Bundling services for SMEs is an opportunity not to be missed

Lucy Hipperson, Analyst and Pauline Trotter, Principal Analyst

There are plenty of reasons why SMEs should find bundled services attractive. Clearly incumbents think so, as bundling forms the main focus of their current SME strategies.

We feel that SMEs should be attracted to bundles because:

• most SMEs like simplicity and bundling can allow them to have a single point of contact, a single bill and one contract
• many customers do not have the time (or in-house expertise) to research all the offers available to them - bundled services are an easy solution to all their ICT needs
• SMEs can avoid the risk of being left behind by technology change - the service provider takes the strain of new technology introduction
• small businesses need to avoid capex - many bundled services use a predictable per seat, per month pricing model
• bundled services should provide overall cost savings for SMEs - if they buy multiple services for one service provider, there should be financial benefits
• many bundles permit a pay-as-you-grow facility which enables businesses to expand their service usage as they grow.

So the question isn't, 'why should SMEs use bundles', but rather, 'why, if they offer so many benefits, don't more SMEs take bundled offerings'? We think incumbents have been less successful than they should have been in selling bundled services for three reasons.

• Many current bundled offers don't provide enough financial incentive to potential buyers: the discounts for buying multiple services aren't good enough. Too many SMEs think they can negotiate better prices on single-service deals from multiple suppliers.
• Service providers need to get the message across better: SMEs need more understanding of what new technologies can do for them - the benefits need to be actively sold to them.
• SMEs need to feel that they have not taken too great a risk in single sourcing. They need to retain some control over the solutions they are using.

Service providers (and incumbents in particular) need to get smarter about bundling. Bundling enables service providers to grow their customer base while at the same time reduce churn. For incumbents, the strategy is invaluable in providing a competitive edge against new entrants with less comprehensive service portfolios.

Smart pricing for bundles needs careful consideration. SMEs need to know they are getting good value, as well as the right bundle for their needs. Discount schemes which offer better value for contracting to multiple services need to be more attractively priced. Better contract terms should also be considered to attract SMEs to bundled services.

Service providers also need to be flexible with their bundles. We think segmenting the SME market is a near-impossible task, but offering a 'pick and mix' bundle would enable SMEs to feel more in control (and would also be a useful tool for service providers wishing to know more about its small customer base).

Identifying the key needs of SMEs will lead to innovation. But these innovative bundles will have to be easy to understand, and SMEs will continue to need guidance from service providers to help them understand what best meets their needs.

Lucy Hipperson is an analyst in Ovum's Enterprise practice. Within the practice she is responsible for bringing together all of the different forecast areas covering fixed and mobile communications services on a global basis.

Pauline Trotter is a principal analyst specialising in enterprise communications, and is responsible for Ovum's research among enterprise users - from SMEs to large multinationals.