Security spending a double-edged sword
US-based Gartner Research told Microsoft partners at this month's worldwide conference that security is both the biggest influence and the biggest handbrake on global IT spending among small and medium enterprises.
"Security is the bumper spending area for this year, followed by compliance," says the firm's vice president of small and medium business research, Bob Anderson. "Cost reduction [the third-biggest influence on IT spending habits in the space] is perennial but security and compliance have overtaken them.
"The security driver is also the biggest inhibitor. SMEs are so set on getting their security house in order they minimise spending in other areas."
Gartner defines small businesses as those with 25–99 seats, and midmarket businesses as 100–499.
Security software stood out in the firm's analysis of big growth areas in SME spending, along with storage, server upgrades and consolidation, virtualisation, voice over IP and WAN upgrades.
Global statistics Gartner presented to the approximately 150 assembled partners highlights how different small and midmarket sales opportunities are.
It finds only 25% of small business worldwide have servers, 30% have LANs (local area networks), under 20% WLANs (wireless LANs) and under 20% VPNs (virtual private networks). By contrast, 90% of midmarket firms have servers, over 90% WLANS and over 70% VPNs. A high proportion of small businesses host their own websites, while only about 30% of midsize businesses do.
Anderson told partners that particular verticals are on the rise globally — financial services, local government, manufacturing and healthcare. However, more mature markets such as wholesale distribution spend more on upgrades and present opportunities for partners to upsell.
He also said it was important for partners to fully understand their customer's industry, present case studies of work done with customers of a similar size and market to potential buyers. Benchmarking and partnering with others on solutions was also recommended.
There was also opportunity to work with companies who offered customers complementary products and solutions, Anderson said.
“When you become the trusted advisor, you can help partners sell into that business. The customers will ask you who you recommend and you have the choice to refer complementary solutions.”
Anderson stressed SMEs did not like to be "oversold".
"It's better to give the product away and build a track record. Give them what they need to solve their business problem — no more, no less."
SME market growing
Microsoft midmarket manager John Lauer was another to highlight opportunities for partners specialising in the SME space, and says the segment accounts for about half of its global revenue.
Lauer says enterprise revenues outstripped SME business as recently as three years ago, but the latter has been growing since.
He says there is a chance for Microsoft partners to grow their business as customers migrate to Office and Vista.
"There are 600 million Windows users and 400 million users of Office. There are tremendous opportunities for resellers as customers refresh their products."
Microsoft has experienced very strong growth in annuity revenue, says Lauer, and there is the potential to garner $5 billion worldwide from this.
Software as a service is also a chance for partners to increase business, through customisation in CRM Live. He agrees with Gartner that partners needed in-depth knowledge of a client's business to succeed.
"The cool thing is we've built CRM Live with partners in mind and they can customise it for their customers," Lauer says. "Resellers make the bulk of their revenue around services and it's how they take it and adapt it for manufacturing, the local chain store or any industry. That's where customers need someone with the industry knowledge to back it up."