The world is flat: Even for Small and Medium Enterprises (SMEs)

 Jan 19 2010    Posted by: admin   Posted in Uncategorized

Thomas Friedman in his book, The World is Flat, describes how faster and more reliable internet connections spawned an era of flatness in which companies reached across the borders and started using vast manpower pool that became available to them. The big companies were the first to take advantage of this flatness. They had the scale, risk tolerance, economies of scale, and financial muscle to setup those global information supply chains that Thomas Friedman talked about in this book. The workflow software and processes brought together work done by people in different countries, streamlined it, and truly created a global knowledge supply chain – similar to global manufacturing supply chains that started getting setup decades ago.

This global integration of manpower into companies’ every day operations is not restricted to large organizations anymore. In this second phase of flat world, SMEs (Small and Midsize Enterprises) are getting in the act and starting to reap the same benefits that compelled global larger companies to take risk on this novel concept in late 90s. This was a predictable trend. In early 80s as personal computers were introduced, initially they were mainly used in the large organizations because of their cost. However, as they became cheaper, they became available for SMEs to own and improve their productivity. The business process innovations brought by this flat world have also tricked down to SMEs which are increasingly looking beyond their borders to collaborate and improve their operations.

One of the biggest reasons why SMEs are successfully taking advantage of this flat world is that in past few years, a new crop of smaller SME focused providers have come in the marketplace. Their services are specifically tailored to SMEs and they have kept their cost structure low and thus can offer services that are affordable to SMEs. The better known and bigger outsourcing providers have primarily targeted large Fortune 500 type companies and their engagements have involved hundreds, if not thousands, of employees of the outsourcing company forming a team to service the needs of a given client. This structure does not map to the requirements of SMEs which may range any where from a single person to a team of few dozen people. The flexible outsourcing plans, that these new smaller providers offer, have targeted the sweet spot of SME outsourcing.

While the larger outsourcing providers have a bigger proportion of their workforce in cheaper locales, they still have priced themselves out of the SME outsourcing market. SMEs are very price conscious and the service cost has to be attractive enough for them to take the plunge. To keep themselves competitive for SMEs, these smaller outsourcing players, in some cases, have opened offices in other South Asian or African locations which are cheaper than India or Russia but still provide educated and well-trained workforce. The internet connectivity has vastly improved in these newer outsourcing locations and can support the activities of these companies.

The end result has been emergence of these smaller and more nimble outsourcing providers who have placed themselves well to target the under served SME outsourcing market. They have been continuously amassing experience working with SMEs in areas of Business Process Outsourcing and other more advanced areas such as Market

Research, Web 2.0 services, Virtual Assistance, Bookkeeping, and Equity and Financial Analysis. With these lower barriers to setup their own mini global information supply chains, the world has indeed become more flat for these SMEs.

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