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Rodney Dangerfield, may he rest in peace, could have been speaking for many SMBs shopping for strategic business applications and software tools when he uttered his famous line, "I can't get no respect!" Adjusting his tie and bugging out his eyes, he surely would've let us in on a few stinging asides directed at the industry's behemoth vendors as they geared their products, sales, and service toward the bigger game found in the Fortune 500 companies.
That is, until recently: In fact, it wouldn't be too much of an overstatement to say that 2004 has been the year of the SMB. In many industries, the fastest economic growth is occurring in the SMB sector. Controlling costs is always important for any organization, no matter what size: but right now, growth is top of mind. From infrastructure to middleware to enterprise applications and business intelligence (BI), vendors are now competing fiercely to package technology solutions and service to meet the needs of businesses reporting under $1 billion in revenues — or under $500 million, depending on which market analyst is defining SMB.
With smaller IT resources and less capital to risk on technology that may or may not pan out, SMBs have traditionally kept well back of the bleeding edge. To excite demand in the SMB market, however, established enterprise application vendors have had to step out of their comfort zone — or watch upstarts succeed with business models that take advantage of the Internet and better meet the needs of SMB customers. No better example exists than Salesforce.com, which upended the sales force automation (SFA) market by offering real on-demand applications while more established competitors were still talking about them. Marc Benioff, the company's chairman and CEO, calls it "the end of software."
A key step for most SMBs intent on growth is getting sales processes under control — and gaining visibility into those processes so that the organization can grow its intelligence about markets and customers. This transition can be tough, especially for organizations built around the production of perhaps one brilliant product or service. Another factor is that CRM's reputation for high cost and high risk gives many SMBs pause — often sending them chasing after low-cost, one-off solutions written by outside consultants, who may be off to the next job as fast as they can get there. IT veterans can see the stovepipes rising right along with the SMB organization's good fortunes. Today's quick fix rapidly becomes tomorrow's expensive integration headache.
In late September, Salesforce.com made a major play to complete its customer relationship management (CRM) portfolio by launching Supportforce.com, aimed at delivering hosted customer service and support over the Internet. Key partners in the announcement were Avaya, Cisco Systems, Alcatel, Aspect Communications, and Genesys — companies that make up "over 70 percent of the global contact center marketplace," according to the Yankee Group's Sheryl Kingstone, quoted in Salesforce.com's press materials. SMB companies, as well as departments within larger organizations that can't wait for IT to buy or build resident applications, are fueling Salesforce.com's tremendous growth.
Siebel Systems, working quickly under new CEO Mike Lawrie, touted Siebel CRM OnDemand at the company's user conference in the beginning of October. Like Salesforce.com, Siebel offers OnDemand at a fixed price per user, per month. Of course, these two vendors aren't alone. Surgient offers Internet access to distributed CRM applications. SAP's marketing resource management and mySAP CRM offerings are experiencing growing demand.
Other important vendors addressing on-demand CRM for SMBs include Manticore Technology, which focuses on marketing optimization and Web analytics; and StreetSmarts, which offers a hosted SFA solution. Manticore's Virtual Commerce Master 4.0 integrates BI functionality with a rules engine, which brings companies nearer to the closed-loop ideal of "actionable" intelligence. WebSideStory has also been rising rapidly as a provider of on-demand, "real-time" Web analytics.
The potential of hosted, on-demand arrangements is bringing new players into the market; several are focused primarily on SMB organizations. In September, Robert Gryphon and Olivier Delerm, both veterans of enterprise applications development and marketing, launched Airframe Business Software.
Gryphon previously founded Octane Software, which E.piphany acquired; before that, he was a major developer at Scopus, which was acquired by Siebel. Delerm was a key senior manager at Siebel. Airframe's competitive differentiator may be its integrated internal structure, which allows "off the rack" applications to grow incrementally. "While some companies will spend 12 months and pay top dollar for a 100 percent solution with forced customization, many others prefer an immediate-use solution that can grow with their needs," Gryphon said. "We estimate there are some four million of these forward-thinking organizations in the U.S. alone."
Fortune 500's IT advantage over rising SMBs disappears as on-demand applications grow more scalable, reliable, and integrated. Especially in the realm of CRM, Web analytics, and marketing management and optimization, SMBs coming of age today have a better shot at matching dynamic business requirements with equally dynamic IT resources — rather than falling short, as they have previously, of being able to amass the high-capacity IT armada that the Fortune 500 can muster. Such dynamism may prove increasingly important as companies of all sizes struggle to gain competitive advantage from new resources, such as radio frequency identification (RFID) data.
As Wal-Mart's business partners know, the RFID monster isn't the selective concern of only large organizations. Chip costs continue to decline; RFID will be nothing if not a form factor change that will affect entire supply and demand chains that serve both public (including military) and private institutions. In late September, Microsoft Business Solutions (MBS) stepped forward with an initiative to help SMBs address RFID technology compliance mandates. According to Microsoft, Jack Link's Beef Jerky will integrate RFID data with MBS's Navision applications to automate existing manual auditing processes. "The power of RFID to automatically capture the physical movement of an item and have its electronic shadow follow it in real time is something that, in time, will help address many of our customers' business challenges," said Satya Nadella, corporate VP of MBS. (For more information, see News & Analysis)
The RFID onslaught is just one factor that could expose SMBs that are trying to grow without giving due attention to the importance of having a scalable IT infrastructure. Dealing primarily with what IT vendors call "partners," it's critical that today's SMBs press these systems developers, value-added resellers, and packaged application providers about the extensibility of their infrastructure. On-demand access is an important piece of the scalability puzzle, but SMBs must take a peek beyond the interface and consider the database and middleware that will do the heaviest lifting. In 2004, both Oracle and IBM have clarified their programs for business partners that serve SMBs. In July, IBM expanded its Solutions Builder Express program, which employs IBM middleware to set the foundation for integrating collaborative document management, analytics, and transaction applications.
The potential of middleware-based business automation is drawing SMBs to vendors, such as Tibco, that have built their reputations in mostly large organizations. Meridian Health Care Management, for example, worked in tandem with Tibco's professional services to turn paper-based processes into electronic data interchange (EDI) transactions based on Tibco's integration software. With HIPAA looming large, Meridian had to reduce operational costs and invest in an infrastructure that could handle growing B2B transaction volumes. SMBs, like nearly all organizations, are under pressure to reduce inefficiency and improve their accountability in the face of governance and compliance pressures — something they have in common with their larger business partners, who will require more careful information management from SMBs.
Business intelligence is critical for SMBs in fast-moving, competitive markets: but again, the infrastructure investment can be daunting. As Stewart McKie describes in his companion article ("SMB Excel-eration"), many organizations go with what's inexpensive, available, and gets them moving without a steep software learning curve. Largely, that means using Intuit's QuickBooks and QuickBase applications, Microsoft Excel or other spreadsheet programs, and sometimes reporting tools embedded in packaged apps.
However, the major BI vendors, including Business Objects and Cognos, are also devoting special attention to SMB customers. Qliktech, a BI company, is a good example of how newer vendors can exploit changes in technology to deliver business advantage at less cost. Qliktech is focused on riding the declining cost of memory to improve price/performance versus traditional, disk-oriented BI software. The company's technology lives primarily in what it calls the "data cloud": an expansive, memory-based resource that doesn't force users and developers to live within prearranged cubes, aggregations, and views. In other words, SMBs don't have to keep going back to developers every time they need a different view or dimension on their data.
Market changes are delivering golden times for SMBs focused on employing information technology to "measure up" to new partnership challenges thrust upon them by larger organizations — and address how they can support their own business growth more dynamically. Just has Rodney Dangerfield finally got his due respect, SMBs are also enjoying long overdue attention. IT vendors and SMBs have something in common: Both are focused on what will make business grow.
David Stodder is editorial director and editor-in-chief of Intelligent Enterprise.