If I reflect on what clients asked me about in 2016, one of the key trends was a greater need to address issues arising from dealing with small and medium-sized (SME) suppliers.
It's not the first time I have written about some of the practical issues of dealing with SMEs in the ICT supply chain. But the frequency with which the topic comes up seems to have increased over the past couple of years. I'm sure that this is to do with structural changes in the ICT services marketplace as the desire of customers to enter into large end-to-end, long-term service arrangements has decreased. Service contract durations have become shorter, and large single-supplier arrangements are much rarer now.
This fracture in the long-term services market has been beneficial for the SME marketplace because it increases the ability for customers to contract for shorter terms and to have less lock-in to one large supplier. And this change has occurred over the same period of time as more SME suppliers in the ICT sector have bypassed the software licensing phase of their development and moved straight to off-premise cloud and anything-as-a-service arrangements.
Additionally, many customers have now got more experience at managing their own supplier ecosystems or, indeed, at contracting out that responsibility via service integration and management (SIAM) models. While the SIAM approach is not new, earlier generations of its use tended to be passing phases, soon replaced by a retreat to the safety of a single large supplier. To me, that phase is past and SIAM-managed, SME populated ecosystems are here to stay.
To be fair, at least some of the credit can be taken by the larger global suppliers who have, almost without exception, vastly improved their ecosystem management skills and learned how to manage different smaller suppliers with different appetites for risk and ability to absorb liability and client exposure. Maybe it's the cynic in me that suspects at least some level of self-interest here: not coincidentally, many SMEs who make it on to larger client ecosystems end up being targets for later M&A activity by larger providers who covet their technology - R&D by acquisition.
In the United States - as, indeed, in other jurisdictions - in some areas there are specific legal requirements to promote SME businesses by mandating that a certain proportion of work on larger contracts must be flowed down to businesses owned by, for example, minorities, women or veterans. Although the UK government supports a greater penetration of SME into the country's technology infrastructure, currently there is no legal mandation in support of it.
Success in managing a SME ecosystem seems to me to be about understanding and valuing the differences between SMEs and large suppliers and not necessarily insisting upon the same status in terms of either contractual clauses or contract management approaches. Even simple things like ensuring that shorter payment periods are adhered to can make a big difference in terms of SME financial stability. While many of the large supermarkets don't have a great record of financial fairness to smaller suppliers, it has been my experience that, in general in the ICT world, SMEs are treated fairly by customers.
It also helps that, in moving to an online or hosted service, customers are increasingly focusing on issues of interchangeability and avoiding lock-in earlier in the process rather than worrying about this at the last minute or only when the worst happens. Preparation ahead of time helps to reduce issues of supplier dependence which may, in theory, be greater than SME than for a large organisation.
I expect the successful penetration of SMEs into the supplier ecosystem to increase, especially as SMEs are very often able to make greater early investments in new types of technology and customers are prepared to make ring-fence investments in order to make quicker strides. But the ICT sector as a whole can't afford to take this for granted and it's pleasing to see some larger suppliers actively and publicly promoting their activities to support SMEs.