St. Louis, Mo. — Think of IBM and images of large enterprise, big business implementations usually come to mind. But if president and CEO Sam Palmisano has his way, in a few years the SMB space will replace financial services as the biggest part of Big Blue’s business.
Speaking at IBM’s annual PartnerWorld event here Tuesday, Palmisano said the SMB space, even in established markets, is the fastest growing market segment for IBM. It’s also an area where IBM is very reliant on the channel: Just over 50 per cent of IBM’s SMB business is driven through partners in some capacity, a figure that’s only expected to rise as the vendor moves to make its services offerings more channel-friendly.
“If this keeps growing the way it’s been growing, I’ll predict SMB will be our largest segment in a few years. We’ll be an SMB company,” said Palmisano. “It won’t be financial services (any longer).”
For the most part, SMBs want the same thing as large enterprise clients, said Steve Solazzo, general manager of IBM’s global midmarket business: value and innovation. They’re also facing the same challenges as their larger cousins. The difference, said Solazzo, is SMBs lack the resources to address those challenges.
“I always say that SMB clients, with respect to large enterprise clients, are the same, but they’re different,” joked Solazzo.
With respect to IBM’s acquisition strategy, Palmisano emphasized he is not attempting to consolidate the market. Rather, he said it has implemented a strategy of globalization and shifted headcount to “lower IBM’s centre of gravity” and bring employees closer to partners and clients. It also has divested itself unimportant areas of business while investing in areas that will fuel future growth.
“We’re made 50 or 60 acquisitions and we might make 50 or 60 more, but they’re in places where we see the future, not the past,” said Palmisano. “They’re not consolidation plays. We’re adding strategic capabilities for you and I to be competitive in the marketplace.”
That future, according to Palmisano, will involve a new computing model that will allow people to apply technology in a different, much deeper way than they could in past.
“The PC/client-server model has run its course,” said Palmisano. “It doesn’t address the needs of clients today as they look at embedding technology in the way they do business.”
To address those challenges IBM is investing in SOA, in managed business process services, in virtualization and in the convergence of software and services. There’s a gap, said Palmisano, between the value companies place on innovation and their level of investment in innovation-enabling technologies. And in that gap, he said, lies opportunity for IBM and its partners.
When IBM first talked about making a play for the SMB space the idea was met with skepticism by Dynax Solutions said Kevin Jinks, senior vice-president with the New York-based IBM partner.
“We thought yeah, right, IBM is going to go after the SMB market,” said Jinks. “Too big, too expensive, and they don’t know the customer market like we do.”
However, transforming itself from a traditional hardware integrator to a software and services-based solutions provider, Jinks said Dynax has found a great deal of success tackling the SMB market with IBM offerings.
“SMBs do want all these good services, they just don’t want to pay that high rate,” said Jinks, adding IBM wouldn’t have had success in the SMB market without the market expertise of solution providers like Dynax.
“It was never a question could IBM do the job, it was really about whether it was too expensive and difficult to implement,” said Ray Boggs, vice-president of SMB research with analyst firm IDC.
To give a sense of the difference between IBM’s enterprise and Express offerings, IDC’s Boggs used a tailoring metaphor.
Enterprise customers pay to end up with a “bespoke perfectly fitting suit” in terms of the products they purchase from IBM, while SMBs effectively pull a ready-made Express suit off the rack. However, as IBM provides partners with more resources, like extending the Express Advantage program, it allows them to “adjust the sleeves and get the cuffs right” on the SMBs’ suits, he said.
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