Servicing the small to midsize business (SMB) market is a hot topic today for most SSPA members. These customers sit somewhere between the consumer and enterprise customer set and offer a really big opportunity for both sales and service revenues. Our friends at Warrillow & Company tell us that there are 27 million firms out there that are in need of technology products and services, so it makes sense that most companies are trying to find a way to expand their current offerings and reach these buyers. Also, this segment is growing rapidly while the enterprise customers are shrinking due to consolidation. So what is the big deal with the SMB marketplace? Why is there a gold rush to acquire these small and medium customers? And most importantly, what are the challenges in supporting them?

First, the SMB customers are really diverse in scope and are located everywhere. This could be a one-man home office or a 500-person company, but both of these examples fit into the SMB market. In other words, if you are not a consumer or an enterprise account, then you are an SMB. It takes a lot of time and energy to find these customers, and the typical product sale is relatively small, so we have to make up the difference in volume activity if we are going to be successful. That’s right, just what you need, more customers with more support issues clogging up the phones and an avalanche of e-mails and Web requests. But wait, it gets worse! These “little” customers have really high expectations for service and are typically in a “system down” condition when they cry for help. This means that more pressure is going to be placed on your support infrastructure to be more responsive to their needs and to get issues resolved quickly. But the big issues still remain; can we actually make money supporting the SMB marketplace?

Recently, the SSPA has established the SMB Marketplace Community of Interest to take a deep dive into the essential elements of servicing the SMB customers. In our conference calls, Web forums, and face-to-face meetings, we’re starting to peel back the onion, and it is not looking so good. One of the first challenges we faced is to try to determine exactly what an SMB customer looks like. At first, this seemed like a very simple task, but it quickly got more and more complex. The “really” small SMB customers are, well, really small and typically don’t even have an IT person on site. This means that they look a lot like consumers when we try to support them. On the other hand, the really big medium-size companies look a lot like our enterprise customers, except that they cannot afford to pay the high fees for maintenance or service. So the question then is; “How small is small, and how big is medium?”

We came to the conclusion that there are really three distinct types of SMB customers—small, small/medium and large/medium—and each one has to be treated differently. Although there are several ways to segment this market, we found that there were three key attributes that could help us determine which bucket to put the SMB customers in. First, the number of employees can help us determine the type of services required, but we could also use total company revenues as an indicator. Also, we could look at the IT staff and skill set as another indicator of how small or big any particular customer is. The one thing that we know is that one size does not fit all when it comes to SMB service and support.

In addition to identifying the customer attributes, we need to understand how we service each of these specific customer segments and still maintain the service revenues and margins that we have grown accustomed to. Once again, each customer segmentation needs to be treated differently, and service offerings must be adjusted to fit the needs and our budgets. For example, we can probably support the large/medium SMB customers by compressing out existing enterprise service offerings into some type of “service light” package, but this will not work for the really small customers who can’t pay the fees. Of course, discussions about using resellers and channel partners always come up when we are talking about geographically dispersed smaller customers, but the service margins are just about as small as the customers themselves. So, even though the analysts are telling us that the SMB buying power will exceed $500 billion, we are still struggling to put together a service plan that is cost-effective for both the customer and ourselves.

In recent meetings with the SMB Community of Interest, we generated more questions than answers, but, that was expected. As we move forward, we will continue to identify key issues in supporting this expanding marketplace and collect input from those companies who are ahead of the power curve and have already established a solid SMB service strategy. If you are one of those people who have this all figured out, or if you just want to learn more about the SMB service challenges, then send me an e-mail, and I will get you involved in our ongoing discussions.

About Bill Rose……………………………….……….…………..………….
Bill Rose is vice president of services research for SSPA and AFSMI. He may be reached at brose@thesspa.com.