Great promise, steep challenges in Indonesia’s SMB market for Lenovo
By Masyitha Baziad June 6, 2016
- Most Indonesian SMBs are micro businesses, do not see IT as key
- Despite gloomy outlook for PC business, Lenovo aims to stay ahead
IN its prediction for Indonesia, US-based research firm International Data Corporation (IDC) has noted that many IT vendors are currently focusing on the country’s small and medium business (SMB) market.
While this segment holds great promise, IDC Indonesia has also cautioned that SMBs’ IT spend is still small, predicted to be US$823.2 million in 2016, a mere 6.4% increase from the US$773.5 million in 2015.
“When we talk to SMBs, we can see that lack of awareness and education are still holding them back,” said IDC Indonesia country manager Sudev Bangah.
“They tell us that vendors come to them only to sell and push their products, rather than provide something that will help these SMBs grow,” he told a press conference last December.
These box-pushers face a quandary – or even an outright contradiction, in Sudev’s reckoning.
SMBs are willing to explore IT for productivity, cost control, and operational efficiency, he suggested. However, they are not as willing to spend, citing cost reasons.
Lenovo Indonesia SMB lead Irene Santosa is certainly cognisant of this challenge, but believes the promise outweighs such concerns.
Indonesia is a huge market – whether for consumers, SMBs, or enterprises – and is the No 1 PC market in South-East Asia for the China company, she told Digital News Asia (DNA) in Jakarta recently.
“However, growing the SMB market is a constant challenge,” she conceded, adding that this challenge was two-pronged: Getting micro and small businesses to spend on IT, and getting medium businesses to scale up.
According to the Ministry of Cooperatives and Small Medium Business, Indonesia had 58 million SMBs in 2013, of which 98.7% were micro businesses, 1.13% small businesses, 0.09% medium businesses, and only 0.01% were large businesses.
The SMB contribution to Indonesia’s gross domestic product (GDP) is 60%, but while making up the biggest proportion of the SMB sector, micro businesses only contribute 37% to the country’s GDP, while medium businesses contributed 14%.
Irene said this is why Lenovo Indonesia believes that SMBs can still be a very good market, despite the challenges.
“Small businesses dominate whole SMB segments, but it is very hard for them to spend on IT because of financial difficulties – banks are still hesitant to give out loans to these small businesses,” she said.
When it comes to medium businesses on the other hand, it is more a perception challenge rather than financial constraints.
Most [medium businesses] tend to “feel they have enough [IT] already,” said Irene.
“Enterprise customers have a very high awareness of the need of IT in their organisations, but SMBs consider it as only being complementary to their business,” she added.
Indonesia may have a huge number of SMBs, but the gaps between them are pretty huge too.
“There is this huge gap in terms of capacity and capability between a medium business and a small business,” said Irene (pic above).
“A medium business can be a company with 2,000 employees, while a small business may even have only one or two people running the company.
“As a result, on a single day we may meet with an SMB that does not need even a single PC, yet on the same day, meet another which needs hundreds – it varies, and the gap is big,” she added.
Despite falling under the catch-all ‘SMB’ umbrella, such customer segments cannot be addressed with one simple strategy, but require tailored and customised approaches.
This is why Lenovo has separated SMBs into a standalone segment in Asia Pacific – in other markets, they are targeted as either part of the consumer or the enterprise business.
In Indonesia, Lenovo has about 20 notebook and desktop computers focused on addressing the different needs of SMBs, according to Irene.
Strong retail game
The retail channel has also been key to penetrating the SMB segment in Indonesia, since most such businesses buy their PCs from retailers, especially in the Java area, including Jakarta, Surabaya, Bandung, and Yogyakarta.
“Jakarta and Surabaya are home to many businesses, and this is where almost all revenue for our SMB segment comes from,” said Irene.
“We are also seeing potential in Yogyakarta because it has the most number of micro-businesses across Indonesia,” she added.
Currently, the SMB segment contributes to approximately 20% of Lenovo Indonesia’s business. Around 60% comes from the consumer segment, and the remaining 20% from the enterprise segment.
Retailers are also important to Lenovo’s SMB business because they can be greater marketers for the company.
“We maintain good relationships with our retail partners because in Indonesia … the retail channel is the first touch point – only after customers buy our products there will they contact us directly,” said Irene.
Gloomy outlook for PCs
According to IDC, PC shipments in Asia Pacific fell 7.7% to a total of 107.6 million units in 2015, and the declining trend will continue this year.
While acknowledging this gloomy outlook, Irene argued that the PC market is not saturated yet.
“It is predicted that overall PC shipments for Indonesia this year would be at 3.8 million units compared with four million units shipped last year,” she said.
“This is the trend now, but we have no other strategy than to keep showing our existence in the market. If we hold back, we are going to be forgotten – and we do not want that,” she added.
On a high-level, this same attitude will inform Lenovo Indonesia’s SMB focus: Be there, while educating the market what can it can do with its products, via roadshows and events, for example.
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