It looks as if IBM will also be making a big push into the SMB market that CPQ and Dell have targeted....
Regards,
John
IBM sets small business as new target
By Brooke Crothers
Staff Writer, CNET News.com
May 4, 1999, 10:45 a.m. PT
update IBM is set to announce sales initiatives and a massive marketing
campaign to raise its profile in the computing industry's important small-business
market.
IBM will marshal a panoply of existing products and services and fuse these with some
new ones to target "very small businesses" with employees of 100 or less, according to
IBM executives. The programs will be tied closely to the Web, where Big Blue already
offers many e-commerce software products and services. IBM will back the initiative with
a $100 million dollar marketing campaign as it begins a full-scale assault on companies
like Gateway, Dell Computer, and Micron, which benefit heavily from online direct sales.
Big Blue's interest in small business reflects the industry's growing emphasis on this
market. With competition for large corporate customers becoming more fierce, small
businesses, which have in the past been served by a variety of manufacturers, are
increasingly seen as a lucrative opportunity for "name-brand" PC makers. Both HP and
Compaq Computer have released dedicated small-business product lines. Micron,
meanwhile, has targeted nearly its entire corporate strategy on these customers.
Next week, IBM will also announce a product for building and managing an electronic
"virtual" storefront using its AS/400 business computers.
IBM is ranked No. 3 in the small-business market based on the percentage of these
businesses that own a particular company's product, according to International Data
Corporation (IDC). IBM is behind Gateway, ranked No. 2, and Compaq, which is No. 1.
"A lot of people think that IBM is a big business for big business. We want to change this
perception," said Judy Smolski, vice president of small and medium business marketing
at the personal systems division.
The strategic move also calls attention to IBM's positioning of its Aptiva line of consumer
PCs firmly in the small business market, where profits tend to be higher compared to the
ruthless price-cutting competition in the consumer retail market.
One of the main pillars of the new program is CustomConnections, a tool for organizing
the Web. Using it, a small business could get, for example, personalized news and
Internet-based market research and access to information on public relations, customer
service, and computing, legal, and financial resources, IBM said.
In addition to using traditional computer resellers, called VARs, IBM will target customers
directly via the Net and through retailers such as OfficeMax and CompUSA. Big Blue will
also recruit IBM business partners--businesses authorized to offer IBM products and
services--to support very small businesses and link them up with customers.
Analysts say that while IBM has been selling to small businesses for a long time, this a
much-needed crystallization of strategy in a market that is estimated at about $50 billion
in the United States and close to $140 billion worldwide, according to IDC. The market is
also growing at a pace that is about three times the information technology market in
general, according to IBM.
"The message seems to be that they have finally gotten it together. IBM has kind of been
there but not with an overarching strategy, not with a philosophical underpinning. But this
is finally emerging," said Ray Boggs, an analyst at IDC.
Trying to demonstrate IBM's existing strengths, Peter Rowley, general manager of IBM
Global Small Business, said that IBM's Web site already provides access to "diverse
products, services and solutions, as well as online consulting and education programs."
Highlights of the sales initiatives include:
A leasing program that offers financing on hardware, software, and services priced at
$1,000 or more.
A host of support options and education and training programs that can be offered at the
customer's site or remotely via the Net. IBM cites a program that entitles a small
business to attend unlimited IBM public classes or conferences for one year at a fixed
rate. "Online experts" are also offered as part of the package.
In an area where IBM is already strong, Big Blue offers a number of e-commerce tools to
help businesses use the Web for communication, collaboration, and commerce. An
interactive Web site, for example, provides information, consulting advice, and
assessments of a company's ability to compete on the Web.
The PC-based IBM Small Business Internet Solution includes an IBM PC with modem
and monitor, IBM Internet Connection Services, IBM's Startup for e-business, and Home
Page Creator software applications.
The Client/Server Network Solution provides a "turnkey" networking solution for growing
businesses. This comes with a IBM Netfinity server, Lotus Domino Intranet Starter Pack
software, and other hardware such as network interface cards, hubs, tape backup drives,
and modems.
IDC's Boggs said that IBM has both a promotional and technical advantage with its
e-business strategies. "They have diverse capabilities, redounding to their benefit.
Here's an area where it's not a negative to be big."
IBM's move also comes at a time when Compaq, another Goliath pushing
forcefully into this market, is grappling with managerial changes and there is some
doubt in the marketplace that "maybe everything isn't working out as well as
planned," Boggs said.
Smolski emphasized that the Web is important for small businesses since it
allows them to expand instantly outside of their local areas. "Currently, maybe
they have email. The next step is to communicate with customers and suppliers
with the Internet."
Smolski also said that the Aptiva line is an important part of IBM's small business
product line since this is the reason many customers buy Aptivas.
National retailer OfficeMax offers a line of snazzy, well-designed Aptiva PCs that
are noticeably different than some of the consumer PCs IBM has offered at other
retailers such as CompUSA. IBM is also expected later this year to cut a deal
with OfficeMax where it sells IBM PCs exclusively in certain locations. In the
future, IBM may also set up a store-within-a-store at some OfficeMax outlets.
But the challenge of selling to small business is clear. "You are rabbit hunting as
opposed to big-game elephant hunting," said Boggs.
IBM agrees. "We have to be efficient about how we do it," said Smolski.
Boggs says the trick is "touch them once and make them very happy" so they will
come back. He points out that no PC maker can afford to spend too much money
serving a customer since very small businesses may not end up buying very
much.
Boggs is also quick to raise the specter of Dell, which sells directly to small
businesses. Many small businesses like the direct approach--which is not an IBM
hallmark. "There is strong brand loyalty in this market. Gateway has done well
with this [too]," he said. |
