Consumer tech firms mining enterprise gold

Tech companies which mainly serve the consumer market are increasingly turning to enterprise customers to capture new revenue, but challenges lie ahead as businesses are more picky than consumers when it comes to purchases.

Internet companies, Google and Skype, which started out mainly as consumer-targeted companies, turned to the enterprise market with the launch of Google Apps in 2007 and Skype for Business in 2004. Both companies today have proven to be viable market competitors as Microsoft launched its own hosted apps that target Google Apps users and recently forked out US$8.5 billion to acquire Skype.

Turning up the focus on the enterprise market can yield benefits, as Dell has uncovered.

In its latest financial results released this May, the hardware maker saw its enterprise business grow while consumer revenue drop. Toward the end of 2010, six months before the release of its financial results, Dell decided to shrink its consumer portfolio and the company's CFO stepped up to announce that the enterprise segment is "at the heart of where [Dell is] driving the strategy".

Willis Sim, deputy director of marketing for enterprise sales at M1, shared in an e-mail that targeting enterprise customers brings in a higher average revenue per user (ARPU) as well as many opportunities to upsell services such as managed Wi-Fi, managed security and managed MPLS (Multi-Protocol Label Switching) services. The opportunity to upsell strengthens customer loyalty, allowing the company to become more than a supplier, Sim added.

The Singapore mobile operator acquired Qala in 2009 to beef up its enterprise team and service offerings, he said.

While M1 does not reveal the ratio of revenue coming from consumers and enterprises, he noted that the enterprise segment currently makes up "only a small portion" of the company's overall revenue.

Enterprise challenges abound
Despite the enterprise gold rush, servicing businesses is not without its challenges.

Sim noted that the telco's enterprise customers range from small and midsize businesses, to multinational corporation (MNC) and government agencies, which all have varying requirements. To further complicate matters, each business category may also include vertical segments with their own unique requirements, he said.

"We have to create services that uniquely address the customer's needs, from a pricing or product perspective, and we have to work with our partners in creating a complete solution to be delivered to the enterprise customer," he explained.

Sim added that compared to consumers, enterprises require a higher quality of service guarantee, covering service activation time, availability and other service level agreement (SLA) indicators.

David McCloskey, who is Intel's Asia-Pacific director of product marketing and business operations, concurred. He noted in an e-mail interview that SLAs for enterprises are typically tighter to ensure their business runs seamlessly and that new products and services make it to market smoothly.

In an e-mail interview, Doug Farber, managing director enterprise at Google Asia-Pacific, said a higher level of customer support is needed to service large businesses. To this end, the Internet giant has invested "a lot of time and resources in building up an enterprise-class support program", he said, noting that this includes 24/7 phone support, deployment teams, and on-site support.

Farber noted that the consumerization of enterprise IT had led Google to venture beyond the consumer space into enterprise. "Employees increasingly expect the same capabilities from their work applications as they have at home, which is why we began adapting our tools originally designed for consumers into the world of enterprise," he said.

With users being familiar with Google products such as Gmail and Android, the challenges with serving enterprise customers "aren't as great as [one] might expect", he added.

For Intel, though, the journey began first with enterprise because the early days of desktop PCs and laptops were driven by demand from the business segment, noted McCloskey. He explained that it was only in the late-1990s to 2000s that the consumer market, led by mobile computers, really started "blossoming".

He added that, currently, sales of consumer PCs are exceeding business PCs due to increasing demand for mobile devices as well as affordability, he noted.

That said, he added that it is important for Intel to maintain "a balanced focus" on both enterprise and consumer segments.

"In fact, for every additional 600 smartphones or 122 tablets, we need a data center in the backend to support the infrastructure," McCloskey pointed out.

During Intel's quarter earning report in April, Intel CEO Paul Otellini said the company is "very bullish" about its datacenter business and expects this segment to be a major growth driver for years to come.