The temptation for many VARs is to set their sights on big customers. But the SMB market has huge opportunities for resellers, especially in security and e-commerce.Small and midsize businesses spend little on security initiatives, but resellers willing to educate their customers can make that percentage grow, according to a recent survey by Forrester Research.
The bad news is that the high spenders—about 28 percent of the total number of North American SMBs surveyed—spend between 2 percent and 4 percent of their budgets on IT security.
Another 28 percent spent less than 2 percent, according to the July 2005 report from Forrester, a market research firm based in Cambridge, Mass.
The survey also cited that about 12 percent of decision makers for the SMBs do not know how much their companies spent on security.
"Small businesses tend not to see the broader economics of security," said Michael Roy, president of Blue World Information Technology, a technology reseller based in Vancouver, British Columbia. "Managing security is largely an operations issue, and, if it is done right, customers can save a lot of money."
However, for resellers willing to take the time to court and educate SMB customers, there's a huge potential upside.
Click here to read about the uneasy partnership between technology and security.
"If you have the right business model, there is a huge opportunity out there with SMBs," said Kevin Hooper, director for worldwide SMB sales and business development at IBM in Somers, N.Y.
According to Forrester, SMBs will account for 48 percent of all IT spending in the United States, up from 44 percent in 2004.
Meanwhile, a recent report from the Yankee Group, a market research firm based in Boston, found that SMBs are similarly underspending on e-commerce projects.
"The slow adoption rate of e-commerce, online marketing tools and hosting services is leaving a key revenue channel underutilized by SMBs," said Sanjeev Aggarwal, Yankee Group senior analyst.
The economics of e-commerce for SMBs and fear of new forms of business are the main reasons, he said.
"One of the biggest challenges in getting small and midsize businesses on board with e-commerce is that it goes altogether deeper than putting up a Web site and developing the ability to sell," said Robert Green, president of Crossroads Business Solutions, a VAR based in Indianapolis, Ind.
Next Page: Serving the SMB market.
"You need a real plan, and you need to spend money on consulting," added Green. "Typically, SMBs don't have the attention span or the pocket book to see that kind of project through unless it is the core of their business."
Serving the SMB market
For SMBs, the fear of having to rip out and replace their existing technology in order to increase security tops the list.
"There's a lot of legacy equipment out there," said IBM's Hooper. "More than 70 percent of SMBs have a heterogeneous environment. They are not looking for someone to come in and say 'I can solve your problem but let's throw all this stuff out.'"
Instead, SMBs are looking for resellers who have the know-how to come in and integrate solutions into their existing environment.
"When you are in the eye of the storm and in your own environment and used to that, it can be hard to see how different components can be plugged in," said Roy.
"Our customers are surprised that they can easily layer in some IBM components and capitalize on the investment they've already made. Rather than rip and replace, it is modify and extend."
SMBs also want to know that their reseller has strong experience in their industry. "In the SMB space, they want to know you've done it thirty eight times before so they know it works," said Hooper.
Most SMB customers are more concerned with how technology will improve their day-to-day business. "These customers don't want to talk about the features and functions of technology, but rather the issues they have in running their business," said Hooper.
Once that relationship is built, resellers have the opportunity to educate customers about how technology can aid their day to day efforts. "Our role is largely awareness generation," said Roy. "Many companies are just too busy doing day-to-day business and don't get that by spending some energy on security they could free up twice the effort of IT to do something else."
Many small businesses waste people power doing manually things that could readily be automated.
Roy mentioned that automation provides a host of benefits including: reduced impact on the help desk, the ability to make changes in a timely manner and the ability to create a precise audit trail.
Next Page: Solutions for the small business.
Finally, SMBs are also looking for a partner with whom they can build a relationship. "They want someone who works a couple of miles down the road," said Hooper. "These partners understand the problems of local businesses and can be around to solve problems later on."
Solutions for the Small Business
In order to better serve the SMB segment, some large software companies are working to package their most popular enterprise apps to serve the needs of business users.
IBM, for example, has launched the Express portfolio of products specifically designed or modified for SMBs, including WebSphere Commerce and Portal products.
It will also be adding security products to the mix shortly. "We have chosen to patent 11 or 12 criteria and come out with the Express moniker to show that it was designed for the wants or needs of the SMB," said Hooper.
Resellers report that the initial offerings have been well received by customers.
"We see small customers writing their own code and inventing their own wheel," said Roy. "IBM products though, do scale down and their Express products have worked well in their Portal and WebSphere offerings. We expect to see similar things for their security products—where a very specific set of capabilities have been scaled down to a smaller organization for a much lower price."
An industry survey shows that SMBs lack minimal security. Read more here.
IBM has also launched its PartnerWorld Industry Networks, which provide detailed information on thirteen different vertical markets including automotive, banking, healthcare, insurance, media, retail, telecommunications and government.
"These efforts are 100 percent aimed at enabling channel partners on an industry-by-industry fashion by giving them the issues, the language and industry-specific tips and tricks," says Hooper.
In June, Islandia, N.Y.-based Computer Associates International announced its own small business initiative.
The company launched five Protection Suites aimed at the security, storage and data migration needs of SMBs.
The company is now offering anti-virus and anti-spyware technology, automated data backup and restore and system migration for PCs. The suites will range in price from $325 to $1,099, the company said.
Hailey Lynne McKeefry, a partner in professionalink.biz, is a freelance writer who specializes in technology and channel issues.
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