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Mile-high view

While humble contracts to small firms are not headline material, they are the linchpins of a profitable business. Small clients will spend $200 billion on IT this year, up from $150 billion in 1999.
Written by David Hakala, Contributor

Our industry has had fun building the "Internet economy" these past three years. Who wouldn't enjoy the challenges and sheer novelty - not to mention the extravagant VC money - of creating a Priceline, a Petopia or a Modo.net?

Oh, you missed Modo.net? No wonder; that urban entertainment guide folded just 50 days after its founding. (Ironically, it was the day before Modo.net's launch party which, we assume, turned into a wake.) Petopia just laid off 60 percent of its staff. Priceline's woes are well known.

In contrast, no client has ever stiffed Mnemonic Computer Solutions, this week's featured solutions provider. Mnemonic (nee-MON-ik) owners Shane and Tony Nejad attribute that singular sign of success to old-fashioned values. "We pay close attention to each of our clients' needs and try to educate them and find solutions that will work for them. We don't believe in overselling."

Mnemonic's clients are old-fashioned small businesses. All of them have 40 or fewer employees. None of the four customers I interviewed spends more than $5,000 per month with Mnemonic. Their needs are similar and simple: "Keep our IT systems running smoothly and help us be more productive." Typically, say the Nejad brothers, that requires a DSL line, a firewall, a VPN, remote system maintenance, an e-mail system and a Web site.

While they're not headline material, such humble contracts are the linchpins of a profitable business. Small clients like Mnemonic's will spend $200 billion on IT this year, up from $150 billion in 1999 according to a recent Cahner's In-Stat report.

"More companies are becoming what I like to call 'digitally intelligent,'" says Tony Nejad. "They're moving from a Rolodex, to a simple contact manager, to an Exchange or Notes workgroup collaboration e-mail/calendar system, and wanting them synchronized with handheld devices that access e-mail remotely."

Add voice-over-IP to that list of opportunities. The same In-Stat report predicts that communications and networking spending will grow from about 35 percent to more than 38 percent of small business IT budgets this year. More than 40,000 voice-over-DSL lines will be installed by year-end, 100,000 by the end of 2001 and 1.4 million by 2004, according to telecommunications consultants at TeleChoice. Most of those VoDSL lines will go into small businesses.

Millions of small businesses will need what you sell during the next few years. Are you ready? Don't expect much help from your top-tier partners, who are big enterprises geared for other big enterprises - or for dot-coms with lots of other people's money.

Selling to really small businesses like Mnemonic's customers requires a radically different approach. You have to emphasize frugality, functionality and added value over massive scalability, bleeding-edge technology and coolness. The right product at the right price may not be available from dominant vendors. You'll need to find smaller partners to serve small businesses properly. Your business methods will have to become more efficient too. On-site service calls will yield to remote maintenance over broadband lines. Self-configuring appliances will reduce installation costs.

Denver-based Dave Hakala is Sm@rt Partner's senior editor for networking. He can be reached at david_hakala@ziffdavis.com.

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