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IBM – Mapping the Way to Global SMB Success

PUND-IT, Inc

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By Charles King, Pund-IT, Inc.

It would be hard to find anyone who would argue that small to medium sized businesses (SMBs) represent anything other than a critical technological constituency, and with good reason. According to research sponsored by the U.S. Small Business Administration (SBA), small businesses represent 99.7 percent of all employer firms, employ about half of all private sector employees, and have generated 60 to 80 percent of net new jobs annually over the last decade. From a technology perspective, smaller companies in the U.S. hire 40 percent of high tech workers (such as scientists, engineers, and computer workers), and small organizations produce 13 times more patents per employee than larger firms. Just as importantly, suggest that smaller businesses in global markets appear to be following similar innovative, entrepreneurial behaviors.

This is all well and good, but there seems to be some disagreement over exactly what constitutes a small business. Is it (as defined by the SBA) any organization with fewer than 500 workers or are “real” small businesses those with fewer than 100 employees? Do SMBs exist as a separate species, or are they best defined by their individual industries and geographical regions? Are SMBs technological neophytes whose tactical purchasing decisions are driven largely by price considerations or are they technically sophisticated consumers who pursue sustainable, strategic IT deployments? The answer to all these questions is a simple “Yes,” a point that says as much about the sheer variety of small business organizations and endeavors as it does about the ways in which they are perceived. 

Early in 2007, IBM’s CEO Sam Palmisano clearly stated the company’s ongoing dedication to SMBs, saying that they “could become IBM’s biggest sector within five years.” Since then, IBM introduced numerous new SMB hardware products including System i additions to its Express Advantage lines, the BladeCenter S small business blade solution, and SMB-focused TotalStorage products. Along the line, the company also delivered numerous new or updated Lotus, Tivoli, DB2, and WebSphere software offerings tailored for smaller customers. In April, IBM realigned part of its Systems Technology Group (STG), creating a new Business Systems organization whose primary purpose is to serve SMB clients. But while the company executed a well-choreographed SMB walk (to go along with its small business talk) some competitors were dismissive, suggesting that IBM was little more than an enterprise wolf making an unconvincing turn in SMB sheep’s clothing. 

These issues were clearly evident at IBM’s recent SMB Influencer Summit in White Plains, NY, an event where the company took the opportunity to discuss in detail the refinement of its small business efforts. By way of silencing critics, IBM was careful to make three points; 1) that SMBs already constitute a significant part (nearly one fifth) of its total business, 2)that while its does some business among smaller (100 or fewer employees) companies, its primary focus lies among larger small (101-500 workers) and medium-sized (501-1000 employees) organizations, and 3) IBM believes that success in the global SMB market rests not in low-margin point products but in providing innovative business and infrastructure solutions that leverage its own and partners integrated hardware, software, and service offerings. 

This seems a reasonable approach, particularly given many smaller organizations’ inherent complexity, but is IBM’s hope of making SMBs its biggest sector achievable? Maybe so, and for some specific reasons. First, the company already has numerous small business Express Advantage products and mechanisms in place. IBM’s well-regarded System x (x86-based) and System i (originally designed for mid-market business applications) servers aim to deliver big business benefits to smaller clients. Related to this, strategic IBM efforts including its PartnerWorld organization have also helped the company cement relationships with key ISVs, developers, and channel partners focused on the SMB market. IBM has already dedicated significant effort and funds to product and partner development efforts, and will continue to do so both in the U.S. and abroad. 

In addition, IBM’s small business product lines can be leveraged among its traditional enterprise customers. The fact is that most large companies include locations and organizations, such as branch banks, retail outlets, and other corporate-connected business divisions, whose essentially autonomous behavior mimics small businesses. For such organizations, products like IBM’s System i Express and BladeCenter S solutions offer highly integrated answers to fundamental business problems. Third, the increasing complexity of technology is likely to add value to solutions-based IT products. Today, many smaller businesses deal with what not too long ago would have qualified as enterprise-class IT issues. These problems are not becoming simpler or going away anytime soon, factors likely to help drive business and infrastructure solutions-based SMB strategies like IBM’s. 

Finally, the company is moving ahead with a number of new and continuing small business- focused efforts which it discussed in detail at the Summit. For example, IBM announced that the SME Toolkit, an online one stop shop for SMB support that the company co-sponsors with International Finance Corporations (IFC), has expanded to 28 markets and 14 languages. The SME Toolkit was launched recently in India, South Africa, and among women- and minority-owned businesses in the U.S., and additional launches in Saudi Arabia, Brazil, and Indonesia are being planned. Additionally, IBM announced that its Express Advantage program has expanded to 43 countries worldwide, and that over 1200 Built on Express partner solutions are now available. The company’s Global Finance (IGF) organization is also playing a key role in IBM’s expanding SMB efforts, working closely with channel partners to simplify the application and approval process for transactions up to $100,000. 

While we found much of the material presented at the IBM SMB Influencer Summit to be impressive and compelling, we also believe that the company has some significant challenges ahead of it. In particular, we believe that IBM’s Global Service (IGS) efforts around small businesses could take longer to penetrate the market than the company might plan or hope. Though IGS representatives pointed out that the group has successfully cut service implementation times by 40-60% (dramatically reducing costs, as well), early adopters of these offerings are more likely to come from “medium” than small-sized organizations. However, smaller companies might well be tempted by simplified services offerings packaged with new infrastructure and business solutions.

IBM’s SMB strategy seems logistically feasible, but the greater challenge may be as much cultural as technological. As was clearly demonstrated at the SMB Influencer Summit, IBM has been steadily building the small business teams and capabilities in its core organizations. All of IBM’s brands along with its financing unit are organized under a worldwide SMB unit that is one of the company’s fastest growing businesses. The vast majority of IBM’s current efforts, however, still revolve around servicing the IT needs of global enterprises, a lucrative customer base whose requirements are fundamentally different than smaller organizations. This is likely to change through new efforts such as IBM’s Business Systems group, which should be able to leverage existing and emerging hardware and software offerings to drive increasing success among SMB customers. 

Achieving longer term plans will require a fundamental and ongoing reordering of priorities among IBM organizations and executives whose eyes remain fixed on large enterprise clients. New strategic programs discussed at the Summit, such as the SMB Territory Partnership Program and SMB Technical Advocate initiative, have assigned senior IBM executives and advanced technical resources to each of the company’s 225 global Territories, and are designed to demonstrate IBM’s progress towards engaging the executive team with small businesses. New systems and solutions, along with large investments in locallyfocused marketing are also beginning to make an impact. Overall, from the evidence presented at IBM’s SMB Influencer Summit the company seems thoroughly focused on bringing to pass the small business strategy enumerated by Palmisano and other leaders. If IBM can continue to execute as it has during 2007, it should be in a solid position to make those goals a reality. 

 

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