IBM Corp has launched a series of new products and services designed to give it a greater share of the $500 billion spent annually on technology and related services by small and medium-sized businesses.
As part of the initiative, IBM said it has increased its number of SMB-specific Express solutions by 24 to about 100, including its new Power5 servers, warranty on-site support services, and financing packages.
IBM is also incorporating virtualization technology as part of its SMB server range to help SMBs improve the flexibility of their IT assets, and move towards IBM’s notion of on-demand computing environments, according to Julian David, VP for SMB EMEA at IBM.
Most SMBs are not interested in technology, they want to buy something that has a clear benefit for their business, David told ComputerWire. They have been using flexible financing packages for their fixed IT assets, and now want a more flexible infrastructure. Instead of buying lots of individual boxes, they want a single server that can scale for peaks or growth in their usage.
IBM defines the SME sector as companies with less than 1,000 employees, and subdivides this into two areas: small companies with fewer than 100 employees, and medium-sized companies with 100 to 1,000 staff. Within the SMB space, IBM focuses on the distribution (retail and wholesale) manufacturing, financial, and professional services sectors.
IBM grew its revenue from the SMB space by 14% in 2003 to $19.8 billion, making it the company’s second fastest-growing industry group, and accounted for 22% of IBM’s total sales. However, IBM ranks only second among the SMB’s largest IT suppliers behind Hewlett-Packard Co, which made $21 billion of its $72 billion in annual revenue in fiscal 2002 in the SMB space.
HP is currently plowing $750 million into SMB initiatives as part of its Smart Office program. The vendor wants to energize the 210,000 partners it has and figure out a way to compete in the SMB space that is more effective in terms of winning business and profits than just trying to sell desktops, laptops, servers, and printers to SMBs.
The attractions of the SMB market are clear. A report by New York-based Access Markets International Partners predicts that IT spending from SME companies worldwide will grow 13% in 2004 to $528 billion in 2004, based on a survey of 5,000 SME companies. AMI expects spending on new PC hardware to grow 14%, with PC shipments to SMBs growing 17% to 71 million units in 2004.
IBM makes the vast majority its $19.8 billion SMB sales through its huge channel of 90,000 resellers, and David said this will remain crucial to IBM’s growth in this area of the market.
SMBs like to buy from small businesses that understand the world from their point of view. Some 65% of the IT spending of medium-sized companies goes on solutions, and we need partners to help us to put together the parts of the solutions that we can’t supply, said David. He also cited recent research that the company undertook with accountancy software vendor Sage Plc, which found that more than 70% of SMBs buy their IT requirements from a company based within 50km of their office space.