Communications and tech companies now recognize the monetary rewards of the market, but mishandle offerings and lack customer focus.
Posted Aug 26, 2005
Communications and High-Tech (CHT) companies are beginning to covet the SMB market, which they have traditionally ignored. According to a new report by Accenture, "Penetrating the Ultimate Market," the declining price of PCs, servers, and telecommunications devices (combined with "razor thin" profit margins) are forcing CHTs to focus on smaller companies. SMBs worldwide spend more than $800 billion each year on IT and telecommunications hardware, software, and services, according to Kevin Bandy, a partner in Accenture's electronics and high tech industry group. By 2008 that figure is expected to top $1.1 trillion, according to AMR Research. In addition, IT and communication spending growth among SMBs tend to outpace that of larger businesses.
But even though CHTs have recognized the importance of the SMB market and are rushing to gain an early foothold, they're faltering in the process, according to Bandy. Speed-to-market pressures are reinforcing high market-penetration failure rates; many CHTs are simply repackaging enterprise capabilities, and often lack strategic direction, receive poor financial returns, and damage customer relations in the market by showing lack of customer focus. "These [CHT] companies aren't structured to address the needs of smaller customers," he says. "They assume their enterprise capabilities will work equally well for the SMB sector when, in fact, this market requires an entirely new set of capabilities."
To successfully penetrate the SMB market, CHTs must reinvent their go-to-market strategies to meet the needs of these smaller companies, according to Bandy. Computer and technology companies should:
Define their customers. Though categorized as a single segment, the SMB market is comprised of many segments. CHTs should team with channel partners to gain access and insight into what SMBs are looking for in both computer and telecommunication products and services.
Define their offerings. A CHT's go-to-market effort should be as sophisticated an offering as the ones tailored for their largest customers and should include competitive assessments, market research, sales planning, and financial modeling. Once again, collaborating with other vendors and leveraging partnerships can give CHTs an edge.
Define and build capabilities. SMBs have different functional competencies -- from marketing, channel and sales operations, to finance and accounting. The best solutions and/or services that CHTs offer are designed to meet these needs. For example, the best solution might involve outsourcing an SMB business function to a third-party. Such outsourcing can be established for either the long-term or until the new business is up and running, at which point the responsibility for managing these functions are transferred back to the CHT.
Develop an engaging model that drives results. The key to successful penetration of the SMB market lies in establishing a sales and delivery model that allows for positive business outcomes. "Convergence partnering," or teaming with other providers to offer comprehensive product and service packages, is a perfect example of creating a business practice that will provide for a strong selling presence within the SMB market.
"By taking the time to develop and implement the right business model today, companies will minimize their investment risk and enable themselves to achieve results more quickly," Bandy says. "Those companies that establish a solid strategy and build partnerships and capabilities will benefit the most from this emerging opportunity."
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