Vendors vie for SMB market

Long an underserved technology market in the past, SMBs (small and midsize businesses) are now seen as important revenue streams for major IT vendors. With the SMB market worth some $300 billion and growing at a significantly faster pace than Fortune 1000s, there are significant revenues to be garnered. In response the big vendors, including IBM, Microsoft, and Sun Microsystems, are retooling enterprise hardware and software offerings to meet SMB needs — delivering low-cost platforms with

simple, automated features that bring ease of use and low maintenance requirements.

IBM Makes an Express Play

“For the last 10 years we have been internally componentizing our middleware,” says Chris Wicher, vice president of development at IBM’s software group responsible for the design, direction, and implementation of the company’s Express products, an SMB line unveiled this summer. “If you dissect the code in WebSphere, you can break apart the thing into component subparts.”

It is this dissection of enterprise-class technologies that has allowed IBM to create Express. The line includes includes combinations of server and desktop hardware; an SMB version of Content Manager; and SMB versions of server apps including WebSphere, DB2, Tivoli, and Notes; along with special financing options. Hardware in the line includes ThinkPad notebooks, NetVista desktops, and eServer xSeries servers. The WebSphere Commerce Express bundle enables the easy creation and management of e-commerce sites. IBM says a simple installation process permits users to build an online store in less than an hour.

The Express line is directly targeted at professionals likely to be found at SMBs, such as systems administrators, Wicher says. “We don’t want midmarket users having to turn 250 knobs on a Web apps server, whereas an enterprise needs to do that to more properly optimize for a much more complex environment.”

Microsoft Buys In

Not to be left behind, Microsoft has set its own SMB agenda. During the past two years, the company has purchased Great Plains Software and Navision, both specialists in developing SMB software. Since the respective acquisitions, Microsoft has completed the integration of both companies’ development teams into its core SMB development group.

“What we are trying to do is build an architecture that allows applications to be customized and to work together,” says Nigel Burton, general manager of Microsoft’s small and mid market solutions and partners group. “The first product that was the result of these integrated teams is Microsoft CRM, which has all the qualities we expect to deliver for all business solutions in the SMB space.”

Some of those qualities include a simpler installation and configuration procedure than other Microsoft products geared toward corporate users with much larger IT staffs. The company has taken pains to integrate the SMB product with desktop applications such as Outlook, Word, and Excel so that data can be more easily shared.

Microsoft has also integrated the product with its complete stable of existing Business Solutions applications, all of which are sold exclusively to SMBs, so that midmarket customers have a reduced need for IT intervention because they can more easily perform data mapping for contacts, accounts, orders, and invoices. This way SMBs have a centralized view of all customer and product information.

Microsoft’s SMB initiative may be held back by its inability to articulate .Net’s benefits to such users, says Mika Krammer, research vice president at Gartner. “They created this mystique around [.Net] that people did not understand. Is it a product? A service? A concept?”

HP and Sun Compete

Even Hewlett-Packard and Sun have recognized the importance of pushing an SMB strategy. This year, each announced an initiative to package its latest low-cost hardware offerings with integration services and partner help.

HP is leveraging its hardware lineup, starting with ProLiant servers, to offer suites of services for SMBs. “We are strong with ProLiant servers and with imaging and printing, and we use these products to leverage some of our other products and solutions like PCs and handhelds,” says Chris Ogburn, HP’s SMB marketing director.

Earlier this year, HP introduced the tc2120 server, a small-scale machine designed to run a limited number of PCs and link them in a network. The tc2120 server is a bridge that allows SMBs to begin projects and later scale to a ProLiant, HP officials say.

HP is continuing a partnership with Denver-based J.D. Edwards — recently purchased by PeopleSoft — to integrate business processes such as CRM and SCM (supply-chain management). The suite is offered with HP ProLiant DL580 and DL380 servers, along with Microsoft SQL Server software. It will be available later in the year with IBM DB2 UDB (Universal Database).

In June, HP announced a partnership with NetLedger to market HP hardware with NetLedger business management applications, enabling SMBs to manage their businesses using HP products, including HP Compaq Business Notebook nx7000 and Compaq Tablet PC.

Still, these alliances are not as extensive as IBM’s and Microsoft’s, says one analyst. “HP is strong in the core SMB business of servers, PCs, printers, and other hardware. But in solutions, they are not as far along as Microsoft and IBM,” says Laurie McCabe, vice president and practice director for small- and medium-sized businesses at Boston-based Summit Strategies. “But stay tuned — their strategy is in progress.

“[Sun] is focused on these specific markets and selected, established ISVs and channel partners to help them,” McCabe says. “They’ve targeted niches in these markets, such as financial services within banking, and in these niches, they’ve done well.”

For example, Sun has touted wins in the banking industry, announcing in March that, along with software provider and partner Kirchman, it sold software and servers to 78 midsize banks in 90 days. A key hardware piece was Sun’s midrange V880 server, which beat out IBM mainframes in several cases and allowed these banks to port their system to a Sun Solaris platform.

Sun’s iForce Community program works with channel partners and ISVs that build systems using Sun’s hardware and software. “We feel there is a real sweet spot in the sub-$100,000 server market,” says Bill Cate, marketing director of Sun’s U.S. reseller channels. This space includes Sun’s low-end, Intel-based, two-way V60x server, which is capable of running standard Linux distributions, Red Hat Enterprise Linux, or the Solaris OS; and V65x, a datacenter-class server.

Open Source an Issue?

Increasingly, SMBs are demanding that out-of-the-box solutions be based around Linux, for a number of reasons. What continues to pique the interest of many SMBs about Linux and other open source solutions is not just the cost but the increasing amount of local expertise these companies can now rely on. Although it will be quite some time before small companies begin installing complete stacks of infrastructure and platform software to run their businesses, many are beginning to incorporate pieces of open source software.

“The major criteria [for SMBs] is the availability of local skills. Linux is a good example of this, where it teetered along [and] smaller companies got a critical mass of local skills, and then it took off. When they can call someone from around the corner at 2 o’clock in the morning to come fix it, it will take off fast,” says Elaine Lennox, director of marketing at IBM’s global small and medium business group.

“SMBs are very conservative adopters of technology, and right now open source is not a standard for them. We also  just witnessed a huge replacement cycle on the client side with many moving to Windows 2000 or XP, and on the server side to Windows Server 2000. SMBs don’t typically replace operating systems just because a new one comes on the market,” Gartner’s Krammer says.