In one of my previous posts (Process vs. Product), I’ve written about the importance of identifying and working towards offering a single (dare I say “converged”) service and identifying and building on your small business’ core competencies. As I’ve mentioned before, it’s easy for a small business to fall prey to the business equivalent of “feature creep”, that is offering services that are outside the scope of your core competencies, whilst still trying to manage and run your existing services. Whilst the prospect of another customer (especially another well paying customer) is sometimes enough to convince you (as a small business) to offer another service, it’s important to identify the requirements of the client’s needs and the requirements of the service (specifically the upfront requirements, whether they be monetary cost or time) as to avoid offering a product that is actually detrimental to your other core products.

The economies of scale in telecommunications are interesting, especially in Australia. Whilst there’s plenty of room for movement in the lower end of the scale (web hosting companies with single dedicated/co-located web servers) and in the top end of the scale (national ISPs such as Telstra or content delivery companies such as Akamai) it’s difficult for small to medium sized content publishing businesses to leverage size to their advantage. While it’s easy enough for smaller businesses to secure relatively high margins on their services, due predominantly to their lower outgoings (especially providers marketing directly to consumers, as in the case of cPanel hosting etc.), smaller providers attempting to break into the enterprise market are unable to use size to their advantage. Factors such as the price of bandwidth, cabinet lease, licensing for enterprise products etc, all negligible to larger providers, place a significant burden on a smaller provider attempting to offer these services.

Many people argue that it is not the place of a smaller service provider to offer enterprise-grade services to larger organisations, usually touting the age-old mantra that smaller businesses either lack the encompassing competencies to ensure a minimum level or service or lack the suitable cash reserves to be able to adequately scale their services for their customer’s needs. Whilst this may have been true five years ago, the advent of emerging technologies (such as virtualization) and the ever-increasing flexibility of both open and closed source software packages means that smaller organizations are now just as able to offer these services to larger cusomers as their heavyweight competitors. In fact, there seems to be a significant amount of growth in smaller content delivery companies (specifically Limelight, Cachefly etc.), due predominantly to their ability to adapt to a changing software landscape and, perhaps more importantly, the ability to offer their service at a more competitive price than some of the larger, more incumbent companies.

The most important thing for smaller providers offering these services, though, is to keep the metaphorical toffee apple in mind. Despite decreased outgoings spent in labor, coupled with the advent of open source alternatives for products that would have traditionally cost tens of thousands of dollars to license, the most important thing to remember is the quality of service that you offer to your customer. Whilst there’s no doubt that smaller businesses can offer a level of service that is equivalent or better to the quality of service offered by their competitors, this minimum level of service can only be maintained by ensuring that your entire team is competent with the products that you offer. Whilst larger organizations are able to get away with balancing their skill-set between multiple employees, the nature of smaller business is that there is an amalgamation between process and management. As a result, it’s important to ensure that you only offer services that you are able to support in all good faith, whilst maintaining a workload that is manageable by your current employee base. It’s all well and good to sell 20 000 managed exchange mailboxes, turning over a yearly income of $200 000; but that’s worth nothing if your staffing requirements increase beyond a level where you are able to break even with the product that you’re selling.

Again, mind the metaphorical toffee apple - it’s easier to get into something than it is to get out of it.