Point of sale: software giants focus on selling to small businesses

Entrepreneur, Nov, 2004 by Liane Cassavoy

YOU ENTER YOUR LOCAL package-delivery store to send a marketing mailing. Attached to your bill is an offer from Microsoft encouraging you to try its List Builder e-mail marketing service. This type of promotion isn't happening yet, but it may be soon. Big-name software companies are now targeting small businesses to prove their products fit an entrepreneur's budget.

The small-business software market is a bright spot in a weak tech economy. In 2003, U.S. small businesses spent $10.1 billion on off-the-shelf software, says market researcher AMI-Partners. By 2008, that figure should reach $16.4 billion. Some firms, like Microsoft, have already saturated other markets and see small businesses as a new revenue source.

This means entrepreneurs will have more products to choose from. "You'll see more functionality available to you at a lower cost, as well as more companies claiming they're the ultimate small-business solution," says Mika Krammer, a research vice president for small business with Gartner Inc., a Stamford, Connecticut, technology research firm. "It'll be a challenge to find out who's right for your business."

Microsoft offers many accounting packages and is integrating recently acquired products with other Microsoft applications--these products won't be released until 2008. PeopleSoft has launched scaled-down versions of its flagship products, and its PeopleSoft World Express package includes applications for automating financials, manufacturing and HR. IBM is offering "Express" versions of its products, most recently announcing lotus Domino Messaging Express.

Big companies offer name recognition, indicating they'll be around long enough to support your product. But that sense of security may be misleading, Krammer says. "When the economy fully recovers, some vendors may pull out. Look at vendors who were focusing on your market before the economy crashed."