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Sorensen said he's determined to crack the midmarket because of the higher returns compared to small businesses. He points out that because of the greater complexity of the business and the resulting demands for more sophisticated IT infrastructure, Heartland can engage more deeply with midmarket customers and thus realize greater returns. And he notes that rising fuel costs even play into his decision.
"With the cost of people and cost of fuel, moving people from location to location is a losing proposition," he said.
Vendors, too, are putting more money behind solution providers willing to pick up the midmarket mantel.
Hewlett-Packard this year vowed to up its midmarket channel funding.
"Channel investments are key," said Adrian Jones, HP's vice president and general manager, Americas Solution Partner Organization. "Last year, we paid over $350 million in PartnerOne rebates, and we plan to do more in 2008."
Jones noted that HP's SPO increased its staff by 10 percent last year to better support partners.
"The SMB market in 2008 is a $72 billion opportunity and we need [partners'] help to reach all of the buying points in the market," he said.
Jones added that storage would be a top priority for HP in 2008, with a dramatic increase in partner incentives and new product rollouts as key parts of the plan. "Storage is a top priority for us and we want to grow that to be No. 1 in the market," he said. "Our investments in storage this year will be unprecedented." He noted that HP increased its solution-provider incentives for storage sales by 38 percent in 2007 and will double that in 2008.
Don Richie, CEO of Sequel Data Systems Inc., an exclusive HP partner in Austin, Texas, said his HP storage business was down last year but that the additional investments in the business should help. "HP's new EVA 4400 is a great product for the midmarket and even the low end," he said.
Armonk, N.Y.-based IBM Corp., too, is making a $100 million investment in the midmarket this year, and channel partners stand to gain much of the benefit.
Rich Michos, vice president of worldwide business partner strategy for IBM, said this year the vendor would be investing $100 million in marketing, all in an effort to drive leads in the midmarket. "With some assistance from IBM.com, we're going to satisfy our midmarket objective almost uniquely through business partners," Michos said. "That's a profound shift."
Michos said solution providers that think IBM is too big or too difficult to work with should give the vendor a second look.
"If you're not working with us, now's the best time," Michos said.
Solution providers said they have recently seen IBM increasing its channel focus.
"In the past year or so, I've seen IBM really stepping up to engage partners," said Ryan Yu, president of Daly Computers Inc., an IBM solution provider in Clarksburg, Md.
Michos said several efforts are under way to help partners sell IBM into the midmarket. For example, the vendor's new Lead Pass Decision Engine is a lead development tool that aims to provide better leads to a larger number of IBM partners, he said.
Michos also pointed to IBM's BladeCenter S, where the "S" stands for SMB.
Heartland Technology's Sorensen added that it's important for solution providers to increase their midmarket presence if they hope to incorporate such hot technologies.
"You can't sell blades into a 10-user environment," he said.
—Jennifer Hagendorf Follett contributed to this report.
Next: The Midmarket List
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