Business Services for SMEs in Emerging Economies

It is well known that the overwhelming proportion of enterprises in developed economies fall into the SME category. What may be less well known is that the same is true in emerging economies. A survey by the OECD in 2004 found that 90% of total enterprises in emerging economies can be classified as SMEs. A more recent survey in the MENA region found that 90% of SMEs have fewer than 50 employees.

We have often said that the SME market is one that is overlooked and that is no less true in emerging as well as developed economies. The fact is that SMEs are a crucial engine of all economies. For example, they provide essential industrial links as sub-contractors and suppliers to larger enterprises. SME growth is good for the economy as a whole. And, there are many SMEs engaged in other segments – health, education, IT, building, retail, etc  - making a similarly vital contribution to the overall economy.

Mobile Centrex can be positioned as a high value service, leveraging higher ARPU figures from enterprise customers and attracting a good premium for access to the core service. Of course, ARPU levels are often cited as a reason why higher value services may not be so attractive in emerging economies, leading some to suspect that offerings such as Mobile Centrex may have a limited uptake.

Our experience is quite the contrary. We are involved in more and more projects in which enterprise and SME services are seen as critical to network growth. There are several reasons for this. One, suggested by recent research, is that, operators in emerging markets have achieved significant network efficiencies, through a “right first time” approach. By learning from the mistakes of early adopters in other markets, operators have been able to leverage successes and avoid failures, avoiding many of the inefficiencies of patchwork, customised networks in established markets. With greater efficiencies, margins can be maintained.

What’s more, although ARPU can be variable, high user uptake and penetration can achieve significant economies of scale, ensuring excellent revenue success. While much of the focus has been on non-data intensive services, operators can be positioned to capitalise on demand for new, data-orientated services when they arrive.

All of which makes Mobile Centrex a particularly attractive service, as much for emerging as well as developed economies. Not only is it a voice-orientated service, so it requires no great demand on the network, but it meets a number of key criteria for mass adoption.

SMEs are obviously very concerned with managing their cash-flow. Capital intensive projects tend to be unattractive, yet all businesses want sophisticated tools that can improve efficiency. Traditional, premises based PBXs have been restricted by variable fixed line penetration to larger enterprises and adoption has not been widespread. Yet, the benefits they offer in terms of employee efficiencies are attractive across all businesses. Mobile Centrex delivers these benefits, but leverages the mobile network which has penetration far exceeding that of fixed lines, and requires no capital investment on the part of the customer, merely a predictable monthly rental. With mobile, it’s an easy proposition to sell.

Even better, a service such as offered by Gintel’s Easy Virtual PaBX requires no modification to handsets, so existing equipment and terminals can be used, again reducing the barriers to adoption. When new employees are added to the service, it’s a matter of adding another user to the virtual team, not physically installing any complicated devices.

Finally, it’s possible to offer Mobile Centrex solutions to pre- and post-paid subscribers, ensuring that in markets with high pre-paid penetration amongst business users, existing billing models and financial controls can be maintained.

This is why Mobile Centrex is becoming very interesting to operators in emerging markets. SMEs are recognised as being critical to growth across the globe – and this is no different in emerging economies. But, SMEs need access to advanced business tools and consistently demonstrate an appetite for increasing efficiency through IT and telecoms solutions. Mobile adoption has been widespread and has contributed to economic development. Mobile Centrex, with low adoption costs and simple positioning helps SMEs leverage the same services that have been restricted to fixed PBX customers in larger enterprises. Even if monthly ARPUs are lower than in some other geographical regions, network efficiencies and scale mean that margins can be maintained and there is ample opportunity for adding value with complementary services.

In emerging economies, Mobile Centrex could become a key weapon for service providers in emerging economies to unlock value while simultaneously helping to fuel the economic growth of vibrant SME markets.

Tore Saeter, October 2010.

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