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August 20, 2006

Business 2.0 Magazine Article: Re-stating the Obvious

Last week Business 2.0 magazine had an article about how software vendors are falling all over themselves trying to stake a claim in the small business segment. Not to toot my own horn (that much), but I and probably a million other folks were blogging about this a lot last year. The article does include some new stats from Forrester that reaffirms why the big boys are focusing on SMBs. Those companies with fewer than 1,000 employees are expected to spend $575 billion on software of all kinds this year, and this market is expected to grow 12 percent by the end of 2006. Large companies, by contrast, will only spend $500 billion on software - and the market is "flat" with 3 percent annual growth. More affirmation came earlier this year from NetSuite with their agreement to let CompUSA resell their on-demand CRM and ERP software aimed at SMBs. NetSuite CEO Zach Nelson is quoted in the article saying the smaller businesses are "the last great business application market." For more entertaining thoughts from Nelson check out what he had to say about Microsoft's entry into the on-demand space.

So has anything really changed since last year? Are vendors making significant inroads grabbing significant market share? I don't know but if I were to guess I would say not enough to brag about. It's extremely difficult for companies who are used to going after big dollar sales deals with larger enterprises to switch gears to the lower dollars-per-sales deals at the SMBs. Particularly when it probably means more work is involved per deal with less to make. I like what NetSuite has done, and companies with huge partner channels like Microsoft and Sage can leverage strong relationships certified partners have with smaller businesses to sell product (As a disclosure, Microsoft hired my company earlier this year to develop a series of webcasts aimed at helping their system builder partners understand the opportunity they have to cross-sell Microsoft CRM to their SBS2003 Server customers. Microsoft Partners can use this link to the OEM Partner site to check out the webcasts under the Getting Started section ). So it's probably too early to tell how successful vendor efforts have been.

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