finding workers with the right skills is a problem,” he said. The skills gap is impeding SME projects for cloud and business intelligence. Meanwhile, culturally SME owners are finding it hard to convince their workers to use mobile tools, for example.
4. Finally, innovation has become a major differentiation for SMEs. There is a rising middle-class in these developing markets, Cone said and SME are empowering these new consumers with products and service offerings that strengthen the customers’ relationship with technology. Duffault said that average age in SME is 32. “These people were born with technology. This is their confront zone. They are users and consumers and this is helping a new generation of SME’s with how to lead with technology,” he added.