Selling to SMBs: Revealing the secrets of SA`s IT channel

Today, most vendors acknowledge the importance of small to medium businesses (SMBs) in the South African marketplace.

Not only are these companies growing in significance - with more than 50% of all IT expenditure emanating from them according to no less an authority than IBM - but their role as IT innovators is becoming evident.

In broad terms, the SMB market can be defined as businesses employing between 20 and 499 employees. However, in SA, SMBs are also associated with small office, home office (SoHo) organisations.

The SMB market may also be defined in terms of vertical markets (retail, distribution, manufacturing, etc) and horizontal markets (by size, hardware and software installed, services used, IT staff size, etc).

An important characteristic of the SMB market is its diversity; there are no neat, "one-size-fits-all" solutions to the business and administrative problems faced by SMBs.

For example, SMBs need to find ways to manage the very real risks associated with competing against bigger, more established players in their many markets - and at the same time adopt solutions that protect themselves from the vagaries of these markets.

They need cutting-edge technologies to give them the advantage to compete on national and even international stages, yet they are particularly vulnerable to SA`s poor telecommunications infrastructures.

These paradoxes point to their increasing need to gain access to appropriate expertise to address these issues. They also support the position of many market watchers: the SMB market is fertile ground for innovation on many fronts.

For IT vendors looking to reach this market, an important question arises. Is this market suitable for the application of the conventional "three-tier" channel distribution model?

Are traditional, compartmentalised vendor-distributor-reseller relationships able to meet the challenges of the SMB market, which is recognised as very price conscious, brand agnostic and results driven?

In any selling environment, a number of elements must be present. These include the ability to:

* Perform detailed needs analysis.

* Give the potential customer access to system design expertise.

* Deliver product selection advice.

* Demonstrate implementation knowledge.

* Provide on-going support and training.

Who is best equipped to deliver these services to the SMB buyers? More importantly, are all these services available from any one individual organisation?

There are probably no more than a handful of vendor organisations in SA capable of delivering this level of service to the SMB market that is not yet viable enough for this level of focus by the "direct touch" sales personnel in these organisations, who are generally tasked with addressing the large enterprise market.

In addition, vendors are geared towards the volume purchases of their distribution partners and meeting the unique challenges that specialised selling to this market entails.

Traditionally, distributors are tasked with identifying and cultivating appropriately skilled resellers while providing basic logistical support.

Many distributors are, in effect, "box-droppers" and their efforts are geared towards providing support to the reseller base - not the end-user.

In fact, if an end-user interface is maintained - and this is unlikely - it is usually under sufferance. The distributor community usually sites the lack of "volume purchases" as the underlying reason for tardy service and support for any end-user - particularly the SMB.

This leaves the reseller. There is no doubt that the reseller`s function is to interface with the end-user and install and commission the products associated with its sales. Technical expertise is a key requirement, as is a suitably staffed and skilled support team.

This looks good on paper. However, working off tight budgets and with competition rife, many resellers ignore SMBs because of the "hassle factor" associated with small value purchases generally made by this sector. The SMB`s poor brand and supplier loyalty also play a significant role here.

The failure of traditional channel structures to effectively address the needs of SMBs has driven many to opt for the "do-it-yourself" retail route. Success here has been limited because few SMBs have the necessary expertise to implement over-the-counter solutions.

A door has been opened for the so-called "freelance" IT support consultant. But poor support and the opportunistic nature of the service provided has dulled many an SMB`s enthusiasm for this option.

The answer seems to be in alliances. Increasingly, vendors, distributors and resellers are getting together to formulate sales strategies targeted at the SMB market.

They are looking at the available profit margins and taking a pragmatic and realistic approach to splitting them between themselves in the belief that the SMB market can become viable if volumes of scale can be realised.

Technical support is a key issue. While all members of the channel realise that technical support can no longer be free - it must be paid for somehow - the best solutions for SMBs are available from the growing number of alliances or partnerships that have been formed by like-minded industry players.

This trend has created significant opportunities for value-added distributors - once said to be a dying breed.