Time to give SMEs a chance?
Posted by Tom Lawrence on Thu, Mar 17, 2011 @ 02:53 AM
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Prime Minister David Cameron recently promised to increase the government’s network of suppliers from the SME community. So what are the possible benefits and drawbacks of this new approach?
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Working with SMEs, as opposed to larger companies, can certainly have its advantages.
Smaller companies tend to place greater value on your business because it often represents a higher percentage of their revenue. SMEs, more so than larger firms, cannot afford to lose their clients and so often commit their best people to the job to ensure client satisfaction. Conversely, it’s not unheard of for bigger firms to assign more junior team members to client accounts, meaning that those working on your behalf could bring less experience to the table than you might expect.
SMEs are often more agile than larger firms, making them better able to adapt to their clients’ processes. SME’s can often develop their service portfolio according to their client needs, which is obviously of benefit to both organisations. Their flexibility and willingness to create bespoke solutions, rather than replicating existing models, is another notable strength and is only possible because of the smaller client portfolios that they manage. Perhaps one of their most attractive qualities however, and one that will surely appeal to government procurers, is the price of this service. Always trying to gain competitive advantage, SMEs will often go above and beyond what’s in the contract to keep the customer happy.
On the other side of the coin, SMEs, because of their size, are potentially new to the market, so they may have a narrower network of contacts and suppliers, and may be less experienced. With experience comes the ability to manage risk, and smaller organisations, when under pressure, may fall short, forcing clients to have to go back to the market to source a new supplier.
The size of the company may also determine the quality and talent of the team deployed on your account. Smaller budgets equate to smaller salaries in many cases. Scale and access to market is also a fundamental influencer; larger companies can usually leverage economies of scale to pass real savings on to the client.
Ultimately, the new approach outlined by the prime minister represents an opportunity for the government to take control of its procurement and manage its supply chain in a more effective and transparent way.
It also creates a real opportunity for a wider array of British businesses to prove themselves at government level, which will no doubt make for a more competitive marketplace and improved quality of service.
For this reason, when looking at suppliers, organisations should judge firms on a case-by-case basis, carefully scrutinising the merits of their offering, rather than just their size, in order to maximise the quality and effectiveness of their investment.