Monetising Services For SMEs

Ubiquitous broadband availability in the business provides an opportunity for companies to change the way they communicate and measure productivity. Communication tools such as e-mail, voice and video communications, which have long been considered the domain of corporate IT are today considered to be fundamental competitive tools for any company. Domain penetration amongst Small Office Home Office and Small & Medium Sized Enterprises (collectively “SMEs”) remains painfully low in emerging markets, where telecom operators have a need to drive the internet as the game-changer it already is in developed markets.

What Do SMEs Want?

SMEs want to be profitable, to grow and to succeed. How can these goals be achieved? By being cost-conscious, being productive and by being more efficient than the competition. Investment in technology is the single most effective source of inexpensive, productivity enhancing products for SMEs and telecom operators are the best-placed to offer these to their SME customers.

Digitisation has fundamentally reshaped business models in Europe, the USA and parts of Asia. Importantly, digitisation has the opportunity to revolutionise how businesses operate across the African Continent. Digitisation and broadband connectivity lower entry barriers and expand the reach of small businesses. Broadband connectivity offer the greatest impact on the way SMEs organise and operate, to help them generate competitive advantage.

To illustrate the arguments made in this article, we use a fictitious SME. Take a small, owner-managed accountancy firm, MBAccount Ltd, based in Mombasa, employing just ten professionals. MBAccount will have ten computers, fixed-line phones, possibly a few mobile handsets and one smartphone (for the boss of course). At the very least, MBAccount uses voice telephony plus a little mobile data. Let us assume the owner has had a broadband connection installed in the office, to ensure his employees can access the internet and have e-mail addresses. MBAccount will obviously be an SME customer for one of Kenya's telecom operators, although which operator does not concern us here.

1. Web Presence

Web presence commences with registering a domain name and creating a company website (www.mbaccount.ke), the purpose of which is of course to attract more customers. According to SME Survey (Pty) Ltd less than 70% of South Africa's SMEs had any type of web presence in 2012; in Tunisia this figure was closer to just 40%. In the USA or in Europe, domain registration takes place before a company is incorporated, as it influences the name of the newly established entity; next, creating the website is probably the first major task before launching one's new business. Having a presence on the web directly increases visibility, contacts and lead-generation for any business, but especially for small, local SMEs.

Now let us imagine that MBAccount acquires from its telecom operator (or an independent systems integrator) a wireless router, to be installed in the middle of their Mombasa office. A wireless router, just like any other, except, this router includes the easiest web hosting and web design software imaginable. With just three data points (company name, industry, address), in just three clicks and a domain registration plus web presence are created in an instant. Granted, the web presence is effectively just an online business card, but it is cheap, extremely simple and is practically immediate.

Providing this solution requires no expertise by the SME customer and limited involvement by the telecom operator, yet the latter is able to brand a national "online in 3 clicks" campaign that will appeal to any SME, delivering web hosting revenues to the telco, with very little effort. Offer MBAccount a value added service such as Google AdWords which automates online marketing campaigns and additional on-going revenues are ensured.

2. Messaging

Company e-mail addresses are perceived to be more credible than gmail or yahoo mail accounts. Despite the same individuals being behind them, company e-mail addresses imply a more 'professional' organisation that takes itself seriously. Two MBAccount professionals each handing out business cards with "firstname.surname@mbaccounts.ke" will automatically be better received than "alex2010@yahoo.com" and "sylviaabasi234@gmail.com" and MBAccount's boss knows this well. Such a simple concept to large corporates with IT experts and IT servers, but company e-mail is not as simple for smaller firms. MBAccount cannot afford to invest in IT infrastructure that requires servers, IT experts to install it and roll out software on all ten employee PCs and MBAccount certainly cannot afford to employ permanent IT professionals. Hosted e-mail is the only cost-effective option for SMEs and an e-mail client is essential, be this Google Apps or Microsoft Exchange or other, providing the latest technology with the best user experience that makes even the highest volume of e-mail traffic easily manageable.

During tax season, MBAccount sends its professional accountants out to client locations - farms, car repair shops, a local grocery chain etc, to collect receipts, invoices and other documents that are necessary for their clients' annual tax returns. Whilst most of MBAccount's clients may be in Mombasa, a few may be based in surrounding towns. As a result, MBAccount often requires its professionals to be mobile and importantly, its professionals need to stay connected. Assuming only the boss owns a smartphone, then MBAccount must be in need of a mobile mail client that works on feature phones. How much would the boss pay MBAccount's telco for this (branded) service? More importantly, how quickly will he upgrade all feature phones to smartphones when he sees the benefits to his business of always-on connectivity? We all recognise the positive impact on data revenues upon upgrade from feature phone to smartphone.

3. File Sharing

Once again, something large corporates with servers and IT departments take for granted, but file sharing is not so simple for SMEs. Possibly resorting to services such as Dropbox (commonly used by friends to share photos and music files), but otherwise mostly sending documents to and fro on e-mail - "do you have the latest version of that document or shall I re-send it...?" Wouldn't MBAccount's boss prefer his employees to use secure, professional, enterprise-grade file sharing?

Central access through collaboration software actually revolutionises traditional file-sharing practices. With hosted folders and files, documents become accessible anytime from anywhere, with efficient track of changes. Information can be easily searched and reused and detailed permission levels may be set without the involvement of professional IT staff. In addition, the functionality offered allows paper-based company documents and forms to be replaced by electronic formats, with automated background workflows. The level of productivity enhancement derived is invaluable to any firm.

4. Peer-to-Peer Communication

This is the absolute gem of all services that a telco can offer down its broadband pipe, facilitated by modern technology and absolutely invaluable to SMEs: peer-to-peer communication. Such services make secure, enterprise-grade communication available to SMEs, at cost-effective rates. Instant Messaging simplifies written communications, phone calls and short meetings, helping users to save time. The ‘presence’ awareness feature, which indicates whether a user is on-line and available, or whether they are busy or just inactive, offers invaluable information to colleagues on the availability of team members and others. Web conferences are in many cases just as effective as personal meetings, presentations and classroom training and they have the added benefit of saving travel time and costs.

5. Backup & Recovery

Data is a company’s most important asset and the loss or corruption of mission-critical business data can cause significant damage to any firm. Automated backup and recovery solutions do not require major investment by an SME and do not require human resources for maintenance as they are fully automated. Data can be stored in geographically independent, secure data centres using the most reliable hardware and continuously updated software. All data is encrypted before being sent to the data centres and the decryption key is held by the SME.

All in all, the five services described above either singly or collectively, have the ability to fundamentally improve the productivity and efficiency of any business, be it MBAccount or any similar SME. African businesses are today lagging behind their western peers who have embraced the revolutionary changes that modern technology has brought and that telecom operators are offering. There is a significant need for innovation in order for African's SMEs to be profitable, to grow and to succeed, but innovation needs to come in the form of relevant products and services.

The Great News for SMEs

Africa’s excessively high software piracy rates imply that software is valued, that it is necessary for business, but that it is simply too expensive. The demand for ICT is here, yet the costs of adoption have remained prohibitive. Back to MBAccount's boss - would he pay for an acclaimed enterprise-grade solution if it was offered to him as a monthly subscription? On a per user basis? Accessed over his regular broadband connection? Without the need for any start-up hardware or licensed software investments? Absolutely! And who better to offer him all of the above, than his trusted telecom operator?

Africa's telcos have spent hundreds of millions of dollars upgrading their telecom networks and rolling out broadband across their territories. Telcos have the invaluable advantage of having their foot in the door of every single business, large or small, in one form or another. A telecom operator's greatest asset after its network, is the direct billing relationship it has with its customers.

Imagine the 'stickiness' of MBAccount to the telco that offers the firm productivity services with its broadband connection. One-stop-shop for all an SME's needs. MBAccount's 10 e-mails that can grow to 15 during tax season and back down to 10 when business volume returns to normal. One telephony bill, paid monthly on a per user basis, all administered at a click of a button.

The Even Greater News for Telcos

Most telecom operators have a significant SME subscriber base, which has increasingly been demanding more advanced ICT solutions. It is obvious that the greatest strategic fit for telecom operators is the ability to offer SMEs communication and collaboration solutions to facilitate their growth and productivity. The fact that SME domain penetration is so low across several African countries is testament to the fact that telcos in such markets have yet to identify the means by which to simplify the process of entering internet commerce. Two elements give rise to even greater news for telcos:

Firstly, Africa's telecom operators need not invest time and money to be able to satisfy the needs of MBAccount as described above. Other than use of the core broadband network, very little else is required of the telco. How come? Check out www.neostratus.com. This small firm is one of just a handful of expert IT companies that have helped telcos monetise their broadband network and possibly the only one with extensive experience across several emerging markets.

Secondly, Development Finance Institutions ("DFIs") would absolutely love to help fund telco-led initiatives that enhance productivity for SMEs, disseminate skills, create new jobs, contribute to GDP growth etc. Between 1998 and 2009, DFIs invested approximately US$2 billion a year into Sub-Saharan Africa’s telecom sector. Such institutions are eager to see the benefits of their investment reach SMEs and broadband connectivity finally allows this to happen.

In summary, the enormous potential for data has yet to be realised from Africa's SME segment. Often SMEs may not even be aware of the potential and value that broadband could bring to their business, how easy it is to adopt broadband services and how inexpensively such services can be scaled. Telecom operators can no longer ignore the data needs of their SME subscribers. Africa's telcos owe it to themselves to capitalise on their broadband capabilities and the resources they require to do so are available to them; no need to reinvent the wheel! There are experts readily available to assist.

Sophie Papasavva

Sophie Papasavva

Sophie Papasavva is the Founding Partner of EMFC Loan Syndications (“EMFC”), a boutique firm assisting companies seeking to raise bank debt. EMFC offers Loan Execution Support, acting as an additional ‘in-house’ resource to time-constrained finance teams. Prior to establishing EMFC, Sophie was a loans banker for 12 years, first as telecoms, media & technology relationship manager and later in loan syndications and sales, where she gained experience in multiple sectors such as oil & gas, mining, infrastructure, agribusiness and others. Sophie has originated, structured, executed, sold, restructured and syndicated loan financings ranging from simple bespoke bilaterals to complex multi-billion dollar, multi-currency syndicated transactions. Her expertise lies in arranging structured, bespoke financings for corporate borrowers operating in the emerging markets. To contact Sophie, please e-mail her directly at sophie@emfc-loans.com or follow her on Twitter at @Sophie_EMFC.