IT and Business Insights for SMB Solution Providers

Tech Trends 2009: Where SMBs Will Invest

Despite economic uncertainty, distributors are guardedly bullish on SMB technology spending in some key areas in 2009. By Cecilia Galvin

Sometimes, what's old is new again. Last year, we polled leading industry analysts to find out what technologies would make their mark in 2008. Now that we're looking at 2009, some of the same technologies are again on the radar. So where will SMBs spend their increasingly tight budgets next year? Rather than relying on straight research data and analysis, we asked that all-important question of IT distributors, those seasoned experts in product and solution demand patterns. Not surprisingly, our panel of experts factored into their responses the precarious economy and its impact on SMB spending. But as dire as that may sound, there are bright spots on the horizon, and technologies with the potential to offer rewards for both resellers and their customers.

"In our field, even in down markets, the reality is that more than $1 trillion in hardware, software, and telecommunications will be bought over the next year," says Joe Quaglia, senior vice president, U.S. marketing at Tech Data Corp. in Clearwater, Fla. "IT vendors continue to reinvent new ways to solve practical problems that pop up every year that are different from last year and will be different next year. That gives us an opportunity to capitalize on the markets that are new, fresh, hot--and provide ways to cut costs and generate new business."

Digital Signage
Digital signage has been a so-called emerging technology for several years, but never seemed to gain much traction. Now, however, it's poised for growth, according to T.J. Trojan, senior vice president of product marketing at Synnex Corp., based in Fremont, Calif. "We have reached critical mass for the market, and acquisition costs are one reason," he says. "It wasn't long ago when a 40-inch or 42- inch display might cost between $5,000 and $10,000. Now it's close to $1,000."

Another reason SMBs are turning to digital signage is the availability of hard data about ROI. "There's been enough proliferation in networks and deployments that we're starting to see results," says Trojan. "Typically, you'll find a 30 percent increase in traffic and/or sales with digital signage. [Retailers] that don't have it are at a competitive disadvantage."

Solution providers are also looking at the metrics--for their own businesses. "The channel can leverage their expertise and experience with networking to create value and visibility for their own companies," says Kent Tibbils, vice president of marketing at ASI Corp. in Fremont, Calif. "It has a lot of hands-on, margin selling--differentiation-type selling."

Trojan concurs, but stresses that the highest margins don't come from hardware, but from services and software. "Margins are 20 percent or more on the software, and there's a recurring revenue stream available if you host the environments for all your digital signage networks," he says. "On services, we expect about 30 percent."

Distributors across the board agree that the fastest-growth areas for the technology include small doctor's offices and hospitals, education, and hospitality venues, in addition to the retail sector. But no matter where the technology ends up, "installations have to be done correctly to be effective," says Trojan. "If it's poorly done, it's wallpaper."

Managed Services
Solution providers continue to embrace managed services. In a study of MSPs by the Pacifica Group conducted in July for Untangle Inc., 80 percent of respondents have been pursuing the model for five years or less, and 30 percent have been MSPs for less than a year. To stay competitive, according to the report, these providers continue to adopt new offerings such as managed security, network access control, and Web content filtering.

"With our economic troubles a reality for the next 12 to 18 months, managed services providers can position themselves as having the ability to maintain a high level of service with a reduced infrastructure and reduced costs to serve end-user businesses," says Justin Crotty, vice president of the Services Division at Santa Ana, Calif.-based Ingram Micro. "They should be pretty successful and continue to sell managed methodologies into consumer accounts, especially if those industries are being hit hard."

Still, Crotty admits the economy looms large, and has concerns that solution providers may stop spending on the development and delivery of new offerings. "What I hope I don't see is a hunker-down mentality," he says. "I still think managed services is going to thrive. The organizations that are selling it successfully will continue to do so, and it can be a good tool in an economic downturn."

So what, if any, new offerings might be on tap for 2009? James Luquire is counting on managed print. As the associate vice president of the Document Solutions Group at Synnex, Luquire has spent the past two and a half years developing the company's managed print offering, known as PRINTSolv. "It's a new model, and it's not the sexiest model," he admits. Yet Luquire indicates that the program has legs, with 125 VARs and 600-plus end users participating already.

"The goal is to help our customers grow their hardware business, increase their aftermarket attach rates, increase their professional services portfolio, and make more margin doing it," says Luquire. "It's helped our customers develop or add managed print to their professional services portfolio without spending any money."

One of the most significant developments in mobility was the introduction earlier this year of Intel's mobile motherboard form factor called Rich Creek 2. What RC2 does, according to ASI's Tibbils, is create an opportunity for system builders to "get their brand into this growing market, with notebooks they can service, warranty, and repair." It also enables these custom builders to better compete with major notebook makers such as HP and Dell.

RC2 aside, the mobile market in general is growing, a trend that started in the enterprise, moved to the consumer market, and has now been embraced by small businesses, says Dan Schwab, co-president of Harrisburg, Pa.-based D&H Distributing Co. "The price points and functionality mimic what you would see in a desktop," he says. "People are working more hours, and from home, and business owners want to take advantage of [notebook] solutions."

Our experts agree that, like managed services, notebook sales will be strong in spite of the poor economy, and that's a great opportunity for resellers. "You're not just selling notebooks, you're selling a Windows mobile phone tied into the Microsoft Exchange Server," says Schwab. "You're selling the VPN and firewall technology--you're offering [customers] the things that will reduce costs in their business or drive productivity."

Cloud Computing
Cloud computing is the new buzzword for software as a service, or SaaS, the benefits of which are now well known: reduced IT infrastructure costs and the ability to pay for applications by the month without a large up-front investment. According to Forrester Research, SMBs have increased their use of hosted solutions by 50 percent over last year, and all indicators point to continued growth. "We're seeing a surge of growth in SaaS today and will continue to see double-digit growth in that area," says Tech Data's Quaglia.

Ingram Micro's Crotty agrees. "I think cloud computing is big," he says. "The model has been proven now, and there will be a lot of investment in it. But I don't think it's as revolutionary as everybody claims it to be. It sort of encompasses hosting, software delivery, and various forms of service or software application consumption, but it's being packaged into form factors that SMB companies can digest."

Even though cloud computing will be attractive to SMBs, Crotty doesn't believe the segment will be the first to embrace it on a large scale. "Cloud computing is first going to go to midmarket companies and the integrators that service those companies," he says. "SMB resellers will be behind that, but there probably won't be wide-scale adoption in 2009."

Crotty is bullish about the future of the model, though, especially for distributors. As he puts it, "We can collapse infrastructure, support lots of solution provider companies on a shared infrastructure, deliver a wide array of services and applications across a shared infrastructure, and reduce the individual cost that solution providers will bear to deliver those services. There's something in that, and I think distributors should be chasing it hard."

Storage and Security
Earlier this year, AMI-Partners reported that midsize companies in the United States would spend nearly $8 billion on data storage and security in 2008--a 12 percent increase over last year. And while that bodes well for continued growth in the midmarket, D&H's Schwab says that the opportunity is even larger in the small business sector. "The penetration in the small business market is clearly too small," he claims. Even small companies generate a lot of data, and "there are too many businesses that are running unprotected," he adds.

Network-attached storage (NAS) is a good fit for these small companies, according to Tech Data's Quaglia, offering that network storage will see double-digit growth in 2009, as extrapolated from an IDC report on hardware sales for 2009. "Network storage is an emerging growth opportunity that is immune to the tech bear market," Quaglia claims.

And, with video, still images, and music hogging lots of storage real estate, sales of storage solutions for the home will be on the rise as well. According to Tibbils of ASI, the first line of defense in storage for the home has been to add external hard drives. "They end up with two or three of those and soon there's a bigger opportunity to offer NAS, which provides extra storage capacity and backup for protecting their data," he says, adding that resellers can increase value for these customers by networking the storage hardware or setting up a wireless network.

About the Author

Cecilia Galvin's picture

Cecilia Galvin is Executive Editor of ChannelPro-SMB.

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