By Harry Brelsford

It’s been widely accepted in the technology community that the “year of security” has been going on for two years now. And correctly so with changes in world geopolitics and increased black-hat badness. But get ready for the small and medium-size business (SMB) technology area to become the new “year of” crown holder.

Defining SMB
In researching my forthcoming book, SMB Consulting Best Practices, I found several definitions of SMB. Microsoft historically has segmented SMB by capping small businesses at 50 seats (this typically equates to approximately 50 employees, especially in the services area) and medium at between 50 and 500 seats. These numbers mapped directly to Microsoft’s Small Business Server (SBS) and BackOffice bundles. That was recently recast when Microsoft laid out a richer view of SMB that redefined small as Lower Small Business (five or fewer PCs with one to 10 employees) and Core Small Business (five to 24 PCs and 11 to 49 employees). Microsoft’s new take on midsize companies is:

  • Lower Midmarket: 25 to 49 PCs, 50 to 99 employees
  • Core Midmarket: 50 to 250 PCs, 100 to 250 employees
  • Upper Midmarket: 250 to 500 PCs, 500 to 1,000 employees

Compare that definition set to that of the U.S. Small Business Administration (SBA), according to which a small business could have up to 500 employees and $30 million in revenue. The SBA doesn’t attempt to define medium-size businesses. So while size definitions vary for the SMB, it’s generally accepted as below 500 employees.

Major players focus in on SMB
The most visible moves in the SMB technology area are Microsoft’s application-level SMB acquisitions and releases. Microsoft has built on its Great Plains and Navision acquisitions to rapidly create an SMB line of business application family that includes:

  • Financial accounting and management
  • Customer relationship management
  • Retail systems management
  • Analytics and reporting
  • Field service
  • Human resource management
  • Inventory and order processing
  • Manufacturing
  • Online business services
  • Project management (this includes solutions from Microsoft’s Navision product area and is separate from Microsoft Project Server)
  • Supply chain management

Not one to stand on the sidelines, Oracle has recently upgraded its small business suite, which is focused on business accounting and operations. But the real news from Oracle is its hostile takeover attempt of PeopleSoft, which is expected to drive consolidation in the medium-size space. This is also a tip of the hat to the SMB sector as consolidation and mergers reflect the maturity and validation of a particular market segment.

Which NOS will win by a nose?
An interesting battle is brewing between Novell and Microsoft to capture the small business infrastructure space. Novell fired one of the first shots by upgrading its struggling NetWare Small Business Suite and offering a compelling introductory offer: It’s free. Of course, the fine print reveals that “free” caps out at five users, after which the small business must purchase the entire Small Business Suite from the start (not just the incremental client licenses above five users).

Microsoft is on the verge of returning fire with its forthcoming Windows Small Business Server 2003 (SBS) suite, the fourth generation of its small business networking solution. Based on public statements made by Microsoft employees at events such as Microsoft TS2 (its popular quarterly SMB partner briefing seminar series—visit msts2.com for details), SBS will significantly increase its licensing limit above the current 50-seat limit and is being repositioned by Microsoft as “the first and essential server” for small businesses. That means an SMB consultant or small businessperson seeking a networking solution would only be sold SBS unless they begged to purchase the standard Microsoft Server SKUs. This is an about-face for Microsoft where, in the past, one had to beg to purchase SBS instead of its standard server products. May the best NOS win.

Microsoft management mayhem
Very soon, Orlando Ayala will officially move from being the chief sales executive at Microsoft to a new assignment leading Microsoft’s $2 billion SMB business group. While some press accounts painted this as a Microsoft-style demotion, it can be viewed as an endorsement of the SMB space (where Microsoft is targeting retailers, manufacturers, and real estate companies). Ayala is a heavy hitter and to have him focus on Microsoft’s SMB applications speaks volumes about Microsoft’s intentions in this space. This is nothing short of executive sponsorship of Microsoft’s SMB endeavors and shouldn’t be minimized. As of press time, reports are circulating that Ayala plans to announce his official arrival in SMB with a massive reorganization of the Microsoft Business Solutions (MBS) partner group. (This is the partner group focused on Great Plains and other lines of business applications.)

In addition, Don Nelson, general manager of Microsoft’s Managed Partner Strategy Group, has moved from Fargo, ND, to Redmond, WA, to assume more SMB-related responsibilities. He is charged with merging the MBS culture with Microsoft’s traditional “bits” culture of infrastructure and desktop applications. MBS partners are a different crowd; they build on long-term relationships and lengthy engagements, not high sales volumes.

A best bet for the keen SMB technology consultant is to continue monitoring Microsoft’s position in this area. It’s a leading indicator of where SMB technology is headed in the next year.

Sector-supporting evidence
And now for my closing arguments in making the case that it’s the year of the SMB. Consider the following:

  • Narrow escape. It’s widely accepted that the SMB space didn’t take the hit that the enterprise space took in the current economic trend. In fact, many enterprise technology consultants have gone downstream to become SMB consultants because it’s where IT work—what little there is—exists. This is a reversal of the historical trend whereby eager IT consultants start in SMB to gain experience, references, and referrals and then go forth and bid on big enterprise engagements.
  • Financials. Microsoft is anticipating that its SMB revenue will grow from $2 billion this year to over $10 billion in 2010. Oracle believes the SMB technology sector will grow from $36 billion in sales to more than $46 billion in two years.
  • Bandwagon. The big players, including J.D. Edwards, Siebel, SAP, Computer Associates, and PeopleSoft, are preparing new applications or upgrades for the SMB space. The PeopleSoft application family should be closely monitored; opponents of the Oracle/PeopleSoft merger (primarily J.D. Edwards) believe that Oracle will simply kill off the PeopleSoft line in a bid to strengthen its own solutions.
  • Quotes. Karen Smith of Aberdeen Group was quoted in USA Today saying that SMB is where the action is for independent software vendors (ISVs) and solution providers because “there aren’t as many multimillion-dollar software contracts (from big companies) as there were during the tech boom a couple of years ago.” Other analysts quoted in mainstream media outlets have reached a consensus growth target of the SMB technology space doubling in sales over the next several years.
  • Conferences. Microsoft has merged its annual partner FUSION conference with its SMB conference “Stampede” to be held in mid-October in Toronto. You’ll want front-row seats for that because, barring any new significant developments, you can anticipate Microsoft will deem this the “year of the SMB.”

So there you have it: a compelling case to focus your technology consulting efforts on SMB now more than ever.

Harry Brelsford, an SMB consultant, is the founder of the SMB Nation conference series. He’s the author of the popular Small Business Server 2000 Best Practices and the forthcoming SMB Consulting Best Practices (due August 2003).