It sounds like a win-win scenario.
Product vendors roll out scores of programs and promotions encouraging resellers and integrators to pursue the small and midsize business (SMB) space. Product vendors get hundreds or thousands of feet on the street via partners. Solutions providers get leads and marketing support from vendors, who extend their marketing reach, and they gain new accounts, as well.
Name any channel-oriented purveyor of hardware, software or networking gear, and it is likely to have initiated some kind of SMB effort based on that general premise. Press releases continue to surface on a weekly basis. But do these vendor programs actually provide any competitive boost? The word on the street is: Dont bet your business on it.
Some solutions provider executives suspect that vendor SMB programs are just thinly disguised dumping grounds for undesirable accounts. Others note that the very act of lumping small and midsize businesses together results in programs that fail to address their needs.
A recent AJS Group survey underscores this dim view of vendors SMB efforts. The 374 solutions providers polled rated the vendors knowledge of the SMB space at 1.3 on a scale of 1 to 10. Of the survey respondents, 82 percent strongly disagreed when asked whether they felt they had at least two strong SMB vendor partners.
“The key problem is the lack of SMB knowledge,” says Janet Szilva, president of AJS Group. “Vendors are beginning to understand that SMB requires specialized marketing, sales and business know-how that many of them—not being small businesses themselves—lack.” The problem, says Szilva, is such that more than 70 percent of AJS Groups business year-to-date has been helping vendors fix their marketing programs.
Ironically, this disconnect is occurring at a time when solutions providers could really use a lift. With dot-coms crashing and enterprise customers balking, small and midmarket firms are perhaps the most viable market segment. Small companies rack up nearly half of the nations sales, according to the U.S. Small Business Administration (SBA).
Keith Barros, VP and practice director of e-business solutions at Livingston Consulting, believes vendors are trying to improve their faulty SMB programs. But, notes Barrows, in his experience with these programs, “market promise was nowhere near the actual delivery.”
What Went Wrong? One common beef among solutions providers is that vendors fail to distinguish between small and medium accounts. There also can be considerable discrepancy of what constitutes a midmarket business.
Eva Losacco, CEO at Forsythe Solutions, says she gets calls from vendors pushing SMB programs all the time. But when it comes to providing leads, vendors may offer up companies in the $10 million to $20 million range. Forsythe, Losacco explains, typically targets companies with sales of $500 million or more. The undersized leads lack “volume opportunity,” she says. “Theres no opportunity for the long-term relationship that we want.”
Barros agrees that vendors could do a better job of “understanding what part of SMB” solutions providers are going after. He cites vendor leads that turned out to be companies interested in learning how to use Microsofts FrontPage Web design tool or companies with $5,000 e-commerce projects. “Weve ended up chasing things that are not really productive,” he says.
A quick survey of government and market researchers shows that SMB definitions abound. International Data Corp., for example, defines a midsize business as one employing between 100 and 999 people, while Yankee Group defines midsize as 100 to 499 employees. The SBA defines small businesses as having 500 or fewer employees.
Marketing support is another key aspect of vendor SMB programs, and here most of them seem to fall down, too. Szilva says the vendors sales and marketing materials are seldom geared toward the small-business owner. Nor do the myriad ads, brochures and mass mailings typically address the key issue that small-business owners care most about: How does the solution at hand increase their revenues or reduce their costs?
“The SMB contact doesnt speak geek,” Szilva says. “They dont care how fast [the product] is. They want to save money and eliminate waste.”
Szilva says vendors also err when they take an enterprise marketing program and simply shrink it to fit the SMB segment. That tactic ignores the differences between the enterprise and the SMB space and contributes to the cynicism of solutions providers, some of which say they cant tell the difference between their vendors enterprise and SMB programs.
Vendors also tend to fall short when they offer product bundles in their SMB programs. “Vendors that try to create a product bundle for the SMB market sometimes mess it up when they try to dumb it down,” says one SMB reseller who preferred to remain anonymous. “Small-business people have needs as sophisticated as enterprise companies,” he says, adding that in most instances, he would rather put together a product bundle using a multivendor solution.
Steve Harper, president of Network Management Group, a network integrator based in Hutchinson, Kansas, points to another problem with many vendor programs: In recent years, they have cut back their market development funds (MDF) or have made it harder for resellers to get access to those MDF monies. Harper attributes vendor hesitancy about MDF to past misuse of these funds throughout the industry. Resellers have used these funds to pay employee salaries or as other forms of compensation.
Harper says he likes to work through Compaqs Solutions Partner Program, which gives the reseller a certain percentage of MDFs for every laptop or server that the partner sells. “Market development funds dont mean that you get a gift and you dont have to deliver,” says Harper. He suggests that vendors begin investing more MDF monies through distributor-based programs, because the distributors are close enough to the resellers to ensure that the money is wisely spent.
Finally, the current economic turbulence adds yet another wrinkle to the SMB conundrum. Some vendors have substantially changed the terms of their programs or have reduced support. Anthony Harbour, president of Richmond, Va.-based solutions provider Harbour and Associates, recently had a vendor pull a $20,000 line of credit. License Online informed the firm that it would no longer offer net terms to any of its partners. Harbour says his company has subsequently shifted much of its software business to Ingram Micro. Harbour and Associates, however, still maintains a link to License Online on its Web site for customers who want to make purchases through the vendor.
Fixing Faulty Programs The SMB situation isnt a complete loss, however. Solutions providers responding to the AJS Group survey gave vendors decent marks for post-sales support (6.8 on a 1-to-10 scale) and the ability of their products to solve an SMB problem (rated at 7.1).
The weak link, according to Szilva, is the vendors inability to help solutions providers market their products. She suggests vendors design marketing collateral to focus on the business owner—the typical SMB decision maker—rather than the customers IT managers or end users.
Szilva also recommends “plug-and-play” sales and marketing programs that solutions providers can readily customize.
Programs along those lines already exist. Distributor Westcon Group (www.westcon.com), for example, runs Tele Track and Web Track, which keep its solutions providers informed about product developments and sales strategies. In addition, IBMs PartnerWorld program (www.ibm.com/partnerworld) includes Campaign Designer, a Web-based tool that lets partners create direct-mail pieces, Web banners and print advertising.
Harbour says he likes programs where he can place an order for postcards, customize the message, and do mailings. He also cites Microsofts Security Services Partner Program, which provides a monthly conference call to go over recently released security bulletins.
Vendors are “starting to wake up a bit,” Szilva notes.
In the meantime, Chris Labonne, president of Atlantic IVR Inc. in Blacksburg, Va., says solutions providers must do their share to make alliance programs work. If a program offers leads, Labonne advises companies to follow up on them—even the dubious ones. “You have to earn your leads by following up on the ones they give you,” he advises. “You have to give back to the partnership, as well.”