July 19, 2004 12:02 PM PDT

Smaller firms on Cisco's radar

Cisco Systems is thinking small.

On Monday the networking giant announced a new channel partner program it hopes will help drive growth in the small and midsize business segment. As part of this initiative, Cisco channel partners focusing on customers with between 20 and 1,000 employees will be given a special designation, called SMB Select Partners, differentiating them from partners selling to enterprise customers.

The company hopes the special designation will let customers know that these resellers understand and support networking solutions for small and midsize companies.

"With today's announcement we are entering the first phase of an aggressive, strategic thrust to help our channel partners better deliver SMB Class solutions and increase their SMB market share." Edison Peres, vice president of Worldwide Channels at Cisco, said in a statement.

Before the launch of this new program, Cisco partners were segmented and certified by technology focus. For instance, one supplier might specialize in Net-based telephony, serving customers large and small. But a company with 1,000 employees and one with 200 employees have very different needs and requirements for implementing the technology, said Helen Chan, an analyst at The Yankee Group.

Cisco has been putting more emphasis on small and midsize businesses for a while now. In 2003 it bought the home networking company Linksys. Back in April of this year, it launched the SMB Class Solutions initiative, a special program designed to provide easier-to-use products and new financing and online education to these customers.

Cisco isn't the only technology company courting small and midsize businesses. Other large companies that have traditionally focused on the enterprise market are also interested in them. For example, in the past two years IBM and Hewlett-Packard have introduced products and special programs geared toward this market. And smaller companies such as SSL VPN provider Aventail recognize its potential.

What's all the fuss about SMBs?
Technology giants are taking notice of this market, and one reason is the market's sheer size. In the United States there are roughly 5.6 million small and midsize businesses. These companies make up about 97 percent of the entire business market, according to Chan of The Yankee Group. For the most part, this market is still relatively untapped. For example, only about 20 percent to 25 percent use popular applications, such as CRM (customer relationship management) software, which has been around in the enterprise for years, Chan said. Many smaller companies don't even have servers running on their networks, she added.

A second reason smaller companies are important is because their spending patterns differ from those of traditional enterprise customers. Because they tend to spend more gradually, they're less affected by highs and lows in the macro economy. As a result, a strong SMB customer base can help offset troubles in the enterprise market when the economy fluctuates, despite the often lower profit margins in the SMB market segment than in the enterprise.

In order to serve small- and midsize-business customers effectively, strong channel partners are a necessity, Chan said.

"The channel partner is the key element to the success of any vendor that aims to be an SMB market leader," she said "And vendors must prove they are committed to their partners' success. This means educating, motivating, and helping them differentiate themselves to SMBs and providing SMB customers with proven solutions."

 

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