IT services target small businesses

Startups help fill outsourcing niche.

With the pool of larger outsourcing deals drying up, IT managers with a few dozen desktops are being courted with a zeal once reserved for large corporations.

This new focus on small and midsize corporate customers is fuelling two California-based startups running neck-and-neck to roll out comprehensive IT outsourcing packages specifically for smaller businesses.

Everdream and CenterBeam offer everything from PCs to Web access to tech support to hosted applications, all for a single monthly fee. These startups are hoping to get a jump on vendors such as IBM and Dell Computer, which are busy ramping up PC-based service offerings for smaller companies. "In my former life with other companies, this market that Everdream has gone after, you used to just skip over," said Tom Jones, a 20-year IT veteran and CEO of StrataSource, an Everdream customer.

Everdream and CenterBeam boast similar services with slightly different prices and delivery models. In addition to PCs, Web access and technical support, customers can get bundled business applications, such as email and spreadsheets, along with online backup. Businesses can either start from scratch or work the services into their infrastructures.

Everdream is targeting its service -- priced at $150 (£93) per seat per month -- at businesses with fewer than 20 desktops, said Gary Griffiths, CEO of the startup. CenterBeam, which targets customers with 10 to 100 seats, uses wireless LANs and digital subscriber lines as key components of its service, which costs about $165 per user per month.

Both companies are backed by impressive venture capital and have veteran IT management at the helm. CenterBeam was founded by Novell and USWeb/CKS veteran Sheldon Laube. Everdream's Griffiths is a veteran of IBM and was a member of the ThinkPad development team. Both companies are testing their services in California and expect to roll out their offerings across the United States next year.

The services answer many of the challenges smaller businesses face, particularly a lack of internal IT skills and the prohibitive cost of new applications, Strata Source's Jones said. "This idea that you can get a PC provided to you and get the service with that PC... to me, that just rang crystal clear," Jones said.

The small and midsize markets represent a landscape currently underserved by IT vendors, said Matthew Nordan, an analyst with Forrester Research. But that's likely to change soon. "I think CenterBeam and Everdream will be victims of their own success," Nordan said. "They found a hole in the market, and they're filling it, but [their model] can be easily replicated."

IBM, for example, announced last week its Small Business Web Connections unit, a subscription-based program that includes bundled hardware, software and service. Dell, for its part, offers components of an end-to-end service package, but not a single, complete offering, said Gary Cotshott, vice president of services at the Round Rock, Texas, company. "The whole idea of a per-seat environment may continue to be more attractive, and Dell will respond," Cotshott said.

For now, both vendors are banking on their early entrance in the market to win customers. Melanie King, CenterBeam's vice president of marketing, said she is undaunted by looming competition. "This is not in [large vendors'] business model," King said.