Hoodwinked CEOs

By Steven Burke, CRN
January 20, 2006 3:00 PM ET

It’s amazing how clueless most of the major vendors are about the IT outsourcing revolution taking place in small and midsize businesses.

STEVEN BURKE
Can be reached at (781) 839-1221 or via e-mail at sburke@cmp.com.

The number of SMB accounts that have decided to outsource their entire IT operations to solution providers is climbing at a mind-boggling pace. Solution providers have basically become the utility companies for these accounts, locking them in with a wide range of security and storage services and a deep knowledge of their respective businesses. This is a huge paradigm shift that requires a radical rethinking of how vendors approach solution providers. This shift is every bit as dramatic as the move from the closed sourcing model that held sway in the early days of the PC industry to the open sourcing that dramatically altered the PC landscape, moving business from a relatively small number of national aggregators to more solutions- oriented local players.

So why aren’t vendors responding to the shift with more channel programs targeted at the solution providers that are locking in these SMB accounts with a predictable, monthly IT bill? One reason is the ignorance and poverty that pervades the SMB-focused efforts of the major vendors. It’s a poverty perpetuated by bloated, direct enterprise sales structures with incredibly poor ROI for the whopping sums they are spending trying to bring home multiyear, multibillion-dollar outsourcing agreements.

Compounding the problem are CEOs so far removed from the purchasing dynamics in SMB accounts that they are being hoodwinked by midlevel executives with a vested interest in grabbing as much of the sales and marketing budget as possible to win these enterprise outsourcing deals.

The high-priced CEOs running the major vendors ought to do some elementary math on the sales and margin growth in the SMB market. Then they ought to look at how much their companies are spending to capture that business compared with the small sales growth and incredible margin pressure in the enterprise market.

The message to the CEOs running these Orwellian sales operations: Get your head out of the enterprise sand and get with the SMB program. It’s your choice: sales and earnings growth or sales and earnings pressure.

Which CEOs do you think are being hoodwinked? Let me know at (781) 839-1221 or via e-mail at sburke@cmp.com.

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