Software Firms Modify Models to Woo SMBs

Small and midsize businesses are in the driver's seat when it comes to dealing with CRM, ERP, and supply chain software providers. With the enterprise market nearly saturated, a new study shows that software providers are modifying their business models in an effort to attract small and midsize business users and expand their market share. According to a recently released study by META Group, the effort to woo SMBs is expected to continue through 2005. META Group considers SMBs to have fewer than 1,000 employees. Many providers use annual revenue under $1 billion to classify SMBs, while others say the SMB market comprises companies with under 500 workers. Although the term SMB is far-reaching and oversimplified, there is total agreement that it is the fastest growing space, especially in the CRM market. Over the past year-and-a-half, many enterprise CRM providers, including PeopleSoft, Siebel Systems, Oracle, and SAP AG, have delivered products aimed at the midmarket. The study shows the changes needed include adjustments to technology, product lines, selling techniques, and pricing models to cater to the special needs of SMBs, which often have less IT resources. "Vendors must not only look at how to cut costs to appeal to SMBs, but how to deliver process-centric applications, not component-centric applications, to that market," says Carl Lehmann, vice president with META Group's technology research services. Vendors will also need to deliver on TCO, and assure users of local resources, such as value-added resellers, that are available to support and service users, according to Lehman, who says that the flip side of the equation is that as vendor business models and selling strategies change, SMB buyers will have to improve their negotiating skills--they must be adapted to include understanding of flaws to thereby get the best deals from vendors that offer complete or partial software, services, and maintenance proposals. Lehmann also notes that many SMB buyers focus on software functionality and fail to adequately address the implementation services or maintenance charges associated with an IT project.