Techno-giants think small

A new marketing pattern is emerging in the computer industry. Roger Trapp investigates
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LOOK at the marketing initiatives of computer companies and you soon see a pattern emerging. They are focusing on everybody's current favourite market - small business.

Hewlett-Packard has set up a franchise operation designed to supply small firms with packages of compatible products, such as computer terminals, printers and fax machines. IBM, Microsoft and Mitel have joined together to supply the in-vogue technology that links telephones and computers under the name of Computer Telephony Integration. Now, Microsoft is sponsoring a small business taskforce to convince firms of the benefits of following their bigger counterparts into the IT jungle.

The taskforce, which has representatives from such bodies as the Forum of Private Business, the Institute of Chartered Accountants and the Institute of Directors, is - despite the Microsoft support - an independent group that has held two meetings since being established last year.

However, Bill Gates' software giant accepts that it is some way short of acting out of true altruism. As Joseph Macri, UK sales and marketing manager for the company's small business sector, says: "If you're doing something to develop the whole market, who gains the most is the market leader."

What is attracting Microsoft and the others is that as the corporate market matures the small-business arena is still relatively untapped. Research suggests that only about a quarter of Britain's 12 million personal computers are in small business. And while the overall UK market for PCs is growing at about 16 per cent, much greater expansion can be obtained from a sector that Microsoft defines as organisations employing fewer than 100 employees.

Though the company reckons that about 2.5 million firms fall into this category, it admits that it still does not know much about them. One problem is that it is not an homogenous market. It is not just that firms operate in all kinds of areas; they also have a range of attitudes.

Microsoft had assumed that every small business was like it had been at its inception in Seattle, eager to develop as quickly as possible. But it has increasingly come to the conclusion that this is a long way from the truth.

According to Mr Macri, business schools specialising in the area have identified three broad categories: the "steady states" that account for the vast majority, the small proportion that are "vulnerables" and the dynamic growers, also known as "10 per centers" because they make up about a tenth of the total.

The vulnerables are generally reckoned to be beyond the help of technology and therefore of little interest. Similarly, the steady states are generally made up of businesses, often employing just one or two people, where the founders are more concerned with having an independent lifestyle than developing a company. Though they may make some use of technology in administration they are not likely to be big customers. On the other hand, dynamic growers, which are often operating in computer-related fields, are seen as having great potential. Already, they account for 40 per cent of the sector's spending on technology. Microsoft and its hi-tech counterparts see the opportunity to increase their expenditure still further.

Much has been made of how only about a quarter of small businesses apparently have access to the Internet. But Neil Holloway, deputy general manager with Microsoft's UK operation, says too much emphasis is being put on this at the expense of looking at more straightforward areas. Accordingly, an early focus of the taskforce has been the use of technology in increasing sales, through such means as using databases for marketing.