As their bread-and-butter business with large North American enterprises suffers in the face of a stagnant U.S. economy, Indian outsourcing providers are overlooking SMBs, a largely untapped -- and potentially quite lucrative -- market.
According to Susquehanna Financial Group research released last year, nearly half of U.S. SMBs had never done any outsourcing. As I noted in an August blog, SMBs surveyed by Datamonitor cited expense and loss of control as their key concerns regarding outsourcing. Compared with their larger counterparts, SMBs were also less familiar with their outsourcing options, says Datamonitor. A ComputerWeekly.com article quoted a Datamonitor analyst:
The fact that many SMBs are unaware of the outsourcing options available to them may stem from vendors having previously overlooked them.
Analyst Sreenivasan Radhakrishnan, writing on SeekingAlpha, says that large Indian service providers have not pursued SMBs because they are typically more cost-conscious than their larger counterparts. But as the Indian giants acquire smaller companies that serve SMBs, they will begin to segment their services, offering higher-margin services to larger clients and lower-cost ones to SMBs.
The keys for Indian providers, says Radhakrishnan, are lowering the costs of sales and account management, creating a menu of standardized services from which SMBs can choose, and offering the kind of personal touch that SMBs prefer. Providers should develop a standardized contract framework geared toward SMBs and create packaged software and/or reuseable frameworks with specific verticals in mind, he advises.
It sounds like software-as-a-service might be a logical fit here. The hybrid SaaS/services model introduced last month by India's Tata Consultancy Services (which I blogged about, natch) may be the first of many to come.