IBM To Fire SMB Salvo

Attractive credit, tailored software for midsize businesses figure in strategy

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IBM is kicking off an aggressive campaign to win over midsize businesses with zero-interest financing in the fourth quarter as well as software tailored for that market, said sources close to the company.

Starting this week, IBM Global Financing will offer deferred payments and financing rates as low as 3.1 percent on software to qualified buyers for one-time-charge products such as WebSphere application server and DB2 database products, the company said.

The minimum transaction size to qualify is now $25,000. Thresholds for such purchases in the past had been $100,000 up to $1 million, an IBM spokesman said.

The deal, intended to jump-start product buys, is part of a fourth-quarter "triple-zero" program, offering product for zero down, zero payments and zero interest until next year. Financing for select hardware could be as low as 4.2 percent.

In addition, the company plans Express versions of its WebSphere application server and DB2 database tailored for its target SMB market, companies with 100 to 1,000 employees, sources said. (See Related Story.)

WebSphere Express Application Server is slated to ship this quarter; DB2 Express is expected to follow in the first quarter of next year. Neither product has been formally announced yet, but IBM has already unveiled WebSphere Portal Express, scheduled to ship this week.

The portal offering sells into companies for as little as $77 per seat for up to 2,000 users. Larger companies are encouraged to go with the regular WebSphere portal software. (See Related Story.))

The midmarket, the definition of which varies widely by vendor, is a hotly contested battleground, with IBM, SAP, PeopleSoft and others coming down from the high end and Microsoft entering the CRM space with its offering later this year.

IBM segments the market into three tiers, with the high end comprising companies with 4,000 to 5,000 employees, the middle tier of companies with 100 to 1,000 employees and the low end of companies with up to 100 employees. IBM is concentrating on the great middle ground where it estimates there are 400,000 companies worldwide. It will devote 20 percent of its $85 million advertising budget next year on that constituency, said Mark Ouellette, vice president of sales and marketing for IBM's software division.

IBM will have some presence in smaller companies with "opportunistic" sales of Lotus QuickPlace and Sametime products, but it will spend the bulk of its time and resources in going after those 400,000 larger companies, Ouellette noted.

Microsoft is focusing, at least for the time being, on the "S" part of SMB, company executives have said.

Its midmarket consists of companies with 100 to 500 employees, perhaps 50 to 250 PCs and IT budgets of $100,000 to $500,000 annually. The lower midmarket, on which Microsoft is also focused, is defined by the company as those organizations with 50 to 99 employees, 25 to 49 PCs and IT budgets of less than $5,000.

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