The New SMB Curriculum
Seeing big opportunities in small to midsize businesses (SMBs), major IT vendors have retooled their SMB channel programs and offerings to get that business. Here's a primer on emerging opportunities for partners to get a piece of the action.
- By Rich Freeman
- September 01, 2008
It's not exactly news that many of the technology world's top hardware and software vendors see big potential in SMBs. Industry titans such as Cisco Systems Inc., Oracle Corp. and SAP AG have been talking up SMBs as their next great growth opportunity for a long while. Nor is the basis for their enthusiasm any secret. Despite the shaky economy, IT spending by SMBs in the United States alone will approach $233 billion this year, according to analyst firm Gartner Inc. With the big-business markets they've traditionally focused on nearing saturation, many longtime enterprise players have been hungrily eyeing that potentially rich revenue stream for quite some time.
Here's what's changed: After years of striving to win over SMBs and the partners who serve them, techdom's leading lights are finally beginning to make real headway. Following is a brief rundown of what several such companies have been up to in the SMB space recently, along with a peek at their plans for the future.
For big-time hardware and software vendors, taking on the SMB market ultimately boils down to two things: rolling out SMB-friendly products and signing up SMB-oriented partners to sell them. San Jose, Calif.-based Cisco has been active on both fronts in recent months.
On the product side, Cisco has added network storage, video surveillance and IP telephony systems to its Linksys line of wireless routers and switches for SMBs. On the channel side, the company has been aggressively promoting the SMB specialization that it added to its partner program in April 2007. Qualifying partners gain access to a deal-registration system and a variety of rebates tied to sales volume. To date, some 7,000 organizations worldwide have enrolled in the new specialization, including 1,500 in the United States.
The Linksys brand is the tip of Cisco's spear for making headway with SMBs.
Among them is Global IT Solutions LLC, an integrator, managed services provider and Registered Member of the Microsoft Partner Program (MSPP). Once convinced that Cisco had little to offer SMB partners, the Tempe, Ariz.-based company has been a satisfied member of Cisco's partner program since January. "I've definitely seen a huge change from them.," says CEO David Rice, citing the dedicated partner management resources Cisco has been adding recently as a prime example.
Though Cisco hopes to recruit another roughly 500 U.S. SMB specialists in the months ahead, deepening its new partners' sales and technical skills is now a higher priority for the company. "Last year was a real recruitment year," says Andrew Sage, Cisco's vice president of worldwide small business sales. "This coming year is going to be focused more on enablement."
Like Cisco, Oracle has emphasized SMB product and channel development during the past year. For starters, the Redwood Shores, Calif.-based giant has been working with its partners to create industry- and geography-specific versions of its SMB-targeted Oracle Accelerate application bundles. There are now 158 such offerings available, and Oracle plans to spend the coming months ensuring that they align properly with SMB demand. "When we first launched, the intent was to build critical mass," says Mark Johnson, vice president of Oracle Accelerate applications marketing. "What we're focused on this year is making sure we've got the right partners in the right geographies with the right coverage."
Oracle has also been busily driving participation in its Value-Added Distributor (VAD) Remarketer program, which lets resellers acquire selected Oracle products from major distributors without first joining the company's partner program. "That allows partners to get started with Oracle with no barriers to entry, no fees, [and] no complex agreements," notes Kevin O'Brien, a director in Oracle's worldwide alliances and channels organization. Introduced in June 2007, the VAD Remarketer program attracted more than 500 members in its first year. Johnson views that effort as just one dimension of a larger, intensified commitment to partnering. "We've made a big push-and will continue to make a push-for selling through the channel," he says.
Such sentiments have made a believer of at least one former Oracle skeptic. "I find Microsoft to be very partner-friendly. That's not always been the case with Oracle," observes Michael Corey, CEO of Dedham, Mass.-based Ntirety Inc., a database administration services provider, MSPP Registered Member and longtime Oracle integrator. Historically, he explains, Oracle has largely ignored all but its largest partners. Lately, however, the company's partner co-marketing programs and other outreach efforts appear to reflect a genuine change of heart. "Honestly, for the first time they're really trying to focus on the SMB space in a kinder and gentler way," Corey says.
Hewlett-Packard Co. continues to court SMB partners with all the vigor you'd expect from a company that views the SMB market as a $70 billion opportunity. In the past year, HP has assigned sales-support representatives to hundreds of additional SMB solution providers and resellers as well as providing enhanced phone support to SMB partners without dedicated reps. It's also introduced SMB Expressway, a new partner portal offering one-stop access to product information, sales and marketing tools, training materials and more.
Still, as far as Rice, the Global IT Solutions CEO, is concerned, partnering with HP is anything but easy. "We couldn't even get past the first hurdle," he sighs. He says that simply enrolling in HP's partner program was such a laborious process that he ultimately gave up in frustration.
Wolfgang Niefert, by contrast, has kinder words for HP. Niefert is CEO of Niefert Certified Solutions LLC, an application and network integrator and MSPP Registered Member based in San Diego, Calif. He's especially pleased with HP's recent focus on the SMB storage market. In February, for example, HP rolled out a new mid-market storage disk array and unveiled a program aimed at opening up its SMB storage products to a wider range of resellers. "They've taken great steps and have really good offerings, especially in the blade server section," Niefert says.
Dell Inc. has been pursuing SMBs even more vigorously than arch-rival HP. And no wonder: Company chairman and CEO Michael Dell has publicly valued the combined SMB hardware and services opportunity at a staggering $400 billion.
Dell Inc. CEO Michael Dell values the company's SMB hardware and services opportunity at $400 billion.
Accordingly, Dell has continued bolstering its SMB hardware lineup, adding products such as the new R300 and T300 servers. Moreover, those efforts are bearing fruit: In June, citing data from analyst firm IDC, Dell reported that hardware shipments to SMBs in the first quarter of 2008 were up 20.5 percent worldwide versus the same period last year.
Meanwhile, in a bid to make similar progress in the services space, the company moved last fall to acquire companies such as Everdream Corp., of Fremont, Calif., which provides remote desktop management services, and MessageOne Inc., of Austin, Texas, which offers e-mail management, archiving and storage services.
For channel partners, though, the last year's biggest Dell-related news item was the December 2007 launch of PartnerDirect, the company's first formal partner program. The new offering provides dedicated sales and customer care resources, credit options, and a deal registration system, among other benefits. As of May, Dell reported having 7,200 registered members in the United States and another 695 in Canada.
Employees at IBM Corp. may someday remember 2008 as the year the company finally got serious about SMBs. In January, Big Blue reorganized its SMB sales group, creating a new team of dedicated mid-market telesales reps. Also that month, the company announced intentions to spend $100 million this year on SMB lead generation and partner co-marketing.
Then in May, IBM introduced the Blue Business Platform, a new family of hardware, software and services tailored to the typical SMB's limited budget and tiny IT staff. The first product under the Blue Business banner, called IBM Lotus Foundations Start, is an "appliance server" with pre-loaded e-mail, collaboration, productivity and security software. According to IBM, the system can be fully ready for use within 30 minutes. Future plans for the Blue Business Platform include the creation of an online marketplace of SMB solutions and services from IBM partners.
Global IT Solutions' Rice, whose company is an IBM partner, is of two minds on the company's latest SMB initiatives. On the one hand, he feels many IBM offerings remain too costly and complex for the average SMB. On the other, however, he's enthusiastic about the new SMB prospecting campaigns and salespeople IBM has been adding. "It's definitely helped on the marketing and strategic side," Rice says.
On the face of it, business applications giant SAP has little need for major new SMB ventures. SMBs already make up about 35,000 of its roughly 47,000 global customers, and account for more than 30 percent of yearly software orders by dollar value.
Just the same, the company has been energetically introducing new programs and offers aimed at ramping up sales of its Business One solution for small companies and Business All-in-One product for larger SMBs. Those include a new "fast-start" program for Business All-in-One that seeks to reduce setup times by pre-packaging and configuring the system for use in specific industries.
SAP's mid-market ambitions suffered a setback in April, however, when the company announced plans to decelerate its rollout of Business ByDesign, an on-demand ERP suite for companies with between 100 and 500 employees. When the new solution first reached market in September 2007, SAP CEO Henning Kagermann boldly predicted that it would have 1,000 customers by the close of 2008 and generate $1 billion in revenue by 2010. Unexpectedly high operating costs and customer complaints about sluggish performance, however, have forced the company to delay those goals by 12 to 18 months.
Looking ahead, SAP plans to increase its channel coverage among smaller SMBs. Currently, most of the company's roughly 2,200 SMB partners concentrate on the higher end of the
midsize business space. "We are absolutely going to keep those partners, but we're also interested in partners that will go with us into the lower midmarket," says company spokesperson Astrid Polchen. Niefert, however, cautions SAP against growing its channel too far. His company, which has been partnering happily with SAP for more than three years, has enough competition without other SAP partners to worry about as well. "A large degree of the SAP channel's quality is based on its exclusivity," Niefert says. Diluting that exclusivity unduly could make partnering with SAP less rewarding.
Microsoft groups its top SMB accomplishments during the previous fiscal year into three categories:
Q New products, including Windows Server 2008 and SQL Server 2008
Q New "Software plus Services" offerings, including hosted e-mail, messaging and collaboration from Microsoft Online Services
Q New licensing and financing options, including the Open Value Subscription volume licensing plan
Partners give those efforts mixed grades. Many, for example, consider the commissions Microsoft says it will pay for Online Services deals too stingy. Others expect to more than make up the difference on configuration, customization and support. [See this month's cover story for more on reactions and implications of Microsoft's S+S strategy.-Ed.]
Microsoft's SMB-related plans for the current fiscal year are generating similarly varied responses. For example, the forthcoming release of Windows Small Business Server 2008 and Windows Essential Business Server 2008, Microsoft's back-office server suites for small businesses and midsize businesses respectively, has some partners energized. "It's going to be huge for us," predicts Michael Cocanower, president of itSynergy, a Phoenix, Ariz.-based SMB technology-consulting company and Gold Certified Partner.
However, Stuart Crawford, vice president of business development at Gold Certified Partner IT Matters Inc., a computer service and network solutions provider in Calgary, Alberta, Canada, has an outlook that's more cautious: "I don't initially see anything like a big bang happening," he says, noting that few of his cash-strapped customers are likely to upgrade their server software just because something new is available.
Crawford is upbeat on the general progress Microsoft has been recording in the SMB space lately. "They made great strides forward in the last fiscal year," he acknowledges.
Still, whether Microsoft can sustain that momentum is an open question. The company's interest in SMBs once set it apart from other IT industry goliaths. But as the updates above make clear, there are plenty of other top vendors crowding the SMB picture these days. If all of their activity over the past year is any indication, none of them plans on abandoning the field to Microsoft or anyone else any time soon.