The BIG business of managed services for SMBs: as applications grow more complex, a key enterprise segment looks for expert guidance

America's Network, August 1, 2004 by Carl Weinschenk

The point is that SMEs' needs have grown to the point where they mirror large enterprises. A good example is managed security. In the past, a small business may have had a consultant install a firewall or bought shrink-wrapped security software at the local CompUSA retail store. Even a cursory glance at the news makes it clear that this is no longer acceptable.

Internet Security Services (ISS) saw an opportunity and introduced a managed service package aimed at companies with about 100 employees. It includes a managed firewall, remote access VPN, intrusion detection services (IDS) and antivirus software. The smaller businesses "found out over the last two years that a firewall doesn't do the whole job," says Rick Miller, ISS vice president of managed security services. "Certainly one of the biggest drivers is education on the threats, unfortunately often at their own expense."

He adds that price reductions also have driven the SME market. ISS revenue grew 47 percent during the last year, he says, and the SME market represents about one-third of that growth.

A COMPLEX MARKET

The growing potential of the SME market doesn't mean it isn't a complex market. Executives point out that it's not a monolithic entity. A medium-sized company with 1,000 employees spread over a dozen locations nationwide has more in common with large enterprises than with a 10-attorney law firm with two offices in the same city.

Likewise, the broad SME classification shouldn't exclude large multinationals' regional offices. These local entities may retain telecommunications and IT services on their own and, functionally, be SMEs.

Indeed, these branch and regional offices of large enterprises often are the most fertile ground for MSPs. The big parent companies may set a broad mandate to extend their mission-critical applications, such as customer relationship management and supply chain management, throughout the organization--and leave it up to the local folks to figure out how to do it. "There's more interest from IT managers who want to push the application environment down into the branches, and that's where they don't have the IT staff," Padhye says.

This market is being targeted both by relative newcomers and by established RBOCs and IXCs. For established carriers, the interest in this market is driven by the slowing of revenue from provisioning of circuits.

SBC, for instance, has taken clear aim at the SME sector. The company defines the market as companies using between eight and 250 access lines. SBC offers packages that build services atop its T1s, according to Brian Buffington, the company's executive director of managed services. The packages include customer premise equipment, a CSU/DSU and a customer-chosen mix of between eight and 22 business lines, Centrex, long distance services, frame relay and Internet access.

The question is how responsive the big RBOCs and IXCs can be. CompuNet's McMillan says that the RBOCs haven't had time to develop the expertise to marry their telecommunications expertise with the LAN knowledge that is necessary to function in an IT environment.