For Resellers, Services Are Where It's At ... And The Future Is SMBs

It's no secret that traditional VARs have been getting squeezed for years by shrinking margins in the ultra-competitive hardware market. It seems every day there are VAR executives somewhere announcing plans to restructure their business and rededicate their employees to a new mission - one focused on services rather than product.

And why not? Even as we emerge from the rubble of a technology sector brutalized by the dot-com bomb and subsequent recession, the trend toward IT outsourcing has continued unabated, a lone bright spot on what was a somewhat barren economic landscape.

The Services Trend
In September of 2001, Hewlett-Packard reported that its outsourcing business was up 27% for the year. It expected further increases in the wake of the attacks on September 11 and the anticipated upturn in demand for off-site data warehousing, security services, and other needs. Likewise, IBM Global Services reported in June 2001 that it had a $97 billion service contract backlog in its services operation. IBM also stated there had been no layoffs due to any fall-off in outsourcing and it planned to add between 10,000 and 20,000 new employees in its services business this year alone.

Now I'm no economist, but I think I understand that where a $97 billion backlog exists - at one company alone - there also exists a market opportunity. I think I also know where that market opportunity is greatest. No, it's not in the large and well-served enterprise market. Been there, done that. It's the underserved "SMB" (small- to mid-sized business) market - you know, the small- to mid-sized organizations that just started becoming "network dependent" in the past several years.

The SMB Opportunity
According to the Small Business Administration, there are 25.5 million SMBs in the United States today. In a recent study by Enterprise Management Associates (EMA) of SMBs that currently use outsourced IT services, EMA found that 32% expect their spending on outsourced IT services to rise 10% or more over the next year. Another 42% indicated their spending on outsourced services to increase up to 10%. That represents a market opportunity.

So how do you go after this SMB market? What do SMBs need, and what can they afford? My company and many others feel you cannot approach the SMB end user customer the same way you approach a Fortune 1000 company. That may seem obvious, but the fact is until the last few years, most technology has been built around serving really big companies with really fancy products that are really complex and really expensive. Companies that serve this market have been successful in no small part because their customers have really big pockets and can afford what they are peddling.

Not so for SMBs. The SMB market for infrastructure management services is underserved in most respects - starving for technologies, tools, services, and support that was built with their unique needs in mind, not the big boys. Talking to SMBs, they told us what they wanted:

"The solution must deploy quickly, not over a period of many months."

"The solution must not be overly complex, requiring a significant dedicated staff."

"The solution must be cost-effective and structured for SMB budgets."

"The solution must be able to scale as the company grows."

"The solution must be business-centric, eliminating technical and statistical overload."

So there you have it. The opportunity is there for those willing to grab it, and many are. While IBM deals with its $97 billion services backlog, our company quietly signed up 75 reseller partners in seven months who want a piece of that pie. It's a big world out there, and the SMB market can and will accommodate a lot of new players in the years ahead. Will you be one of them?