albert's analysis: Can IBM's "B" Stand for "Small" Instead of "Big"?

Although I've said it before, it can't be emphasized enough. The Small and Medium Business market (which I'll call SMBs) is growing rapidly in the U.S. and abroad, and remains critical to IBM and the AS/400's success.

But by the very nature of the market (defined as businesses with 1,000 or fewer employees) it can be elusive -- especially to a monolith like IBM, that no longer has the "blue suits" to call on these customers individually.

So, IBM has begun out of necessity (and wisely) to deploy programs and alternate channel initiatives to reach those customers (going beyond its traditional hardware and software products) with the same aggressive focus on services and total solutions that IBM is promoting companywide.

As I mentioned in my first column on SMBs (Nov. 30, page 43), IBM took a major step two years ago by creating a Business Partner Charter – designed to empower its business partners so they, in turn, could deliver world class solutions to SMBs. In essence, Big Blue created its own "channel-centric" model, helping its distribution partners better deliver IBM goods. It also embraced joint marketing initiatives with its business partners, to help growing customers in the wholesale, retail and manufacturing industries.

That approach seems to be working and is also quite necessary, to compete with fierce rivals in this market such as Microsoft, Compaq and Dell, to name just a few. But there's a part two to IBM's strategy to reach SMBs by providing expanded e-business solutions.

As recently as this past September, IBM staked its claim as a leader in e-business in the small and growing business arena. It did this by announcing a broad expansion of e-business packaged services – one highlight being the on-line activation of ServicePac, IBM's packaged technical support for SMBs (also called eServicePac).

The goal? To level the playing field by helping small players compete with larger enterprises. IBM knows it must embrace its SMBs; indeed, a good number of them will likely be those large enterprises of tomorrow. By helping them on their way, IBM stands to build long-standing customer loyalty to boot. That approach is certainly hard to argue with.

Clearly, IBM is backing this strategy with a lot of muscle. Keenie MacDonald, general manager, SMB, IBM Global Services, boasts that ServicePac is among the first packaged technical support packages for growing or emerging businesses. She says it provides benefits like on-site repair or exchange capabilities, 24 X 7 activation of services and global access.

There's also an Internet Starter Kit for growing businesses, a Content Hosting Kit, and a Domino Hosting Kit with bundled e-business services for a monthly price.

Dataquest, a nationally recognized market research firm, expected the SMB market to grow at a rate of 31.7 percent this year – the strongest growth of any major segment. That number translates to 8 billion units of product shipped annually, or more than $18 billion in factory revenue: not a market that IBM, Microsoft, Compaq, et al, or any serious competitor can ignore.

The SMBs are a certainly a terrific, yet very diverse group, and they resist any kind of label to define their technology needs. IBM seems to know this, and is putting a lot of money and management muscle behind its push to serve this difficult market. Now let's see if good execution of IBM's SMB plan pays off.

Sam Albert is president of Sam Albert Associates (Scarsdale, N.Y.), a consulting firm that specializes in developing strategic corporate relationships.