WIRING SMALL BUSINESSThere's a big market in small companies that aren't hooked up
Here's a marketing lesson from cyberspace: Bulk Handling Technology Inc. of Winchester, Ohio, with only three employees and $1 million in annual sales, builds conveyor belts, rock crushers, and the like for mines and industrial sites. It survives against giants such as Dresser Industries by offering customized products that the huge competitors won't bother with. Problem is, Bulk Handling doesn't have the resources to spread the word. So this summer, it decided to jump on the World Wide Web. A computer hobbyist on staff designed the Web site--after about $1,500 worth of training from AT&T--and the long-distance carrier ''hosts'' the page on its Web server (page 166). Bulk Handling only had to buy a modem and Microsoft Corp.'s Windows 95.
The Web page went up in July--and the world started beating a path to Bulk Handling's door. Thanks to the Internet, the company has been asked to bid on some $2.5 million worth of contracts in the past three months--from customers outside the U.S. ''that we never would have heard of before,'' says Marketing Director Tammy C. Cardoso. The Web site attracted a pineapple-processing plant in Western Australia that wants waste recycling equipment. A huge copper mine in Chile needs a customized rock sifter. ''It's been really neat,'' says Cardoso. ''The type of inquiries we've gotten proves we made the right move.''
It's also proof that a little networking can go a long way toward helping a small enterprise compete against the big boys. The ubiquity of the Internet and the rapid drop in the cost and complexity of networking equipment is bringing such sophisticated applications as electronic commerce, electronic data interchange, telecommuting, groupware, and the World Wide Web to businesses with just a handful of employees. As Bulk Handling has learned, a small business in Indiana can easily do business in India. The reverse is just as true--there's no reason why a small business in India with a Web site can't bid on contracts in Ohio. ''Technology becomes a great equalizer,'' says Daniel H. Schulman, head of small-business marketing for AT&T. ''Neither you nor your competition are local any longer.''
The need is clear. But wiring small businesses is no small task. Market researcher IDC/Link estimates that of the 7 million small businesses in the U.S., 30% don't have PCs. Of those that do, only 20% have networks. A Nynex survey of 70,000 small businesses found that only 15% have Web pages. If they can figure out how to reach that untapped market, suppliers of hardware, software, and services for networking can look forward to years of additional growth.
The trick is finding ways to make the technology accessible. ''For lots of small businesses, the language of this industry might as well be Chinese,'' says Janice Roberts, head of small-business marketing at 3Com Corp., a leading networking-equipment maker. Focus groups, she says, find that small-business people ''don't talk about Internet or networks--they talk about faxes, E-mail, and voice mail.''
SIMPLE KIT. To create the products and marketing programs needed to bring these prospects into the wired world, 3Com has formed a small-business unit. Its only job is to serve customers with 100 or fewer employees. The unit's watchword: Simplify. 3Com's OfficeConnect series, a line of prepackaged local area network (LAN) setups, illustrates the new paradigm. The product is intended to be simple enough for most small-business owners to install by themselves, and 3Com is confident enough to offer a money-back guarantee on the entry-level $799 OfficeConnect kit, which ties as many as eight PCs into a LAN. If the customer can't get the setup working in 15 minutes or less, the purchase price is refunded.
3Com is only one of many big technology companies to see the opportunities in small business. AT&T, IBM, Microsoft, Hewlett-Packard, and virtually every local phone company in the U.S. have set up units specifically targeting the small-business market (table). You can already buy low-end products like 3Com's OfficeConnect at electronics chains such as Fry's, CompUSA, and Computer City.
IBM is using telephone marketing reps for its small-business customers--each is responsible for 10 to 12 small companies. They work with the customer, get them product information, and arrange for service from a local IBM dealer--all via the phone. IBM is also offering equipment financing, putting packages of hardware, software, and services all on one lease. Microsoft was scheduled to announce a new small-business push on Nov. 13. It will work with professional associations such as the American Institute of Certified Public Accountants to deliver its products.
Beyond new marketing initiatives, the networking kings are beefing up efforts to adapt their big-company pro-ducts for small businesses. Novell, whose Netware operating system can run thousands of desktop computers on scores of interconnected LANs, is readying a slimmed-down Netware tailored for 7 to 100 users. The new product, code-named Kayak, is set to debut in early 1997 with most of the features of Netware, except that it won't support LANs multiple locations.
Thanks to all this attention, small businesses are finding that they, too, can get the security blanket of a blue-chip brand. Take BruWest Enterprises, a California-based franchisee of Brueggers Bagel. Tired of seeing its PC-based network server crash, the subchain has decided to upgrade to an IBM AS/400 minicomputer, purchased through a local reseller. BruWest Chief Financial Officer Dick Brokl says the IBM server will be linked to all 12 of the company's stores, so that sales data can be downloaded automatically every night. BruWest has spent about $35,000 for the AS/400 hardware and software, and it now plans to add software that can poll stores for specific data. Brokl says he chose IBM so he could sleep at night. ''We don't have a lot of techies running around here, so we need a piece of technology that's reliable,'' says Brokl. ''We want to run bagel stores. I don't want to be running systems.''
Nor do most small-business owners. That's why, between the maker of technology and the new consumers, there stand thousands of so-called value-added resellers (VARs) like the one used by BruWest. These companies--at least in theory--do for small businesses what the sophisticated systems integrators, such as Andersen Consulting and Electronic Data Systems Corp., do for giant corporations. ''We are a small business ourselves, so we can understand the needs of small businesses much better,'' says Michael Mullins, president of Comtex Information Systems Inc., a VAR in New York City.
REALITY CHECK. Resellers can also provide a reality check for companies that are blinded by the light of all the gee-whiz networking gear out there. ''Customers make mistakes when they want the latest technology but haven't looked carefully at what they really need,'' says Tom Sullivan, a network consultant with Digital Equipment Corp. Another common mistake: Customers tend to focus on a few specific problems. ''That usually evolves into building islands of technology, with no coherent plan for linking them together,'' says Sullivan.
Networks don't have to be huge affairs. Timbrel Medical Development Corp., a hospital consultancy in Ridgewood, N.J., with 10 employees, uses Windows 95's limited networking capability to share files and printers. ''It allows us to not have to carry floppies from machine to machine,'' says Scott Van Sickle, Timbrel's information director. Timbrel needn't stop at mere file sharing. Prices have dropped dramatically for once pricey groupware products that enable teams of workers to share information (page 170).
Small businesses often don't have a choice about getting wired: The big companies they work with insist on it. Wal-Mart Stores Inc. and J.C. Penney Co., for example, require all suppliers, no matter how small, to be linked electronically to their order-processing systems if they want to sell to the huge retailers. Such electronic data interchange (EDI) systems are becoming the norm for large organizations; small businesses that serve them must join or die.
Even if EDI isn't mandated, customers appreciate the electronic link. ''Our clients kept asking us for our E-mail address and to send a file electronically,'' says Todd Irwin, vice-president of Coltrin & Associates, a New York public-relations firm with 22 employees. Last year, Irwin started pushing founder Steve Coltrin, a 51-year-old technology neophyte, for a network. ''I have to admit I didn't see it as a need-to-have,'' says Coltrin. ''But it became very clear that if we wanted to compete with the 3,000-people firms, we'd have to be technologically superior.''
The agency's odyssey into LAN-world is something of a primer on what small businesses should--and should not--do when installing a network (see table). ''I wish now I had talked to another small-business owner with a network,'' says Coltrin. The firm designated Irwin as the project's point man, chosen because he was the PC-savviest staffer. Most small businesses probably have such employees, but they should think long and hard about whether they can spare them. ''I spent so much time on this, it was like having a night job that I didn't get paid for,'' says Irwin.
The agency brought in a VAR chosen from a list of authorized resellers supplied by 3Com and other manufacturers. It spent $110,000 on equipment and fees, keeping the Apple Macintoshes it already had. Coltrin says his smartest move was to lock the VAR, Lande Group, into a flat rate. That's because it took two months longer than promised to get the network up and running--primarily because Nynex was 10 weeks late in installing a high-speed phone link.
It took the boss an additional three to four months to be convinced that this leap into the wired world was worth it. Today, though, Coltrin couldn't be more enthusiastic. ''I thought initially it would boost productivity, and that didn't really happen,'' he says. ''Instead, I've seen a real performance improvement. Our people are much more creative now.''
Indeed, as big companies have learned, networking can be a powerful force for change in an organization. The new links change work patterns and rearrange hierarchies. And because the technology allows a business to operate as a ''virtual corporation''--relying on remote freelancers and so on--a network investment by a small company can have a big payoff, by avoiding fixed costs.
True, the world of routers and LANs can seem daunting--a Hewlett-Packard survey found that some 55% of small businesses would like to be networked but think it's too complex. And too many small businesses ''have a knee-jerk reaction to something simple that looks like a panacea'' says Comtex President Mullins. ''They don't look where they're going long-term.'' So they wind up buying a bare-bones net that can only do printer- or file-sharing. ''If you just want to save money, you don't need to go to the high end,'' says Raymond L. Boggs, director of small-business programs for IDC/Link. ''But if you're trying to make money, you do.'' Words to remember for a small company gazing into cyberspace.
By Catherine Arnst, with Ira Sager and Paul Eng, in New York, Andy Reinhardt in San Francisco, and bureau reports
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.