The Four Hundred

It could be called the battle for the SMB, and it's nothing like a DMZ, or demilitarized zone, typically found in areas where war breaks out. The SMB, or small and midsized business, market is turf that IBM, among others, considers crucial to future sales. So if you work for a company that fits squarely in this niche, be ready for a full-tilt assault that will put you in position to take advantage of vendors elbowing each other for your business.

Just last week, IBM began its latest SMB battle plan by offering zero-interest financing in the fourth quarter. IBM is attempting to lure customers by offering zero down, zero payments, and zero interest until next year, much like the offers being put forth by car manufacturers these days. And, as with your local car dealer, it's not likely you will find exactly what you dreamed of, with the best discounts attached. But deferred payments and financing rates as low as 3.1 percent on software to "qualified buyers" should get some attention, even if the best deals from IBM Global Financing will be reserved for single-charge wares like WebSphere Application Server and DB2 database products. There will also be better than average financing for select hardware that in certain instances is expected to be as low as 4.2 percent.

Before this promotion, only the big dogs making purchases in the $100,000 and up range received such favorable financing. Now, if your shopping cart can hold at least $25,000 in selected items, you get a sweeter deal. IBM expects this promotion to help it reconnect with many SMB customers that have drifted from the flock. That Microsoft in many ways owns this territory adds a degree of urgency to IBM's desire to be friendlier with the SMB customer base, even if it often means pushing a Microsoft platform. IBM is obviously worried that Microsoft's influence will spread to larger enterprises, much as it has spread from the PC to the departmental server to the data center.

For some perspective on IBM's affinity for small and midsized businesses, Judy Smolski, IBM's vice president of marketing to the SMB in the Americas, told The Four Hundred, during the COMMON conference last month, that the Global SMB marketing team--in collaboration with the eServer brands--will spend $100 million in marketing in 2003.

The strategy for the SMB marketing team, which includes the iSeries, the other eServers, and IBM software and IBM services, is to reach the line-of-business executives with solution messages for targeted industries.

"This is a very price-sensitive and fragmented market," Smolski said of the SMB space. "A 50-person company is very different from a 200-person company, which is very different from a 750-person company. We need to be focused with our message, particularly to the size of the company."

One message that she believes will resonate in the SMB is that IBM has the technology, regardless of platform, that will help a business make money in this tight economy. "The people IBM is trying to reach," Smolski said, "are those that have a business need that is bothering them--something has changed. Either their competitors are now selling over the Web and they need to respond, or they have seen their best customers buy less, or their cost of manufacturing has just gone up and they need to deal with that."

Looking at a broad SMB picture, Smolski sees IBM doing well in 2003 within areas such as CRM, wireless, Linux, and all topics related to e-commerce. She also sees Domino becoming a bigger factor and is expecting big things from WebSphere and WebSphere Express, the small-footprint version of the WebSphere Application Server and portal sometimes referred to as "WebSphere Lite." (For a closer look at WebSphere in the SMB, see "WebSphere Is Not the Only Game in Town, and That's Good," in last week's issue.)

In what may be the long shot bet of 2003, Smolski said Web hosting holds great potential in the SMB space. There will be huge growth here, she predicted, even though she couched that by noting there is currently an obviously small base. "We built Web hosting from the bottom up, so we don't have to worry about price points, difficult installations, things that are too complex for the needs of an SMB," she said.

"E-business on demand is the next thrust, the next phase of e-business. You will pay only for what you use. It is technology as a utility. People will pay for the capabilities they need, then, as they grow, or in peak times, they know that the IBM server will scale for those peak periods." There are thousands of customers--and not just large enterprises--taking advantage of IBM's Web hosting opportunities, according to Smolski.

To gain a better grasp on SMB parameters, IBM's marketeers slice the SMB pie into three pieces, based on the number of employees. The high-end companies, where IBM has traditionally excelled, have 4,000 to 5,000 employees on the payroll. The SMB slice, where IBM admits it needs to work, includes mid-level companies that have more than 100, and up to several thousand, employees. Companies with up to 100 employees are identified as small businesses. According to Smolski, IBM's marketing research has projected that there are 135,000 midsized businesses in the United States, while small businesses total about 9 million.

With the economic climate showing signs of remaining gloomy in 2003, everyone is going to be chasing those SMBs. Watch as vendors that have relied on the top tier of corporations to increasingly target the middle market, and companies in that segment will gain leverage with purchase decisions that evolve into more competitive pricing battles than they have been privy to before. Demand a lot of attention from your IT vendors, SMBs. Make them work for the money you give them.