Make the right bet

Few small and medium businesses invest in new technology unless they have to or can see a tangible benefit. Hobbled by small or non-existent IT staffs, they don’t have the expertise and buying patterns of larger firms.

Yet vendors continue hyping the opportunities and either downsizing their enterprise products to cater to SMBs or creating new products.

This is where a channel partner or advisor can offer some real value: helping these customers spend their money wisely on technology that they’ll actually benefit from.

How lucrative is this market for VARs and where should they focus their efforts?

Most SMBs tend to buy based on business pain, said Michael Hyjek, research director of customer segments with IDC Canada in Toronto.

In a survey of small businesses (up to 99 employees) conducted last year, 26 per cent said their business priority is to exploit their markets more efficiently, 23 per cent want to improve customer service, 13 per cent want to introduce new and improved products and services faster, while 12 per cent are concerned with increasing productivity in their organization.

From an IT investment standpoint, top priorities for small businesses are desktop PCs (16 per cent), inventory and materials management (14 per cent) and Internet infrastructure (12 per cent).

The mid-size market (from 100-499 employees) has somewhat different business priorities: 25 per cent said improving productivity within their organization is their number-one priority, while 24 per cent chose improving infrastructure, 10 per cent want to improve customer service and 10 per cent are aiming to accelerate the introduction of new and improved products.

IDC Canada also asked mid-size companies which technologies they’re considering, piloting or acquiring in the next 18 months.

“The technologies that jumped out at us were wireless networking at 42 per cent, mobile computing devices at 41 per cent, IP telephony at 37 per cent and CRM at 35 per cent,” he said. “CRM and mobility definitely have some interest out there in the medium market.”

They were also asked which technologies they associate with helping improve operational efficiency. “Mobile computing devices, CRM and business analytics . . . are three areas [where] mid-market firms are understanding these solutions can actually have an impact on their operational efficiency,” he said.

VARs should realize that the challenge for businesses today isn’t putting data into systems, it’s getting it out, said Francois Pare, an associate with Groupe Conseil LVMB, a reseller based in Laval, Que. businesses today isn’t putting data into systems, it’s getting it out, said Francois Pare, an associate with Groupe Conseil LVMB, a reseller based in Laval, Que.

“Everybody’s using Excel to manage that information in some shape or form,” he said. Now customers are moving to the next level, which is why ERP (enterprise resource planning) and CRM (customer relationship management) are hot topics in the SMB space.

The challenge is to show customers how to use the features that are available to them, like key performance indicators and dashboards. “It’s available, the tools are there,” he said. “Our challenge as a partner is to deploy those solutions, to put together a team that has a robust skill set.”

Most small companies have the same need to produce reports as their larger firms — and in some cases, may require multi-location, multi-currency tools.

“If they’re smaller in size, they need those tools even more,” he said. For example, a Canadian mining company made up of five geologists looking for gold could be listed in New York and digging in Africa.

Understand processes
As a partner, the key is to fit ERP software around the customer’s needs, so they don’t have to change their processes to fit the software, he said, whether they’re a charitable organization, a pet food retailer or a mining company.

“We [used to be] an installer,” said Pare. “Today that’s less than five per cent of our work. We understand their business process, what information they need out of the system.”

When it comes to software spending, however, security tops the list of priorities, according to Forrester Research.

Viruses, worms, spyware and spam are SMBs’ top IT security concerns, it found, with Symantec the most popular vendor for desktop security software.

Security is followed by Web applications, desktop productivity applications and infrastructure software.

On the hardware side, 75 per cent of SMBs will increase spending on PCs and workstations, while 71 per cent will increase spending on networking equipment.

“It obviously varies a bit by company size,” said Michael Speyer, senior analyst with Forrester Research in Cambridge, Mass. “For larger SMBs, 45 per cent will increase spending on storage.”

SMB spending in North America is going to be robust this year, he added.

“On average [they have] IT budget increases overall of about 7.2 per cent. If you contrast that to large enterprise budgets, which are increasing at 3.2 per cent, it’s a much healthier outlook in the overall SMB market.” Some vertical sectors are going to spend more than others, he said, such as manufacturing, finance, insurance and telecom. This could be a result of line-of-business application upgrades or hardware infrastructure replacements.

Increasingly, SMBs are turning to managed services to provide capabilities they don’t have in-house. Innovation Networks, for example, is a Vancouver-based managed services provider that sees a need for managed services such as remote network and security monitoring. Eighty per cent of the province is made up of SMBs and it caters mainly to that audience.

“We started as a break-and-fix shop, just fixing our customers’ computers,” said Dan Stratton, president of Innovation Networks Inc. “Now we provide managed services.”

It offers everything from emergency response to online backup services to disaster recovery to anti-virus systems.

“People want to know their servers are secure,” he said. “With managed services they get that — we know if there’s an account that’s been locked out.”

UpTime, its network management service, includes network monitoring, detailed site-level inventory, security monitoring, performance reporting and patch management. This year it’s also offering remote desktop capabilities.

“We’re seeing quite a bit of demand for that,” he said.

“Quite a few customers have inquired about a solution like that — more the smaller offices that want the remote capabilities that some of the larger companies [have].”

This would give them “desktop anywhere” capabilities, without having to pay the big bucks.

Remote access popular
The biggest demand right now is for flawless remote access to data, he said, a demand that has increased quite dramatically over the past year.

“When we’re quoting system upgrades, it is always part of it now,” he said. “Everybody seems to have two to three people who are working from home.”

VARs not providing managed services are missing opportunities, he added.

Offering “selective” outsourcing is another area that’s gaining popularity among SMB customers.

“They’re looking at how much it would cost them to do it internally versus how much it would cost for somebody else to do that for them,” said George Kerns, president and CEO of Fusepoint in Mississauga, Ont.

“That carries weight, but not as much weight as access to skill set.”

SMBs have the same challenges that enterprises do, just on a smaller scale.

“The driver is [that] there’s certain things they feel comfortable managing themselves, and there are certain things that are critical that they need to manage at a high service level,” he said, “and they’re really concerned about having continuous access to that skill set.”

Three areas where Fusepoint is focusing its selective outsourcing efforts are operating system lifecycle management (including Windows, Unix and Linux), security and data-base management.

For SMBs, applying patches can be a time-consuming and costly process.

“When these patches come out, they can’t wait days, weeks, months to have these things applied because they’ve left the barn door open if they do that,” he said. “So we’re doing that as quickly as humanly possible.”

When a vulnerability is identified in an operating system and the software vendor provides a patch for it, Fusepoint will test the patch and make sure it doesn’t break anything else, then apply it across the board.

“In the enterprise space we tend to bang heads with the IBMs of the world [but] they have much higher cost structures,” he said.

Lost in shuffle
SMBs can sometimes get lost in the shuffle of a large vendor, he added, so they’re turning to smaller, more specialized service providers.

Two or three years ago Fusepoint was half the size it is today. Now it has offices in Vancouver, Montreal and Quebec City.

“I think we’re now on the radar screens of the SMBs who say, ‘I can’t afford to go to an IBM but I’d sure like to have IBM-like services.’”

Over the next few years he expects IT managers of small and mid-size firms who have previously rejected outsourcing to turn to selective outsourcing because of limited funds or skill sets.

SMBs may believe the old saying that ‘if it ain’t broke don’t fix it.’ True, their systems may not be broke, but VARs that can show how to make them work better and demonstrate a tangible return on investment should be able to convince customers they’re worth fixing.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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