Waiting for IT spending to increase is like watching a tortoise race against a hare--you know the slow-moving turtle will eventually cross the finish line, but you'd sure like it to move a lot faster. Similarly, despite all the optimism around improved technology spending, the economic recovery is plodding along at a frustratingly unhurried pace, and many resellers have seen only modest improvements in business with their bigger clients.
Yet a number of solution providers are making their mark in an unsung sector of the market with technologies ranging from wireless security software to flat-panel monitors. With all the talk from big vendors such as IBM, Hewlett-Packard and Cisco on the treasures of the small and midsize business market, the "S" in SMB has been overshadowed. And that's exactly where several resellers say they're seeing the most demand for emerging technologies and upgrade purchases.
In fact, according to a recent survey by Yankee Group, IT spending on wireless voice and data technologies among small and midsize businesses will grow an astounding 93 percent this year. In addition, VARBusiness' own research survey shows that 24 percent of responding solution providers are getting the highest percentage of revenue around application development from very small companies (between 1 to 19 employees), which was the highest-rated end-user category in the survey.
Best of all, channel players mining small businesses have seen a chain reaction of sorts with IT investments, leading to a cascading series of opportunities where one technology opens the door for another. Take Paul Thompson, CEO of Portland, Ore.-based IPT Northwest, who says small businesses in his region are investing more aggressively in wireless networking. But, he says, many small businesses are still unaware that secure wireless solutions exist or are even necessary, which leads to another opportunity.
"They have no idea how many unsecured rogue access points exist on their networks," he says. So IPT Northwest has promoted wireless security solutions from such vendor partners as SonicWall. It's also building a managed-security services practice to complement its other services offerings, which include a Business Critical Support Plan for small-business IT support and remote-network monitoring.
"We have a seen a slight increase, mostly focusing on the "S' in the SMB market here in Oregon," Thompson says. "Wireless and security are still of interest, and we've probably done more with security due to our strong partnership with SonicWall."
After having put off IT purchases for the past three years, many experts say small businesses are leaping forward with new investments this year. The Meta Group issued a recent report that predicts the largest IT spending increase in 2004 will come from businesses with less than $100 million a year in sales, while forecasting that small-business technology spending will continue to grow next year at a rate of 11.4 percent. So, how can you get a piece of the acton? Here's an in-depth look at what technologies and products those customers are interested in.
Software And Security
Contrary to conventional wisdom, spam may be good for something after all. Resellers across the nation have pulled in revenue around the numerous security software tools aimed at reducing junk mail and potentially lethal e-mail.
"We've seen a lot more small-business customers recognize the important of security over the past year," says Dave Gilden, partner at Acuity Solutions, Tampa, Fla. "A lot of the vendors have made great strides in terms of making their security products more functional and affordable for SMBs."
Acuity has built an extensive security practice around such vendors as Check Point, Nokia, RSA and SurfControl, offering traditional firewall and VPN technologies as well as new e-mail content-filtering products. Thompson says antispam security solutions have also become increasingly popular among his small-business clients; IPT Northwest teamed with security vendor MX Logic and now offers its antispam network-protection tool, dubbed E-mail Defense. In another example of one solution leading to another, Thompson also plans to launch a mobile, secure e-mail solution.
Vendors, themselves, are also making aggressive pushes in the small-business market. At Tech Data's recent conference for TechSelect, its exclusive organization of more than 300 SMB-focused resellers, McAfee vice president Mike Rogers emphasized the small-business opportunity for such security solutions as antivirus software. For example, he said more than 40 percent of small businesses don't have antivirus protection, and an even higher percentage are without some sort of VPN.
Along with security, channel companies say their small-business customers are upgrading their software independently of the related systems and servers. And one of the biggest benefactors is none other than Microsoft. Robert Whiton, managing director of Net Solutions, a certified Microsoft partner specializing in network and systems integration, says spending has surprisingly increased on network software upgrades with smaller customers. In addition, Whiton's Tustin, Calif.-based company also has a strong practice that provides accounting and financial solutions based on Microsoft Great Plains' Small Business Manager for clients with less than 100 employees.
"The refresh of some of the PC and server software is moving along well now," Whiton says. "We've seen good growth in the small-business sector for software as a lot of customers are moving up from Windows NT to Windows Server 2003."
Microsoft also is a core business for IPT Northwest, which specializes in Windows networking software and server migrations. Thompson says MS CRM and SharePoint are also promising, and that his company is actively looking for additional services, solutions and new vendor partners that tie in with Microsoft's network software--which, of course, plays into IPT Northwest's security business.
Both Windows 2003 Server and Microsoft's .Net programming language will likely play a larger role in small-business practices as the year progresses, too. VARBusiness research shows that 61 percent of responding solution providers say they do most of their software integration and development around either .Net or Windows Server 2003 or both.
Hardware And Services
Small businesses may not be flocking in droves to buy the latest Windows XP-powered PC models, but resellers and vendors alike say small businesses are making IT investments around the desktop. Rey Roque, vice president of marketing at Samsung America, says his company is putting more emphasis on its printers and monitors with its channel partners.
"Our value proposition to them is upgrading their peripherals, such as printers and displays," Roque says.
Flat-panel displays have been particularly popular, such as the multifunction LCD monitors, Roque says. Many solution providers agree. Jim Crews, president of Swifteagle Enterprises in Harrisburg, Pa., says flat-panel monitors are in high demand, even for older PCs used for lower-end administrative functions.
"The LCD market is going wild," he says. "We'll spend $600 for a 17-inch LCD display as opposed to $120 for a 17-inch CRT model."
Roque says Samsung resellers have also seen an increasing demand in the small-business segment for color laser printers (see "Fall's Multifunction Printer Crop," page 59). "Usually, that market sticks with the lower-end inkjet printers, but we've seen our color laser printers really take off this year," he says.
Roque adds that Samsung is helping its channel partners package such printers as part of a full document-management solution for small businesses.
"We're trying to show our partners how to turn that one-time hardware sale into more of an annuity stream by offering a complete printing and document-management solution with regular support and services," Roque says.
Resellers like Net Solutions also are seeing a greater return on managed services around small-business systems and networks. Whiton says the value proposition of managed services for small businesses that have little or no dedicated IT staff is compelling.
"Our managed-services business has really resonated with smaller customers, particularly our networking management outsourcing," Whiton says. "We had a CFO of one of our small-business customers tell us during a client focus group that his company's productivity increased almost immediately."
So while hardware sales may not be plentiful, some resellers are making the most of the situation with strong service offerings. That said, some SMB-focused solution providers say it won't be long before those same customers begin snatching up new PCs and systems as well. So, perhaps, the tortoise will arrive sooner than we thought.
1. Don't be afraid to pitch emerging technologies just because the business has fewer than 100 employees; a number of resellers have had success with cutting-edge wireless and VoIP products.
2. Small Businesses usually have little to no IT staff. Thus, technical support and managed services contracts are a good bet for smaller clients and can give solution providers a lucrative annuity stream.
3. Just because the PC upgrade cycle is slow doesn't mean small businesses won't buy peripherals. Flat-panel LCD monitors are hot, and printing and document-management systems aren't doing badly, either.
4. Stress the importance of security; most small business customers don't have adequate firewall, antivirus or VPN protection for their networks or wireless systems.
5. Application development can be a hidden gem for resellers; small-business customers are investing in software, primarily around Microsoft.