Small and Medium Businesses feel the desperate need for adopting IT, yet no single vendor solution seems to serve their plight. Does this call for an entirely different service model?...

1. White Paper
SMB Comes of Age, Needs
IT on Tap!
Small and Medium Businesses feel the desperate need
for adopting IT, yet no single vendor solution seems to
serve their plight. Does this call for an entirelydifferent
service model?
IT demand from SMB is growing. It is a market that is
characteristically different from large enterprises. Till
date, IT industry has seen this market attractive for
niche solutions in hardware and software. Yet, the
business needs of the SMB, demands holistic
partnership. With too many options and very little
in-house knowledge, the plight of SMBs is far from
being met.
This calls for a different service model, which relieves
this segment from these challenges. IT on tap, though
not literally, is about making IT available as remotely
managed and hosted services. TCS, with 35 years of IT
solutions experience and expertise in various
verticals, is making this happen by bringing
IT- as- a- Service catering to the needs of SMB.

2. About the Author
Venguswamy Ramaswamy
Venguswamy Ramaswamy, or “Swamy” as he is better known,
globally heads the TCS Small and Medium Business (SMB)-iON.
iON is a strategic business unit of TCS and provides end- to- end
business solutions to the SMB segment.
In his previous role, he was the Director of TCS' Global Consulting
Practice (GCP) and was instrumental in the structural formation,
development and positioning of TCS’ consulting offerings.
Consulting Magazine has named him amongst the top 25
consultants of the year 2007.
During his 16 year tenure at TCS, Swamy has held several strategic
positions including managing key customer relationships,
building and heading the Process Consulting group, managing
the Corporate Resource Management function, leading numerous
Centers of Excellence, as well as launching TCS' first steps in
geographies such as Hungary and China.
Swamy is a firm believer in the power of IT to create business
value and is known for his interest in Innovation & Quality and
expertise in Six Sigma. He is also recognized as a champion of
many digitization drives within TCS, including deploying digital
platforms for Six Sigma, creativity and talent acquisition.
2

3. Table of Contents
1. Constrained working capital and low risk preference 5
2. Empathizing wit issues in evolving businesses 5
3. IT talent – too expensive and volatile for SMBs 6
4. SaaS evolution - when adoptions fail,
Technology finds a way out 7
5. Another spike in the Technology evolution curve
– The Utility Model 8
6. IT-as-a-Service –bringing managed services to SMBs 9
3

4. IT vendors, business financers and telecom service
providers, all see a new business opportunity at the frontier. SMBs are confused with too many
We have been ignoring an impending market that has vendors touting their solutions and
recently surfaced and it is demanding attention. SMB is no
services. There is little knowledge on
longer confined to niche products and services, which can
be delivered with little sophistication. Rather, it demands what is best suitable. SMBs are
state-of-art solutions to scale up and adopt matured clamoring for advisers to help them out
operating models. of the confusion created by a plethora
SMB is a burgeoning economic component that is capable of options.
of driving economic growth in its own right. In Germany,
46% of the GDP is contributed by SMBs. They have customers like Siemens, BMW and SAP setting standards
for them. In India, contribution of SMBs to exports is 46%. Yes, SMBs too demand sophistication in the way
they operate; and it is high time IT services see the segment differently.
For IT service companies, to scale up to service SMBs, one may be inclined to think that it would be a natural
augmentation of services for them. For instance, we may think it is easier for the SAPs and Oracles of today,
to service the growing ERP market. On the contrary, SMB is a different ball game. Products and solutions that
have traditionally served large enterprises will find it difficult to unlearn and rebuild solutions to the
characteristic needs of this segment.
Firstly, capital constraints for operations and raw materials thwart growth. Interest rates fluctuation and
capital investments in production assets continue to defer assets needed for IT adoption. SMBs would like to
invest on phased basis in order to allow investments return cash flows.
Secondly, the business uniqueness is high owing to evolving processes. Level of standardization of processes
is low. ERP implementation, for example, sees realizations in course of implementation on standard
functionalities not matching with user scenario. SMBs have to redefine their processes from time-to-time
and bring in efficiency as they scale up.
Thirdly, the main issue plaguing the SMBs today is talent crunch. With a huge demand for IT professionals in
IT services industry, SMBs are starving for in-house IT work force. Not just that they are expensive, they are
also volatile. High attrition of Network or Database administrators, for example, leads to a loss of internal
knowledge.
In the midst of this, SMBs are confused with too many vendors touting their solutions and services. There is
little knowledge on what is best suitable. Very few vendors look credible to suggest a solution that fits the
overall requirement of the organization. If we think that
SMB would rarely need IT consulting, we are grossly wrong.
SMBs are clamoring for advisers to help them out of the No single vendor today looks capable
confusion created by a plethora of options. to solving all the issues that lie with IT
Considering these aspects, we find that the SMB market is adoption in the segment. While the
very different from the enterprise market. Nevertheless, market for the SMBs has come of age,
they demand similar sophistication. They are getting
the suppliers are yet to!
technology-savvy and looking at new business models to
leverage the same. For example, an increasing trend in SMBs
4

5. is to equip sales-force with mobile devices to update orders taken. Yet, today we have a spectrum of
vendors, with enterprise service capabilities, jumping into the bandwagon to tap the now-very-attractive
SMB market. In the midst of this, the question that we would like to ask is “does the SMB need a newer
service model?” – A model that is different from how we served enterprises. No single vendor today looks
capable to solving all the issues that lie with IT adoption in the segment. While the market for the SMBs
has come of age, the suppliers are yet to! The conventional service models do not serve the plight of this
segment. Or may be, we can not have just one breed of vendors to cater to this unique market. Rather,
what we need is an ecosystem. We are strongly inclined to the vision that the service player, who will be
able to drive an ecosystem of service providers, and provide a basket of services, will see better
acceptance in the SMB. Our discussion in the course of this paper will find the reasons for this and how a
new business model evolves for it.
Constrained working capital and low risk preference
Small business financing broadly, fall into three categories. One is working capital financing through
overdraft accounts. Two, large credits to customers of SMB are funded though bill discounting. Three,
capital investments are funded by hypothecating the invested asset to the bank; the repayments are
done in equated installments. Investments like software licenses and customized software cannot be
hypothecated generally, and therefore, there is the need for
collaterals like land and shares. We can take a cue from automobile
Today with liberal and more professional banking services, industries. Organizations like Toyota
the financial sector has shown high keenness in funding IT
and General Motors have their own
adoption ventures. However, with high interest rates and
demanding collaterals, there is always a difficult trade-off financing firms that provide car finance
between capital and operational expenditures. The to customers at lower rates of interests.
capacity to take risks in large IT projects, for example, ERP This strategy has been instrumental in
implementation, is less in SMBs. Instances of cost over-run
boosting sales by tapping the latent
or failures in ERP implementation is rife in large enterprise
segments; similar experience in an SMB can be costly. demand.
Rather, an SMB would like to pilot less complex solutions
and scale up as it reaps benefits. This however, leads to a business compromise, where you end up taking
lesser solutions not meeting the desired need. Therefore, the service model has to mitigate the risk of
adopting expensive feature-rich solutions.
Empathizing with issues in evolving businesses
A medium scale fabric manufacturer in India selected an ERP package but wound up after making
extensive, unexpected and expensive modifications. The system could not handle the scenario where the
company priced the same bolt of cloth in two different ways. Unfortunately, in that ERP, there was no way
to assign two prices to the same unit of the item, keeping inventory count accurate. One unit, two prices,
said the manufacturer. Two prices, two units, said the ERP Vendor.
Instances of such issues are not rare. In fact, it characterizes the SMB market. It is also common to find
such unique processes in large enterprises. Yet, SMBs have made little attempts to standardize these
5

6. processes from an end-to-end perspective. We will rarely
find investment in business process re-engineering in most The positive side is that SMBs today feel
companies of these segments. This does not mean that such the imperative to change – to be a part of
interventions would be overkilled. Rather, process re- the global economy, and transgress the
engineering is being more pertinent in SMBs who are
boundaries that hold it from being global
striving to be participants in the global supply chains. They
have to adopt standard interfaces and benchmarks that players.
their enterprise customers demand. On the flipside, a
typical SMB is always evolving, scaling in operations, locations and scope. They are often family owned and
have traditional practices overriding best practices. Many of the processes are very orthodox and stubborn.
For instance, in accounting, we still have book keeping practices that comfort an archaic system of
governance, and thereby become impediments to better integrated processes. In manufacturing execution
systems, which is what the production process is commonly referred to as, the uniqueness is higher. For
example, estimating stocks for work-in-progress, is done on heuristics and it takes radical rationalization for
transition to better practices. Does this not warrant a new mindset to run SMBs?
The positive side is that SMBs today feel the imperative to change – to be a part of the global economy, and
transgress the boundaries that hold it from being global players. China has shown how SMBs evolve into
global players in short time. The same is happening in India and many emerging economies. Hence,
aspirations are high. The demand for process solutions in SMBs along with IT adoption is natural and waiting
to be tapped.
We are talking about a convergence of two evolutions here. On one side, we have SMBs with unique
processes and aspirations to benchmark those with better ones. On the other side, we will have service
providers trying to make their solutions flexible and expect users to standardize their processes.
IT talent – too expensive and volatile for
SMBs SMBs have made little attempt to
standardize these processes from an end-
We see the need for SMBs to maintain a miniature internal IT
organization that would maintain and administer the to-end perspective. We will rarely find
solutions that are running. For instance, you would need a investment in business process
network administrator for your network. You would also reengineering in most companies of these
need database administrators for applications running to
segment. This does not mean that such
recover from corruptions. Above all, you would need
someone who would understand your business process and interventions would be overkill.
who would be a functional expert in helping your
organization use the software applications. Also, you would like the people to stay in organization for a long
period so that the knowledge is retained.
With I.T. off-shoring boom in many countries, IT talent is hugely attracted to the large enterprise segments
and IT Service organizations. With talent resource exhausting, and increase in demand is leading to rising
salaries and high attrition. In midst of this, SMBs are finding it difficult to attract and retain IT talent.
It is common to see salaries for IT staff higher in SMBs than in enterprise segment. This is simply to
6

7. compensate lower job security and social recognition that
an SMB can provide. The fear of hiring costly IT talent and SaaS is just a part of the service model that
the vitality of it, which can leave your systems stranded, is can truly tap the IT potential that lies in the
deferring IT adoption in SMBs. Effective cost of IT is higher SMB segment. Impersonal services like
and the risk of business stoppage increases as you adopt
standard CRM can be a successful model in
more sophisticated and integrated IT solutions. While the
imperative to adopt IT for efficiency and innovation is there, SMB, but for ERP and Manufacturing
the fear of scarce and volatile IT talent is no less deterring. Execution Systems, the software needs to
be flexible and customized within an
SaaS evolution - when adoptions fail,
extent.
Technology finds a way out
Software investments are expensive. It curtails your capacity to fund operation by taking a slice of your
working capital. Again, capital investments, like software and the infrastructure involved, are needed for
business change – to adopt new processes and bring efficiency. This dilemma continues to dog small
industries.
Amidst this, an interesting evolution has happened in software industry. Few years back, the software
community had been talking about software applications being rendered on the Internet, instead of being
installed on the desktops and Local Area Network (LAN). This concept was touted as the “Applications Service
Provider (ASP) paradigm”. Ironically, this didn’t turn out to be a paradigm literally. The problems were many.
Internet was still evolving, though very rapidly. Its ability to provide logically intensive content was limited
then. Bandwidth explosion that we see today was then a pipedream. Software makers deferred their agenda
to provide software in an Internet-hosted model, looking at low immediate realization. The industry became
more cautious and realistic after the dot com bubble burst. While Internet became popular for emails,
collaboration and portals, rich software remained in the domain of local networks hosted within the
organization.
As it often happens, a disruption starts with an innocuous beginning. Such a beginning is done by people As
it often happens, a disruption starts with an innocuous beginning. Such a beginning is done by people who
pursue vision against all odds. After the dot com bubble bursts, we saw new-age star-ups working out new
business models around hosted software. In 1999, Mark Beinoff, from Oracle saw CRM and Sales Force
Automation (often a part of CRM) to be a solution that can be offered over the net. In those days, CRM was a
just a buzzword and the industry was weary about its returns. Moreover, CRM practices varied from
enterprise to enterprise with very little standardisation. Therefore, adoption of CRM was buffeted by
instances of failed implementations. Beinoff decided to make the adoption capital friendly by rendering it as
a service hosted on net. Salesforce.com was formed. Beinoff’s concept underwent many striking realisations
and it became an eye opener to the IT industry. One was that, more than large enterprises, the model turned
out to be a boon for small industries who could experiment with new software with little investment. The
paradigm got re-christened as SaaS – Software as a Service. This time around, it is a paradigm, because SaaS
products are mushrooming. Conducively, Internet bandwidth is increasing three times year-on-year. Google,
with office suites on the net, and ERP vendors, with re-engineered SaaS solutions, have jumped into the
bandwagon. SaaS is here to stay.
It seems that some of the perennial problems that lie on the way of IT adoption in SMBs are solved by the
7

8. SaaS model. Capital investments are low. Software and
infrastructure are remotely managed, and therefore there is In the utility model, all the software
lesser in-house talent dependency. Upgrading software with applications are centrally hosted and
changing business is managed by the service providers. All managed, and rendered on demand. By
this sounds to be a winning model. The question that
doing this, your maintenance of IT
remains is whether the panacea can aid the plight of
services and infrastructure can be
evolving SMBs?
administered as a separate organization
In fact, SaaS is just a part of the service model that can truly
and can also be outsourced.
tap the IT potential that lies in the SMB segment. Impersonal
services like standard CRM can be a successful model in
SMB, but for ERP and Manufacturing Execution Systems, the software needs to be flexible and customised
within an extent. The necessity for in-house talent for functional knowledge of the systems will remain.
Moreover, a good part of the infrastructure would have to be in-house, such as network routers, client PCs.
Above all, how would the SaaS provider provide the consulting and system integration service needed at the
last mile? The confusion with the user about identifying the system that would help the best way to improve
their processes would still exist.
SaaS is a foundation to a larger service model in the making - the model that will mitigate the hassles on last
mile integration, provide the much-needed advisory service, and bring multiple solutions to the basket. How
can an ecosystem of software service provider, hardware vendor, Internet and network service providers and
professional process and quality consultants be brought together? Tapping the promising SMB market
needs a service provider, who will drive such an ecosystem.
Another spike in the Technology evolution curve– The Utility Model
Not all systems can work on a SaaS model. For instance, a point of sales system (typically the billing software
used in retail outlets) would ideally be a locally hosted system so that it can be compatible with complex
local devices like bar code scanners. Vendors and advocates of SaaS may argue that a SaaS can integrate with
local devices. While this argument is valid, with technology maturing, such scenarios are currently more
conveniently sufficed by having local systems.
Therefore, a holistic IT solutions model for the SMB would have a few applications residing within the
enterprise. This would include the legacy applications. Investment in servers to host mission-critical
applications locally is an expensive capital investment. With applications being resource intensive, especially
in the peak transaction time, enterprises are compelled to have separate servers for separate applications.
This leads to redundancy of resources, since average consumption of server resources range between 30-
45%. The idea that comes to our mind is that we can cross-utilise server resources to support each other’s
peak periods and thereby do with lesser number of servers. While this idea is quite old, only recently, has
this taken a practical shape with a technology called virtualization. This helps to host multiple virtual servers
in one physical server, and have “many-to-many” relationships with those. Virtualization dynamically
allocates resources to applications depending on the resource consumption.
With server costs being very high, virtualization is an attractive infrastructure option in SMBs. However,
virtualization is a foundation to a larger service model in store – one that would be more relevant and
attractive to SMBs. Utility Computing is a paradigm where applications are rendered on demand through
8

9. centralised hosting. The applications service is metered on
usage and the cost is a function of it. The name is drawn from
How can an ecosystem of software
utility services like electricity and water, where billing is done service provider, hardware vendor,
on usage. This computing paradigm sounds similar to SaaS, Internet and network service providers
yet it is a more matured model. In the utility model, all the and professional process and quality
software applications are centrally hosted and managed, and
consultants be brought together?
rendered on demand. By doing this, your maintenance of IT
services and infrastructure can be administered as a separate Tapping the promising SMB market needs
organization and can also be outsourced. We are yet to see a a service provider, who will drive such an
100% utility computing enterprise (may be it is too ecosystem.
theoretical to expect one in following years) but partial
adoption of utility computing within companies is growing
very rapidly.
What if this centrally administered IT is managed by a vendor who provides end-to-end IT capability? Is it not
that the impending evolution of utility computing model and SaaS indicate a new service model for the
SMBs?
IT–as-a-Service – bringing managed services to SMBs
If we have to connect the dots, the need of the hour is managed services: a vendor who would provide all
these components and would relieve the business by taking the ownership of IT management. The vendor
has to drive an ecosystem of support partner, niche software vendors, financers, network service providers,
datacenters and hardware vendors. This in turn, would complement its software solutions and consulting
capabilities. We call this IT-as-a-Service.
We find six layers of IT Services needed for this model, with each layer towards the top getting more niche
and specialized.
Niche Vertical Applications Space Mgmt, Loyality Mgmt, Business Analytics
Vertical Core Applications POS, Inventory Mgmt
Common Business Applications Payroll, CRM, Accounting HR Mgmt
Common Office Applications email, Document Mgmt, Collaboration Suite
Network LAN, WAN, Routers
Access Devices Desktop, Laptop, POS devices
Access devices like client PC, laptops and Point-of-Sales accessories would require an efficient vendor
management to bring about best prices against the requirement. It would also include considerations like
logistical convenience, support availability and management of support contracts. Financing the investment
would need partnership arrangements with the financing institution.
9

10. A similar set of operations would be needed for the Network solutions. Network solution would also include
system integration services and security setups, which will have to be provided at the last mile mostly.
An SMB would need office collaboration suites and messaging. Many of these can be provided as a SaaS
model, for instance email messaging and office suites. To lower the license cost, open source options are
attractive.
In case of business solutions, transition to SaaS mode, will depend on a few factors. Engagement with
customer to understand the business requirement and IT roadmap is important. There is also a need to
understand the degree to which the customisation would be needed in the application. However, the
service model will have to focus on standardising the functionalities of these solutions so that most of the
critical process requirements are met. At the same time, consulting service and implementation support will
need to help the business find opportunities to rationalise their process to standard and best practices.
An SMB would have concerns about the security of their data, particularly when it resides in remote
datacenters owned by the service provider. Therefore, the service provider has to ensure that it complies
with and implements adequate security policy that protects data privacy. Fortunately, technology has
evolved to provide high data privacy and security in managed services models. Moreover, sophisticated
intrusion detection systems can be deployed to alert any unforeseen event of intrusion or leakage. There are
also security process standards, compliance of which indicates the vendor’s maturity is protecting customer
data.
When data is located remotely, one would also be concerned about business continuity and disaster
recovery. While technology today is capable of ensuring real time replication of data to backup and
continuity, partnerships with well-established data centers who have adopted such technology is important.
TCS brings IT solutions in each of these spaces, in a concerted way. We call it “IT on Tap” because we provide
one shop IT solutions that is rendered on demand. The demand may be in terms of scalability with business
expanding, or in terms of new solutions as business adopt new operating models to evolve and compete.
Our managed services, most of the time, remotely hosted and administered, relieve users from complexities
of IT management. Therefore, our users get maximum benefit of the solutions they adopt, with our people
innovating on it and managing it on their behalf. By centralising and standardising solutions to multiple
customers, we are able to achieve cost advantage for the customer. We are able to relieve the customer from
enduring capital investments and therefore allow them to fund operations.
TCS has been serving large enterprises for 35 years now. Our rich expertise, diverse pool of talent and
technology capabilities has brought us to a threshold where we can redefine the way SMBs leverage IT.
10

11. Why iON
iON provides comprehensive solutions that address varied IT requirements. From network to ERP, iON is offered as a single
service, in a pay-per-use model, allowing you to leverage the solution’s true potential. iON ensures integration of all processes
along with ease of use.
iON promises:
n High performance in normal broadband;
n Stringent security and data privacy;
n Guaranteed availability (99 per cent uptime);
n Disaster recovery;
n Reduced need for IT staff.
iON, therefore, manages your processes while you use the software. You gain from
Integrated solutions
We ensure that all your solutions are connected. For example, if you are using a CRM along with an ERP, and have a document
management system to organise your files, we ensure that these solutions are connected and work as one. So for you, it is
simply IT and not applications.
Increased agility
We bring in the agility to keep pace with changing processes or a new line of business. We help you configure the processes to
work differently or simply choose new practices recommended by the software. Our activation system flags on best practices
while the system is running. As you pick and choose, we give you more options to choose from.
A pay-as-you-use model
This model eliminates capital investment as we provide the IT infrastructure and software on rent. You pay as you use and only
for the number of users who actually use the software. The rent is charged monthly. Typically, the cumulative rental for three
years is equal to the capital cost of acquiring similar or lesser software with one-time payment. Usually, the ROI exceeds rental
within three months, when best practices are well followed. The rental includes maintenance and training, with no hidden
costs.
Personalised solutions
Although this is a cloud service, the software is configurable to each business. You will always get the flavour of your own
business by picking and choosing what processes you would need.
Automatic upgrades
We continuously invest in our solutions to ensure best practices. We enrich the software based on user feedback and business
and statutory changes. We ensure the upgrade without disrupting the user.
11

12. About iON
iON is Tata Consultancy Services’ strategic unit for Small and Medium Business. iON provides
end - to - end business solutions to the SMB segment, the growth engine of the economy. iON
caters to the needs of multiple industry segments with best practices gained through TCS’
global experience, domestic market reach, skills, know-how and delivery capabilities.
For more information, visit us at www.tcsion.com
Contact
To know more about iON
Toll Free Number 1800 209 6030
Email ion.salessupport@tcs.com
Subscribe to TCS White Papers
TCS.com RSS: http://www.tcs.com/rss_feeds/Pages/feed.aspx?f=w
Feedburner: http://feeds2.feedburner.com/tcswhitepapers
About Tata Consultancy Services (TCS)
Tata Consultancy Services is an IT services, consulting and business solutions organization that
delivers real results to global business, ensuring a level of certainty no other firm can match.
TCS offers a consulting-led, integrated portfolio of IT and IT-enabled infrastructure, engineering
and assurance services. This is delivered through its unique Global Network Delivery ModelTM,
recognized as the benchmark of excellence in software development. A part of the Tata Group,
India’s largest industrial conglomerate, TCS has a global footprint and is listed on the National
Stock Exchange and Bombay Stock Exchange in India.
For more information, visit us at www.tcs.com
IT Services
TCS Design Services I M I 09 I 11
Business Solutions
Outsourcing
All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is
correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in
any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and
other applicable laws, and could result in criminal or civil penalties. Copyright © 2011 Tata Consultancy Services Limited