Selling to the SMB Community

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This article appeared in the 15th October, 2007 issue of CRN magazine.

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Selling to the SMB Community
SMALL AND MEDIUM BUSINESSES (SMBs), the sweet spot that all vendors, most distributors and thousands of resellers are trying to embrace. There are obvious spoils to be gained from this hotly contested arena, but it is not a simple exercise to develop a sound strategic plan or cost effective model to address this disparate and geographically expansive market. There are tens of thousands of small to medium businesses all over Australia needing technology support and enhancements via a dedicated, supportive and competitive channel.

For clarification, in this article, I will define SMBs as the SMB end user businesses, not the SMB resellers. Whilst there is some correlation between both groups (i.e. SMB end users are generally serviced by SMB resellers) it would be misleading to suggest that this was gospel – as many larger resellers, service providers and systems integrators are developing or executing SMB strategies. The geographical spread of SMBs into regional Australia has increased because of:

• The web
• Phenomena of seeking the Aussie ‘sea change’
• Increased pressure on housing prices in our capital cities
• Increased infrastructure into regional areas from roads, to education, to health care, to broadband access
• Aging population with better medical support continuing to work
• Increase in redundancies from larger enterprises

Major technology vendors are developing SMB solutions from their traditional enterprise level technologies. Traditional enterprise software vendors like SAP and Oracle have released SMB versions, while traditional hardware vendors such as Cisco, HP and IBM have developed SMB products and strategies to try and address this market. As this technology and solutions become more ubiquitous, the SMBs want and need enterprise level solutions that are easy to understand, simple to utilise and maintain, and cost effective to install
and service.

The vendors do not have the business model, coverage model or cost model to effectively service and reach the SMB market. Therefore, the channel is the main medium for reaching SMBs. Many distributors have tried to develop an SMB model. The key requirements to reach this market Australia wide are:

• Staff and offices in most capital cities and some key regional areas to establish a solid ‘footprint’ that allows the building of localised relationships
• Access to a large number of global market leading technologies that allow resellers to consolidate their distribution relationships to save costs
• Infrastructure, including distribution centres and systems, that allow for the appropriate stock holdings and its efficient distribution
• Credit levels and policies that support the smaller resellers but give them the flexibility to grow their business
• Efficient and effective eCommerce solutions and communication mediums that allow SMB resellers to trade 24 hours a day, seven days a week.

From a reseller perspective, there are two main models. The larger corporate resellers, such as Commander, Data#3, Corporate Express, Leading Solutions, ASI and Dimension Data, who have all developed models to capture the SMB market. In addition to the increasing ubiquitous technology push, the increasing direct strategies of many Tier 1 vendors have forced the Tier 1 resellers to seek replacement business from the top end of the SMB market. But many are finding it difficult to run both a large corporate and SMB strategy within their overall business model and so have developed almost separate divisions or business units to manage their push into this market.

Commander’s model to establish franchises is one example. They are finding that vastly different financial models and metrics are required.

The second model is the smaller reseller, whose model is to dominate their regional area, whether it be Dubbo or Parramatta. They drive their business on local relationships and obtain ‘trusted advisor’ status for all things technology. This is especially the case in regional Australia, where economies of scale do not allow too much specialisation. These resellers require more support from distributors to ensure:

• They are treated as important resellers through a model that allows good communications and touch points for relationship development
• They have consistency of supply of a range of technologies from leading vendors
• They have access to competitive pricing and freight arrangements
• They establish credit facilities that supports business growth
• They have access to systems that reduce their costs, such as web based ordering, marketing and eCommerce tools
• They can access education and enablement sessions, either face to face or web based
• There is availability for the pre-sales technical support of technologies and products, especially around those that are more complex or leading edge

To gain both breath and depth into the SMB market Australia wide requires significant investment in both resources to gain a large enough ‘footprint’ and infrastructure to gain economies of scale. There has been considerable consolidation in the Australian reseller community over the past couple of years. While gaining access to government and corporate business has been the major motivator, the increased ‘footprint’ and economies of scale have allowed greater focus to be directed to SMBs.

Distributors have a significant role to play in the support of both these main reseller models and all their various iterations and permutations. To enable the channel to support the needs of Australia’s SMBs, the distributor must develop business models that provide economies of scale, leading edge enterprise level technologies, pre-sales services, and communication strategies that addresses and enhances relationships.

This is a real challenge in a country as dispersed as Australia, but with focus, investment and the right attitude it can be done.
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