IBM’s
Aggressive Plans For The SMB Market
No
one disputes that in the land of the Very Large Customer, IBM is
king. IBM built its business on knowing how to build products
and solutions for worldwide
enterprises. In recent years, IBM has also seen real success
at the upper end of the mid-market, too. The “S” part of
the SMB market has proven more illusive. That’s for three
reasons:
-
Products
built for enterprises can be downsized for mid-market customers;
note the success of IBM’s Express line of middleware, now
totaling 60 products. It’s much harder to downsize it
further to fit the needs, hardware, skill sets, and price points
of the small business market.
-
Small
businesses require an entirely different marketing channel than
the direct sales force that IBM uses to so successfully market
to its big customers. Typically, this is done via some
combination of partner resellers and VAR’s plus web sites.
It can be done; it’s just a whole different culture that must
be painstakingly learned.
-
For
middleware vendors like IBM, part of your business value to
customers is the large ecosystem of business partners you
attract, especially ISVs who write software to your platforms
and middleware. The ISVs for the small business market
are, needless to say, a different crew, with relatively few
overlaps, from the enterprise software vendors.
IBM
is working on all of these things in an effort to more deeply
penetrate the mid-market and to eventually have a position in at
least some part of the small business market.
Here’s
an update.
IBM
is still mainly focused on the mid-Market with its $207 billion in
available IT revenue, its 7% growth rate, and its 500,000 potential
customers. That means they are focusing on industry-specific
solutions (the mid-market likes that), on demand integration,
supporting heterogeneous IT environments.
They note that a big differentiator between medium and small
businesses is the presence of some kind of formal IT function.
Even
within the mid-market, IBM is focused on what they term pockets of
hypergrowth, prioritizing on where the revenue and growth are best.
This means they’re interested in:
Enterprise
Applications for the Mid-Market:
ERP and CRM
New
Platforms and Technologies:
Linux, Wireless, Digital Media
New
Markets: Life Sciences
New
Geographies: India, China,
Russia
They’re
also very interested in the 18% increase in 2004 in enterprise
integration. IBM estimates that 10% of mid-market IT budgets
will be spent there, with the opportunity growing 109% between this
year and 2007.
IBM’s
Express Portfolio, targeted at the mid-market, has grown from a
naming convention, encompassing six products a year ago, to a brand
with 60.
Some
SMB
Definitions
Enterprise
– Big customers with more than 1,000 employees. Usually
synonymous with Fortune 1000 and Global 2000.
Medium
– Companies with 100 to 999 employees. Also referred to as
Mid-Market. This is the Census Department definition.
Vendors play fast and loose with it. IBM uses the definition
but often focuses on companies with 500 to 2,000 employees as
“their” mid-market.
Small
–
Companies with fewer than 100 employees. Companies with fewer
than 10 or fewer than 25 employees are sometimes referred to as
VSMBs or Very Small. Companies with 50 employees are sometimes
referred to as the “Sweet Spot.”
Now
IBM’s job is to build a new ecosystem with lots more SMB ISVs (500
now), more strategic alliances (partnerships with big ISVs who serve
this market), and support for application migration with both
Virtual Innovation Centers (web-based) and Migration Stations.
IBM’s aggressive plans include 15% revenue growth in 2004 for SMB,
up from $19.8
billion in 2003, supported by lots of TV and print advertising, and
increasing support for vertical market applications, taking
advantage of IBM’s Solutions Builder Express and other product
offerings like Integrated RunTime.
We
don’t expect to find IBM middleware selling in a retail store near
you – that’s not the point – but we do expect to see it
selling WITH lots of vertical solutions in SMB markets this year.
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