The estimated 2.3 million SMEs in the region clearly represent a significant business opportunity for Oracle, which has been traditionally known as a leader in the enterprise space.
In the country, Yashi Kant, the new managing director of Oracle Philippines Corp., has identified about 2,000 SMEs as potential clients.
In an interview with NetWorks, Kant discussed what IT and business integration issues SMEs face and how the software brand they probably thought was too much to have, both in terms of price and technical points, now fits their needs.
NetWorks: What’s the profile of the 2,000 SMEs that Oracle Philippines has identified?
Kant: We segmented SMEs in the Philippines, for our purposes, as those with annual revenues from P250 million to P5 billion and with an organizational size from 50 to 500 employees. They are unlikely to have their own IT staff; maybe only in the higher end of this segment can we find some. Having no IT staff to support their adoption of technology is one of their challenges. That is the reason why they need solutions that offer best practices coming from their larger counterparts that are simple to install, implement and use. Simplicity is key for an SME.
NetWorks: What are their other IT challenges?
Kant: What SMEs are really looking for today is to streamline their business operations and decision-making processes. They also now realize the need to connect electronically with their larger counterparts, which were the early adopters. Because everybody is trying to go global, it’s becoming imperative for SMEs to put in the right systems and processes to deal with their suppliers and customers.
NetWorks: At what stage of integration with large companies will we find most of the 2,000 SMEs today?
Kant: The top 20 to 25 percent (of SMEs) are already in that process. If you look at the retail sector, a lot of them are into exports. There’s also a lot of high-tech electronics contract manufacturing being done here for larger enterprises. For these SMEs, they need to connect to larger enterprises electronically. As for the rest of the market, they are in the education (phase) where we are trying to help by showing them how to go about the process and the benefits that they will derive out of it.
NetWorks: Given the SMEs’ small budget for IT in relation to large companies, how should they plan for their IT needs next year?
Kant: First is simplicity. SMEs don’t have an IT infrastructure to manage the complexity, but they also don’t have complex business processes given their size. It’s easier for them to adopt standard and best practice processes that are available from business solutions like Oracle’s eBusiness Suite Special Edition.
Second is affordability. Simplicity also means affordability, in some sense. If it’s easier and simpler to install and implement, then the implementation time-frame is reduced and so would the cost of solutions as a large component of it is ongoing maintenance, which becomes higher when there’s a lot of customization. If there’s not much customization, then the maintenance cost and TCO (total cost of ownership) over five years would come down. What we did with the eBusiness Suite Special Edition is offer it on low-cost servers running open-source software to bring the maintenance cost down and make it executable within 10 to 40 days.
NetWorks: How are the SMEs taking to the Oracle eBusiness Suite Special Edition?
Kant: We did an analysis and we found that 40 percent of our eBusiness Suite sales have been to the SMEs and about 50 percent of our overall business in the Asia-Pacific is to SMEs. So we are a significant player (in the SME space) although it’s probably a little known fact.
We have solutions that are now clearly focused on the SME space. We have solutions that allow you to start small and there’s a roadmap to take as you grow. For example, our Standard Edition 1.0 is for companies that are starting out with small applications like payroll on a single CPU server. From a licensing perspective, it is basically the same database but available primarily on the single CPU servers. As soon as your requirements grow, you can then graduate to what we call Standard Edition, which can run up to four CPU servers until you can move to the Enterprise Edition.
NetWorks: How much would it typically cost an SME to roll out the eBusiness Suite Special Edition?
Kant: It comes in modules. If they just want to take the financials and distribution modules for 10 users with software, first-year maintenance, implementation and hardware, it would be in the range of P1.6 million to P1.8 million, which is significantly lower than what you could get from Oracle in the past.
The eBusiness Suite Special Edition is 100-percent channel-centric. We are proud to have a very strong channel base to help us leverage in the SME market whether for our 9i technology products or e-Business Suite Special Edition. Our channel partners are supported by our alliance and channels organization within Oracle. Meanwhile, we are providing options for leasing through our partners to help companies procure these solutions.
NetWorks: How open are SMEs to invest in IT in 2004?
Kant: I think the need to invest in IT is driven by a few aspects. One is for SMEs to globalize their business because of the push coming from the external market or competition. There’s also an increasing need for SMEs to look at things like corporate governance in terms of visibility and control of processes. For example, how do you know the true cost of your business? Through efficient business systems, which provide the visibility and controls that let you make business decisions effectively.
Of course, the economy will also play a role, and based on what we are hearing there would be around four percent GDP growth. I think that should be a fair amount for people to still consider making business investments in IT. It will differ from industry to industry. For Oracle, our strong sectors are finance that includes banking, insurance and capital markets; manufacturing, both discreet and process; government and telecommunications.
NetWorks: How do you plan to grow Oracle’s business in the country next year?
Kant: From an Oracle perspective, what we need to address is market coverage. We have already completed aligning our sales organization by industry, focusing on large accounts. But as I said we are addressing the enterprise market better than the rest. So, clearly we could still do much better to focus on SME and open-source systems like Linux. The partnering aspect will also help us scour the broader market and the interiors of the market.
Oracle is extremely committed to the Philippine market. We have a very large set-up here and instead of downsizing we are growing our sales team. The opportunity is huge. With 2,000 SMEs, even if I just take a fraction of that, I will be a happy man.