By Matt Donnelly, associate editor
Most IT vendors have been flocking to the small business services market over the last two years, forcing the value-added resellers (VARs) in that market either to become trusted advisors to their customers or face replacement. In order to become trusted advisors, VARs have to keep up with the demands of changing networking and security landscapes while keeping their focus on building relationships with customers.
Unlike enterprise or even midmarket customers, small businesses typically have few if any IT staffers. The U.S. Small Business Administration (SBA) defines a small business as having fewer than 500 employees, though IT vendors define the market so broadly that “small” could mean five employees — or 1,000. Either way, the small business services market is rich; the SBA estimates that 45% of annual U.S. private payroll passes through them.
Some VARs, like eMazzanti Technologies, a Hoboken, New Jersey-based VAR that also provides consulting services, have already capitalized on the opportunity. “We saw that there was this big market in New York City of small, growing business that were on their own,” said Jennifer Mazzanti, president of eMazzanti. “There was just this demographic where they didn’t have their own IT people. They needed an outsourced IT solution.”
Just last month a survey commissioned by Dell and the International Council for Small Business (ICBS) revealed that while two-thirds of small businesses accepted that security was important, almost half said they had no trusted advisors when it came to IT. And yet a recent report on small business IT services clearly shows the time-saving and cost-saving benefits for SMBs when they do outsource their IT: 54% spend only 5% of their budget on upkeep of their IT infrastructure.
Just what is a trusted advisor? “Highly effective leaders trust advisors to help them explore new ideas and discover critical solutions,” wrote David Peck, founder of San Francisco-based Leadership Unleashed, in BusinessWeek. “The candor, talent, expertise, and heart of those we choose will help illuminate our blind spots and navigate the road ahead. Indeed, people without an advisor operate somewhat in the dark, lacking healthy, outside perspective.”
|There was just this demographic where they didn’t have their own IT people. They needed an outsourced IT solution.|
It seems that now, more than ever, the small business services market needs trusted advisors, and VARs are poised to fill that role. “The number one cause of a disaster in this market is human error,” according to Julie Parrish, vice president of enterprise, mid market, and channel marketing for Symantec. “If Bob loses the backup tape he made two years ago, you’re sunk. All of the data shows customers are worried about these things, [but are also] worried about cost or complexity.”
Parrish adds that Symantec does offer in-house consulting services, but isn’t geared toward small or midmarket businesses that require simple, low-cost solutions. “The customers in those markets aren’t coming to us,” she said.
The most important consideration for the small business customer when engaging a VAR is a pain-free solution that streamlines operations, relieves pain points, and allows them to control and predict monthly IT outsourcing expenditures, preferably through a fixed-cost managed services agreement.
“Customers absolutely are looking for someone who can help them from a strategic path. I think they can sort of ferret out who’s coming to them from that perspective and who’s not,” said Michael Halpern, a security expert at Westborough, Ma.-based IT consultancy Akibia.
Becoming a trusted advisor can be complicated for VARs because some small businesses have had prior dealings with vendors (25% according to the Dell/ICBS survey) and consultants (22%). Rather than seeing vendors or consultants as competitors, these prior relationships present an opportunity for VARs to establish mutually beneficial business partnerships. “When we partner with a consultant, one-plus-one actually equals three for the customer because they get a lot more visibility into what they’re doing [regarding IT],” said Vinny DiSpigno, CEO of Long Island-based VAR Webistix.
To become that trusted advisor – according to Michael Hommer, manager of engineering at the Cranbury, NJ-based network testing and consulting firm Miercom – VARs need a dose of humility and a willingness to work closely with others to get the additional informational or technical resources they need.
For example, a VAR that installs a voice over IP (VoIP) system for a customer may be stumped when it lags across the WAN, and may lack the skills for complex network reconfigurations.
But treating a small business services consultant with those skills as a threat makes the job even harder, Hommer said. VARs have to allow others to share the trusted advisor role.
“Both are trusted advisors — VARs earlier in deployment cycle, helping client make product decisions, deploy, introduce [products] into their [network] environment. In other aspects of your deployment, and [regarding] operational considerations, a consultant will be a trusted advisor.”
Meanwhile, networking vendors and security vendors, seeing a large market in small business services, have begun to pay increased attention to the SMB space. They’ve done this mainly by recruiting and working with and through channel partners.
“The SMB [space] is hugely, hugely important to Symantec,” said Parrish. “If you look at some of our primary [small business] product lines, we have No. 1 market share. We’re not a vendor that woke up one day and said ‘That’s a very important market. Let’s go after it.’ We’ve invested hundreds and hundreds of sales resources in last few years specifically to [serve] partners that call on this space.”
In January, security vendor McAfee resegmented their channel program to distinguish between small (up to 100 employees), midmarket (up to 1,000 employees) and enterprise (over 1,000) customers. “Service providers had different business needs and requirements,” said Dave Dickison, McAfee’s senior vice president of North American channel operations.
Al Monserat, Citrix’s global channel chief, expressed his company’s focus on small business services in terms of trusted advisors and trusted partners: “We want to be the trusted partner for the VAR and the VAR to be the trusted advisor to the customer.” He added that since Citrix is relatively new to the networking space, the company is actively recruiting resellers for that vertical market, many of whom will work with small businesses.
Though it creates friction with some VARs and consultants, who accuse vendors of confusing customers, vendors continue to use direct marketing as a way, they argue, to clear a sales path for VARs.
“On this particular point, [our] partners – whether VARs or consultants – are very schizophrenic,” said Parrish. “They look to vendors to create market demand, but I don’t see how you do that without direct marketing to warm up a prospect.”
Parrish said Symantec is simply “trying to remove [marketing] cost from that reseller” because “I would bet nine out of 10 partners do not have enough marketing resources to run those direct mail campaigns on their own.”
But the increased vendor attention to VARs in the small business services space, according to some analysts, is due as much to cost-cutting and priming sales opportunities as to the fact that many vendors aren’t convinced that VARs are doing everything possible to represent their products.
“A lot of manufacturers now are starting to demand more from their VARs as far as certification and training if you’re going to be able to get any margin whatsoever on [their] products,” said Michael Farnum, a consultant with Denver-based security consultancy Accuvant. “VARs without certification are getting less and less deals. [Vendors] are seeing that their products are being put out there and they’re becoming more and more shelfware.”
On the other hand, emboldened by the attractiveness of the SMB market and their strength as the customer’s advocate, VARs providing small business services are becoming more forceful with prospective vendors and cutting ties with existing vendors they feel are underperforming.
Mike Rothman, president and principal analyst at Atlanta-based Security Incite, said that VARs typically show little patience with unhelpful vendors. “Most VARs operate with a ‘fool me once, fool me twice’ type of approach when it comes to vendors. There’s not a lot of loyalty there.”
Mazzanti said her company made the strategic decision two years ago to become more aggressive in their dealings with vendors. “[We decided] if they’re not making our lives better, they don’t deserve to do business with us. We’ve really narrowed down the partnerships we work with.”
She estimated that she gets 10-15 vendor sales calls a week, but takes on only one or two “large partners” — which she defines as having formal reseller programs — per year. “Vendors have to show us what they can do [for us], and not the other way around.” She cited hosted VoIP provider M5 Networks as having an especially high-quality and useful portal for their channel partners.
In talking with other VARs providing small business services, Mazzanti sees a trend in which vendors are being auditioned by VARs. “I think it’s happening more and more. The vendors are less and less shocked to hear that [strong stance from VARs].”