Necessary Competition

With a lack of funds always a problem, many small businesses have turned to online service sites to take advantage of free services. Some resellers, however, find that potential loss of business to these portal sites is not threatening but necessary to the evolution of the market.

Online sites run by companies such as @Backup.com Inc., San Diego; Stamps.com Inc., Santa Monica, Calif.; and New York-based Office.com Inc., offer small businesses a range of services from portal sites to online postage. Competition created by the Internet will refresh the industry and its players, said resellers.

"The Internet is just spreading the little bit of business out there thinner," said Jody Palacios, sales manager for VAR Computer Systems International, Chesapeake, Va. "It will force everybody to be more competitive, which is good because there are so many companies out there with the same set of services. To find their niche, businesses have to become creative."

Although business fundamentals will not change because of the Internet, competition will come from other areas, said Matt Kramer, executive vice president of VAR Mobile Planet Inc., Chatsworth, Calif.

"Business channels are dramatically changed because of the Internet," Kramer said. "There are a whole bunch of businesses that are going to be turned around because of the Internet."

Cahners In-Stat Group, Scottsdale, Ariz., published an evaluation of online business centers and ranked the sites of Office.com; SmartOnline.com Inc., Research Triangle Park, N.C.; and DigitalWork.com Inc., Chicago, as the top three business service sites.

The low-cost, or even free, services associated with online sites attract small businesses that have limited resources or lack of in-house options. Online service sites meet a need that VARs often cannot fulfill, said Rob Enderle, vice president of Giga Information Group, Cambridge, Mass., a research firm.

"Generally, you get what you pay for," Enderle said. "At some point the automated Internet could be as intelligent as one-on-one service, but we are not at that tech level yet."

Online service sites are a resource for businesses that want to help themselves, Enderle said. "For the most part, the sites are easy to use but some basic knowledge is required," he said.

Service sites are geared more toward the "tinkerers" who enjoy the learning process, said Eric Feldman, business technology consultant for Computerland of Plainview, N.Y.

"There will always be a need for VARs to provide service because there will always be people who do not like to tinker," he said.

Sites such as @Backup.com and Stamps.com said partnerships with resellers are being established to enhance service opportunities.

Resellers are an integral component of the company's strategy, said Jim Till, vice president of marketing for @Backup.com.

"We recognize that resellers add a tremendous opportunity to magnify our service, [and] there is no way that we can do that all by ourself," Till said. "We can get resellers in the business of selling backup service while we do all the work in the background."

@Backup.com, which also has licensing agreements with Round Rock, Texas-based Dell Computer Corp. and Toshiba Corp., Tokyo, established its Authorized Partnership Program, which allows VARs to offer the backup solution as a value-added service. "Our services can also be bundled with other plans," Till said.

A benefit of using Stamps.com, which offers small businesses alternatives to traditional postage options, is the flexibility it offers, a company spokesperson said.

For more news on the small-business market: www.crn.com/smallbiz