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| The big business of small business |
September 7, 2007 |
Selling to SMBs is all the rage right now. Large tech vendors can’t utter five sentences without “SMB” cropping up, and many of them are changing to address the market
By Gail Balfour
 Waiting more than 90 minutes on hold before connecting with a live support person was the last straw for Trevor Anderson. He used the time on the phone to reflect on how unhappy he was with his current technology provider—and before the call was complete, he had decided to make a switch.
“I am not asking for VIP treatment, but (as a business customer) I don’t want to be taken for granted either,” said Anderson, IT manager for network systems and operation at Winnipeg-based law firm Thompson Dorfman Sweatman (TDS) LLP.
Nine years ago the whole organization was running primarily on one Dell server. The single-server architecture and its lack of redundancy concerned Anderson, and the decision was made a few years ago to upgrade. This was a good opportunity to see what other vendors had to offer, and Anderson liked what he saw from HP.
“We were 100 per cent Dell in the data centre and the desktop. Now we’re 100 per cent HP.”
Anderson’s vendor switch was prompted by a problem common to many small- and medium-sized businesses: the products and support offered by technology vendors are geared to larger organizations—if you’re smaller, you don’t fit the model.
Small, lucrative, complex
About 97 per cent of all firms in Canada are in the small- and medium-sized business (SMB) group. Enterprise computing companies such as IBM, Dell, HP and Cisco have tried for years to focus on this market, with varying degrees of success. Not long ago, even the vendor pitches targeting SMBs amounted to little more than a product tweak and a revamped marketing message, but this is slowly changing, according to Carmi Levy, senior vice-president of strategic consulting with Toronto-based AR Communications.
“Especially in Canada, you cannot underestimate the importance of the small- and medium-sized enterprise. Vendors are starting to realize that there’s real money in providing proper support to SMBs. This is a market that no vendor, at this point in time, can afford to walk away from.”
Internet-enabled technologies have made it easier for smaller companies to compete on a level playing field with larger competitors, Levy said, thereby creating a growing market for tech. However, with this profit potential comes the need to service and support all these companies.
Where a large vendor could before have sold to 10 very large customers, it now has to sell to 1,000 much smaller ones.
Chris Ellsay, president and CEO of Ottawa-based Workshift.com, a value added reseller (VAR) and managed service provider, said that creates real problems for vendors. “The recognition that it’s an absolutely massive market has sunk in, but it’s an exceedingly difficult market to hit. It’s so hugely fragmented.” SMB customers demand 24/7 support, but on a much more intimate level than enterprise clients. Often they don’t have a dedicated IT person or staff, and are sometimes not very tech savvy. Plus they are also extremely price sensitive.
All of which means sellers can’t simply downsize a larger product offering and expect SMBs to buy it, or even understand it, Levy said. “That doesn’t work any better than trying to take a large car and reproducing it at three-quarters scale. You end up with a really bad copy of a large car,” he said.
“Throwing Microsoft Office on a PC doesn’t make it a business system. And the average SMB customer is not going to pay $50,000 for a server,” Ellsay added.
What vendors need to do is build a package of products and services from the ground up for that particular market, and realize the typical SMB customer is driven by “consumer thinking” and emotional impact, Levy said, and not by the harder-nosed enterprise attitude.
“Similar to driving out of your way to go a favourite coffee shop, people will go that extra mile to have a rich consumer experience.” And unlike in a large organization, changing brands is less political and a lot easier to do in an SMB space, said Jayanth Angl, research analyst with Info-Tech Research Group in London, Ont. “If a company is going to give them a better solution, [SMBs] are in a much better position to make that shift, whereas in a very large enterprise that is just not as likely.”
One negative incident, as Anderson’s experience illustrates, is often enough to push SMBs to change vendors. They base the decision more on emotion, and their smaller size allows them to migrate to a new product without much pain or downtime.
So, what do they really want?
Fortunately, vendors are starting to listen to SMBs. For example, Dell has just announced a new product line for this space called Vostro (Latin for “yours”). After surveying many small business customers, Dell realized most of its products catered to the consumer market or the enterprise customer.
“There was nothing in between,” said Jenny Tam, a product manager with Toronto-based Dell Canada. The Vostro products will differ from consumer products in many ways: for one, they will not have any trialware preinstalled, because business customers don’t like that. “Trialware was identified as the most frustrating thing in a recent Dell SMB survey,” said CEO Michael Dell in announcing Vostro. “And [SMB customers] kept saying the same thing: ‘Make technology easier.’”
Dell is also offering a 30-day return policy, a new online portal and a dedicated 24-hour SMB support line.
According to Steve Kelley, a product manager with WebSense Canada in Toronto, the key to customer service in the SMB space is to offer a lot of options. Have phone support readily available but also offer a comprehensive portal so customers can research answers themselves.
Kelley sees a lot of potential in the SMB market for his company, an online security service provider. This is because many small companies do not believe they are at risk. “Within the SMB market, there is an awful lot of…need, a lot of false sense of security with firewalls and antivirus. Those technologies are a mile wide, but only an inch deep.”
Shift into business mode
Vendors targetting SMBs also must be prepared to talk business, not tech, Levy said, because now they are sitting down with owners, marketing execs and managers, not IT staff.
“Now you are speaking with people who are more closely tied to the life and death of their business, who don’t necessarily speak the language of technology and don’t have a lot of time to sit on a help desk line,” he said.
“So it changes your entire sales strategy, it changes your entire support strategy; it changes everything.”
Ellsay underlined the importance of “feet-on-the-street people” like VARs, who are well trained on the vendors’ products but who also get to know the business of their customers intimately, and provide the necessary bridge between the vendor and the customer.
Providing this level of support as a VAR can be challenging though, because small businesses are so diverse. How can you learn the ins and outs of so many businesses? Ellsay’s take is that hardware and software should be standardized as much as possible. About 90 per cent of technology can be standardized, he said. “It’s like a fleet of cars: you want the technician to be able to jump into any of them and know where the starter is. We don’t have to document it over and over again, it’s already documented. “When people say they need a completely custom system, what they are really saying is that they have one little application that is 100 per cent of their life. We have to know those things and document them inside and out. We have to keep that 10 per cent ‘special sauce’ that’s important to the customer.”
According to Michael McAvoy, director of commercial marketing for SMB at HP Canada, it’s crucial that VARs act as “local experts” of their technology products.
“It means knowing when our customers will need a large amount of hand-holding, to help them understand where their pain points might be,” he said. “It’s an area we have to be tremendously respectful in. A large number of small businesses are still very intimidated by technology. And the last thing you want to do is spook them.”
HP also offers an SMB portal where users can learn how technology can grow their business. It features tools like templates for letterhead and business cards, and a live chat feature for support issues.
“It’s not about prices and products shoved in your face. It’s about learning opportunities,” McAvoy said.
But for Anderson, portals and customized tech packages only get him part of the way there. As important is his personal comfort level. “I can talk to these (new) guys, we meet down the street for lunch,” he said. “That’s something I never had with other vendors.”
SIDEBAR
Definition
VAR: a value-added reseller is a business that improves and customizes hardware and software for an end purchaser.
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