The SMB Channel Wants to Sell SaaS and Managed Services

Published: August 11, 2008

by Timothy Prickett Morgan

AMI-Partners is an IT consultancy that makes a living tracking what technologies and management techniques are being deployed by small and medium businesses; think of it as a Gartner and IDC for the little guys. And according to a recent report, two areas are heating up in the SMB space--SaaS and managed services--and AMI is advising companies in the IT channel that service SMB shops start looking in this area.

"Clearly services in the SMB space have become a priority for IT and telecom manufacturers," explains Ryan Brock, vice president of AMI's channel partners practice in New York. "And managed services and software as a service (SaaS) provide a migratory path from where many IT vendors are today--providing technology products, to where they want to be in the future--offering complete solutions."

AMI's definition of SMB is any company that has fewer than 1,000 employees. And in the United States, AMI reckons that within the SMB sector, sales of managed services and SaaS are expected to grow at almost 20 percent annually over the next five years. This is big money, particularly when you consider that SMB shops are expected to spend $1.6 billion on SaaS applications in 2008; if you do the math, this will grow to nearly $4 billion by the end of 2012.

By AMI's estimates, four out of 10 of channel partners in the United States are now offering some kind of managed services to their SMP customers, and these offerings are bolstering profit margins even as these partners cope with skinnier profits on server and storage hardware each successive year. The most popular managed service offered today is network administration and management, but AMI expects that managed applications, storage, and security will be hot areas. The average SMB channel partner in the States has about 20 different product and services that it sells, but these channel partners are also trying to consolidate and streamline their offerings--partly to become more focused, but also partly because of so many mergers in the IT sector.

The important thing is that in any area where an SMB shop is lacking expertise in-house, they are looking to spend money if it helps them do better IT. "Managed and hosted services are a good fit for SMBs for several reasons," explains Avinash Arun, a senior associate at AMI who worked on casing SMB customers about their plans for SaaS and other kinds of services. "With the economy slowing and finances a key concern, U.S. SMBs are looking for ways to maintain current levels of operations and efficiency without spending heavily on equipment, complicated training, and new IT staff." Arun also cited the elimination of large capital outlays, predictable cash flows, and shorter deployment windows as reasons why SMBs would shift certain functions from their own IT departments and out to partners.

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