What's in a name?

Vendors who focus on SMBs could be missing out on a slice of the pie because of poor market definition.

commentary Vendors who focus on SMBs could be missing out on a slice of the pie because of poor market definition.

The packaged business application vendor community is aglow with possibilities that the small and medium business (SMB) market has for future of their industry. The impetus now being applied to customers once relegated as "nice to have if we have the time" is driven by the saturation of Global 2000 companies and a belief that SMBs present a vibrant opportunity.

The result has been a significant upheaval as vendors large and small redesign products, alter go-to-market strategies, and undertake acquisitions to appeal to SMBs. And what for years has essentially been noise is now starting to come together into meaningful solutions.

SMBs are bound not so much by a similar set of needs, but rather by a similar set of constraints.
Regardless, many IT organisations (ITOs) are ignoring these trends because they 1) do not see themselves as being a small or medium business; 2) associate SMB business applications as a compromised solution; or 3) are sold "enterprise" solutions due to the vagaries in the way business application vendors define their sales territories. The result is a disconnect between a growing community of vendors that are starting to develop relevant products and strategies and ITOs which can benefit from these endeavours.

What underpins this gap is nomenclature. SMB is a term essentially borne out of a process of elimination -- it refers to the organisations that were neither Global 2000 nor public-sector accounts. It is inherently vendor-centric. Missing from the definition is a common set of needs and requirements of these customers.

Yet there arises a common thread among this segment. SMBs are bound not so much by a similar set of needs, but rather by a similar set of constraints. Whatever the expected outcomes from a business application may be, these organisations must achieve their results with a fraction of the capital expenditure, dedicated IT staff, and post-implementation operational budgets traditionally associated with packaged business applications.

As this reality sinks in ITOs will start to dismiss any coincidental mappings to a vendor's SMB segmentations. They are arbitrary and focused on vendor-specific sales outcomes. Instead they will see themselves as resource-constrained organisations (RCOs).

If you're thinking that new three-letter-acronym is a little too inclusive, well you're right. It's meant to be since RCOs are not just found among discrete SMBs. Today many large companies have federated business structures. With their focus on unit-level results and the ongoing challenges in determining IT charge-backs, these semi-autonomous business units are also RCOs.

In fact, while many business application vendors have been talking about SMBs, it's the federated enterprise that is the real focus. Second tier vendors have for years targeted these organisations as their tier one competitors focused on the mega whole-of-enterprise deployments. Now, the big boys are being forced to respond.

What's important to note is that the products which are appealing most to this audience have been blending both the latest technology with an over-riding focus on simple and flexible design. Upfront and ongoing costs are lower.

Ultimately, RCOs will create their own blend of best practices to leverage the lower capital, staff, and operational resources required by these products. By achieving similar business results under these conditions RCOs will become thought leaders, providing real alternatives to complex and centralised application deployments.

Brian Prentice is a senior analyst with META Group and focuses much of his industry research and analysis on the trends effecting the uptake of business applications by organisations with revenues below US$1 billion. Email edit@zdnet.com.au.

This article was first published in Technology & Business magazine.
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