MICROSOFT Certified Professional Magazine Feature Article | Uneasy Courtship

by Rich Freeman

For years, Michael Corey has watched software giant Oracle Corp. studiously ignore companies that, like his, serve small and midsize businesses (SMBs). Corey is CEO of Charlestown, Mass.-based Gold Certified Partner Ntirety LLC, a provider of database administration services and a veteran Oracle reseller. “Historically, they’ve talked about partnering but not really wanted to do it,” he says of Oracle.

How times have changed. Recently, Oracle has been providing discounted pricing, specialized deployment tools and enhanced marketing resources to resellers of its SMB-targeted Oracle Accelerate application bundles. And under a program launched in July, partners can now acquire selected Oracle products through major distributors without first paying $1,995 to join Oracle’s channel program. That makes partnering with Oracle far more feasible for the mostly smaller resellers, integrators and solution providers that serve SMBs.

Despite such measures, however, Corey remains wary of Oracle. “I’m in wait-and-see mode,” he says. “I’ve been pulling my own wagon for so long at this point that there’s no benefit to jumping in early.”

Others in the SMB partner community share that opinion, and they’re not just talking about Oracle. Looking to cash in on a rich new market, many tech industry goliaths–including Cisco Systems Inc., SAP Inc. and IBM Corp.–have begun aggressively courting SMBs. In doing so, they’re looking to break into a market in which Microsoft–thanks to its relatively inexpensive products and enormous partner network–has long been a leader. The result: Microsoft partners increasingly find themselves juggling a slew of new offers, opportunities and resources from vendors historically associated with the now-maturing enterprise market.

Unaccustomed to such attention, many SMB partners are responding with a mix of hope and caution. “If a billion-dollar gorilla says ‘I want to bring you business,’ and they mean it, you’d be foolish not to take advantage of it,” says Corey. But he adds that it’s going to take more than promises to win him over.

Overwhelming Interest
To understand why top IT vendors are pursuing SMBs so avidly, simply consider the numbers. There are a whopping 8.3 million SMBs (defined as businesses with fewer than 1,000 employees) in the United States alone, according to IDC, the Framingham, Mass.-based IT research and analysis firm. IDC projects that those companies will spend more than $100 billion on IT in 2007, an increase of about 8 percent over 2006.

For companies that have traditionally focused on the maturing enterprise market, those large and growing outlays make a tempting target. But as any partner who caters to them can attest, SMBs pose some unique sales challenges. “Simply put, they’re cheap and short-sighted,” says Daniel Duffy, CEO/CIO of Valley Network Solutions Inc., a Fresno, Calif.-based integrator and Gold Certified Partner that earns nearly 70 percent of its revenues from SMBs. “A lot of SMB folks think making a trip to Best Buy and picking up whatever’s on the shelf that day is fine. They end up with a hodge-podge.”

Enterprise players such as IBM and Hewlett-Packard Co. are adapting to this unfamiliar terrain by introducing smaller, more affordably priced products that are easier to deploy and maintain. In June, for example, IBM rolled out its BladeCenter “S” server system. Designed to fit comfortably on a desktop, the new offering plugs into the standard 110-volt outlets found in most home offices. HP, similarly, has been building out a line of “all-in-one” storage products that combine normally separate technologies in a single package; prices start at $5,000.

SMB-focused partners like Michael Corey, CEO of Ntirety LLC, are finding themselves pursued by major vendors who want help reaching their elusive customers. Corey is encouraged but says he’s in “wait-and-see mode.”

What’s more, after years of treating partners with indifference, the big vendors are finally getting serious about channel building. “The light’s gone on and they’ve realized that the best way to fulfill [SMB demand] is through the channel,” says Paul Myerson, senior channel analyst at the Enterprise Strategy Group, a Milford, Mass.-based analysis firm. That burst of understanding has many partners’ phones ringing off the hook. “It’s really overwhelming, the number of companies you get called by,” says Jennifer Mazzanti, president of Gold Certified Partner eMazzanti Technologies, a Hoboken, N.J.-based provider of network consulting and integration services with an SMB-heavy clientele. Mazzanti receives some 10 inquiries a week from vendors large and small asking her to join their partner program. Duffy says he receives only two or three such calls weekly, but finds the rush of suitors startling just the same. “We got a call from Dell recently,” he says. “That’s never happened in 11 years of business.”

To sweeten their recruiting pitches, many big vendors are offering steeper discounts and richer compensation. In April, for example, Cisco announced plans to lower the minimum deal size for eligibility for its rebate incentive programs from $30,000 to $10,000. Other vendors are taking steps to reduce channel conflict, a common source of frustration among SMB partners. HP, for instance, now awards its salespeople commissions for helping partners close deals, while EMC Corp. has begun stripping commissions from sales reps caught stealing business from the channel.

Meanwhile, many SMB partners say they’re getting significantly more event funding, training and presales support. “There are a lot more helping hands than in the past,” says Robert Barrese, business development manager for channel partnerships at Maintech, a Gold Certified provider of infrastructure support services headquartered in Wallington, N.J.

Still, SMB partners give some big vendors better grades than others. HP, for one, tends to receive high marks. In recent years the massive hardware maker has boosted rebates for sales of certain server, PC and printer products, and hired additional partner support personnel, among other moves. Such efforts have Mazzanti singing HP’s praises. “They have SMB-focused incentives, their marketing materials are more focused on SMBs [and] they’ve supported us on events,” she says. Duffy, however, is less impressed with HP. “They’re still not as easy to do business with as they should be,” he says. He complains that registering deals and getting price quotes can take days, and HP sales reps still call into his accounts periodically. “We’ve supplanted a lot of Dell’s business [for HP] in this market and there seems to be no recognition of that,” he says.

Jennifer Mazzanti - eMazzanti Technologies Uneasy Courtship Micrsoft Certified Professionals Magazine
Perfecting the SMB-Vendor Partnership
Jennifer Mazzanti, president of eMazzanti Technologies, remembers the days when IT vendors dictated the terms for partnering with them. But with industry giants such as Hewlett-Packard Co. and IBM Corp. now aggressively pursuing small and midsize business (SMB) partners, the tables have turned. “I give them instructions on how to be my partner and not the other way around,” Mazzanti says. Here are some of her key demands:Assign me a dedicated rep: Mazzanti has little use for toll-free support lines. “I need a resource that’s my go-to person,” she says.

Spare me the small stuff: Few busy SMB partners have time to waste on reporting chores, such as compiling sales figures. “They should be able to do that through distribution,” Mazzanti says.

Show me the money: Customer events are a big part of Mazzanti’s marketing strategy, so she works only with vendors who provide funding for such activities.

Define our terms of engagement: Mazzanti asks vendors to specify how often they’ll meet with her and whether those conferences will take place by phone or in person.

Give me clear success metrics: Finally, Mazzanti insists that vendors tell her how much revenue she must generate to retain their attention. If it’s beyond her reach, she says, there’s no point in forging a relationship.

–R.F.

Many in the SMB channel speak more kindly of IBM. “They’re a good partner,” says Troy Webb, chief marketing officer and managing partner of InCentric Solutions LLC, a Morrisville, N.C.-based Certified Partner that provides communication and collaboration solutions to SMBs. Webb admires IBM’s line of SMB-ready Express Advantage solutions, and he likes the marketing dollars that partners receive as well. In July, IBM also announced plans to simplify its SMB sales and partner organization by replacing multiple, product-specific teams with a single, integrated field force. That sounds good to Barrese, who finds IBM a difficult company to navigate. But he adds that he’d rather see Big Blue concentrate on being a more predictable collaborator: “They want to partner with you one minute and then they compete with you the next.”

Some partners find Oracle similarly schizophrenic. Pleased to see the software maker introducing more affordable products and simpler partnering options, many resellers say that engaging with Oracle remains a struggle. “There’s no one I can call to get help,” says Brian Buffalini, general manager of Westminster, Md.-based Gold Certified Partner Modus Novus Inc., an ERP consultancy and training provider. Buffalini says his contact at Oracle’s local sales office hasn’t returned a phone call in six months.

But no major vendor inspires more mixed responses from SMB partners than does Dell Inc. Though it has informally worked with resellers for years, Dell announced plans in May to create its first true partner program by the end of 2007. And in July, the company opened its new Vostro line of SMB-targeted servers and notebooks to the channel as well. So far, though, such measures have done little to change Dell’s reputation among many SMB partners as stingy and unresponsive. “‘Dell’ is a hated word in my life,” says Buffalini. “They offer zero support or incentive to their partners.”

Maintech’s Barrese, however, believes Dell has turned over a new leaf. Last spring he phoned the hardware vendor about partnering opportunities. To his surprise, someone from Dell called right back. A few conference calls and meetings later, Maintech and Dell were sharing leads. “We were impressed with the attention they gave us,” Barrese says. “The relationship is new, [and] it may die on the vine, but so far they’re doing all the right things to move forward.”

Protecting the Stable
As for Microsoft, it’s pushing just as hard as the other top vendors, but in the opposite direction. Already a dominant player among SMBs, the company is focused on the enterprise at the moment, says Paul DeGroot, lead analyst for sales and support strategies with the Kirkland, Wash.-based research firm Directions on Microsoft. “That’s where they see more of the upside and much of the threat to their business,” he notes.

Not that Microsoft is ignoring SMBs, of course. It’s been actively recruiting partners into its Small Business Specialist Community, which helps SMB customers and partners find one another more easily, since July 2005. And it continues to turn out SMB-friendly products–such as its Response Point small business phone systems and Office Live Web hosting product–at a steady rate. Meanwhile, Microsoft’s partner group keeps rolling out new SMB-oriented sales and marketing aids. The Business and Technology Assessment Toolkit, for example, helps partners measure an SMB prospect’s IT needs and propose Microsoft-based solutions.

Moreover, Microsoft continues to maintain a deep stable of largely satisfied SMB partners. “They certainly offer you a good value for your partnership,” says Modus Novus’s Buffalini. “You get free support tickets, you get free product. That’s more than I can say for Oracle or SAP.” Corey, of Ntirety, agrees, noting that Microsoft-related projects are the fastest growing part of his business. “I love working with Microsoft,” he says. “I’ve found them incredibly easy to do business with and incredibly supportive.”

Still, all those big companies muscling into the SMB space pose a potential risk for Microsoft. “They’re going to have a lot of competition for their partners,” notes Paul Edwards, IDC’s director of software partnering and alliances. So far, few in Microsoft’s channel appear to be contemplating defection. “We’re a Microsoft shop,” says Mazzanti. “I don’t see that changing any time soon.” But if companies such as IBM and Oracle succeed in gaining traction among SMB partners, they’re likely to do so partially at Microsoft’s expense. Says DeGroot: “It’s possible that there’s poaching going on already, as some partners may find some of the competitive solutions better for their customers.”

Though that’s bad news for Microsoft, most partners view the IT industry’s newfound interest in SMBs as nothing but good news for them. “I see it as beneficial, not just for us but for our clients,” says Michael Chapman, professional services director at InCentric. Working with more vendors means he can offer his customers more options. And that, Barrese adds, ultimately makes for happier clients and more business. “That’s what we’re hoping,” he says. “We’re hoping that, because we’re partnering with [more companies], there’s going to be more opportunity.”

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