DoaSS #2: Thinking small

In late 2009 through early 2010 we’re seeing an unprecedented death rate of technology businesses involved in SMB (VARs, MSPs, technology experts), traditionally reseller-friendly companies going direct and the rapidly changing set of rates (from netbooks to computer service to “app store” software) for technology. The five part series titled “Death of a Services Salesman” will explore these trends, the causes behind them and hopefully give some clarity to the many that are rightfully asking: Are the good times in technology services gone for good?

Thinking small for small business..

Personally, this has been my biggest failure as a business owner. I did not recognize when OWN matured past my own ambitions and agenda and I didn’t get aggressive enough quickly enough. This is an issue I find many of the people in the SMB solution space face and it’s the #2 reason contributing to the death spiral we’re seeing out there among solution providers:

Problem: We’re a small business too. Just like you. So we know what it’s like and are better positioned to help you!

What may seem like a very warm familiarity pitch turned out to be fatal during the downturn in which many entrepreneurs faced their own mortality. Now the taste has changed. Now people want larger brands. Established companies on a solid ground. Having been burned by everything from Circuit City to local branches closing, people want a brand!

One of my friends and most successful MSPs out there (ARRC) has a HaaS division called CharTec through which they make it possible for managed services providers to offer computer and network systems (everything from a workstation to a phone system) for a low monthly fee as a subscription service. And guess what, they sell inferior (by spec) HP workstations over OEM ones for more because some partners have a challenge selling “white boxes” – now mind you that these aren’t white boxes at all! – but the sentiment has changed.

Problem: When people are not just willing but persisting in choosing even an inferior solution over the one you recommend because they are more inclined to trust the big brand than you, your days as a solution provider are numbered.

We build and manage SBS and SBS networks..

This has been the pledge of allegiance for small business solution providers for the past decade. When Microsoft released EBS (mid-market version of SBS) there was a lot of rejoicing about how this product will revolutionize the midmarket and make technology there so much easier to manage and administer.

Then Microsoft killed EBS. And they recommended replacing it with Microsoft Online Services (hosted Exchange/SharePoint). Double ouch!

Problem: What Microsoft knows, and the rest of it’s providers seem to have only tepid willingness to accept, is that people are no longer see value of owning their own local area network.

But take your average solution provider than half their product sheet is filled with high margin junk to build a network that can serve thousands and thousands of people with the uplink speed that wouldn’t even provide for a good Xbox game. And when that fails people turn to their iPhone/Android and wonder – which one was a good investment? Which one is working for me now?

The tastes have changed.

The needs have changed.

Back in the 90’s we needed a local area network because there was no high speed network in our pocket. We needed a server because we couldn’t keep a ton of data on our workstation because there was no efficient way to back it up. We needed Active Directory because there was no way to control and restrict access to applications and documents if you could browse to them.

Now all of that can be done with a cell phone and a free web app. If you want to be fancy, you can spend a few bucks a month and get one with “enterprise” features.

Fatality Check: My MCSE exams had roughly a quarter of it’s questions covering permissions, inheritance, which options “deny” permission would override – and in 2010 thinking that you needed an engineering certification to grant or deny access to a document would get you laughed out of a job interview.

Problem: If people aren’t willing to pay to build a network, what makes you think they will be willing to pay to have one professionally managed when even Microsoft has given up on it?

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When it comes to small business solutions, service providers tend to represent small (company) but pitch big (solution)! The client has an option of small, local and expensive over big, global and affordable.

This is the second reason we’re seeing a rapid decline in opportunities for small business solution providers. You don’t have to look far to see who wins out in that equation over the long term – Walmart, Home Depot, McDonalds, etc. Now, as soon as I figure out how to make a Versce or Ferrari brand out of technology solution providers I’ll let you know, in the meantime join me later this week for the other two reasons small business solution providers need to think very differently about what kind of business they need to be building.