Partners in the SMB channel must narrow market scope and IT services

Partners looking to get a firmer foothold in the small and medium-sized business (SMB) channel will have to approach the SMB market with a narrow lens to succeed, limiting themselves by geography, vertical markets or services -- or better yet, by all three.

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Partners looking to get a firmer foothold in the small and medium-sized business (SMB) channel will have to approach the SMB market with a narrow lens to succeed, focusing on geography, vertical markets or services -- or better yet, on all three.

"One of the biggest things I see channel partners doing wrong is [trying to] be all things to all people," said Joslyn Faust, a principal analyst at Gartner Inc. "Your message is just not being heard by anybody."

Even the broadness of the term SMB market makes some analysts cringe, lamenting that the phrase small and medium-sized lumps businesses with four employees in the same category as those that have 499 employees.

Partners in the SMB channel can't be so vague in their business strategies, either. Just like your mother told you: Don't spread yourself too thin.

"One of the biggest things I see channel partners doing wrong is [trying to] be all things to all people."
Joslyn Faust
Principal analystGartner Inc.

"Channel partners have to decide what they're going to be good at, because you can't be good at [every aspect of] SMB," said Steve Hilton, a vice president at Yankee Group Research Inc. "It's actually a complex, heterogeneous market. There are big differences in size segments, there are big differences in multi-site versus single-site, and there are big differences in some of the requirements by industry segment."

It's a philosophy worth considering, as businesses with fewer than 500 employees account for 99.7% of all firms in the United States, according to the federal Small Business Administration. Small and medium-sized businesses also tend to suffer less and recover faster in a recession, analysts say.

 

SMB channel and enterprise channel pose different marketing challenges

The SMB channel is a world away from the enterprise channel. The deals are smaller, but the cycle is faster. Customers tend to be more tactical than strategic. They shop for a solution that shaves money off their Internet or phone bills, not to map out long-range network goals. Clients want simple terms, not cloud diagrams. And that's just the marketing perspective.

"The only way I think a partner can effectively serve both masters -- enterprises and the small business market -- is to run those operations as separate business units because they have very different cost structures," Hilton said. "One is much more of a volume-based, build-to-stock approach -- that's the small business market. … In the enterprise market, it's more like a build-to-order process."

Bert Wilhelm, who previously worked in the enterprise market, was aware of these nuances when he founded APW Solutions, a Cisco Systems partner, two years ago in Austin, Texas. As a small business owner himself -- three employees total, including Wilhelm -- he knew his focus had to be narrow.

The company caters to businesses with 100 employees or less, mostly in tech-heavy healthcare specialties. It only resells Cisco solutions for voice, security, wireless and data protection.

One of his recent clients, a doctor's office in central Texas, was unhappy with how confusing and cumbersome it was to change the automated attendant options on his key phone system.

"He said, 'It took three of us three hours to figure out the manual," Wilhelm said. "That's nine man-hours. You have to ask, 'What is that worth to you in revenue?'"

After explaining how the doctor's office could better function with a solution that merged data and voice into one line, Wilhelm was asked to install it.

"I don't have to deal with loads and loads of competition. I don't really have any competition," Wilhelm said. "We're really good at what we do here, and [customers] really appreciate that sort of consultancy approach we always do."

Specialization can mean saying 'no' in the SMB channel

For some partners in the SMB channel, that degree of specialty means not taking a sale sometimes.

"We definitely know where we fit and where we don't," said Ryan Halper, president of Seattle-based Cynnex Networks, a Cisco networking partner. "We have to find some parameters to say, 'If you're just a five-person business, your needs are incredibly basic and there's no real compelling ROI here with my portfolio of offerings. We're just going to walk away from that because it's not going to be a good fit."

Although specializing to such a high degree may seem counterintuitive to some partners looking to get a bigger piece of the action, analysts say it's the best path to profitability in the SMB channel.

"Since it's getting more competitive out there, channel partners and vendors are starting to focus more strongly on just a certain segment," Faust said. "If an SMB has a choice of buying from someone who really knows dentist offices and someone who really doesn't know dentist offices and sells to everyone, they're going to buy from the partner who knows about dentist offices."

Recognizing that it will have to rely on partners to push its products in the SMB channel, Cisco has ramped up its rebate program for VARs, offering up to 10% for certified partners selling unified communications (UC) and security products. For the first time, Cisco will also offer 5% rebates to uncertified but registered resellers.

"Small business is channel-driven and channel-dependent," Sage said. "It's not something we can do on our own. We can't engineer ourselves into a differentiated position. … We have to work extremely closely with our partners."

Let us know what you think about the story; email: Jessica Scarpati, News Writer

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