Techaisle Blog

BROADENS RANGE OF OFFERINGS AND INCREASES NUMBER OF SMB CHANNEL PARTNERS

On March 13th, 2012, Dell announced the acquisition of SonicWALL, a leader in Unified Threat Management (UTM), further broadening its portfolio of security offerings, especially for SMBs and branch offices. By acquiring SonicWALL, Dell gains on multiple fronts.

• Broaden its Portfolio of Products and Services for SMBs. While SonicWALL has added enterprise-level offerings in recent years, for a long time it was known primarily as SMB-focused company and one of the leaders in UTM for SMBs. Known primarily for its security appliances, it offers SMBs gateway security to protect their networks as well as web and email security, secure remote access and continuous data protection (secured at remote locations). Most of these offerings would supplement Dell’s existing products and enable SMBs to purchase more of their products from a single source.

• Expand its Channel Partner Base. SonicWALL sold almost all of its products through a loyal base of channel partners, who benefitted not only by selling SonicWALL appliances but also earning ongoing service revenues from managing those appliances as well as off-site continuous data protection (CDP). In that respect, SonicWALL was a step ahead of the industry in offering remote services and would fit in well with Dell’s cloud ambitions. While there may be some overlap between the channel partners of the two companies, and Dell may not grandfather all of SonicWALL’s partners to resell Dell products, Dell would still significantly increase the number of its channel partners (including many MSPs) and broaden its footprint in the SMB market.

• Enter a Fast Growing and More Profitable Area. SonicWALL accounts for less than one-half of one percent of Dell’s revenues but it is growing much faster. While Dell’s revenues, including revenues from various acquisitions, have essentially remained stagnant over the last five years, SonicWALL has grown by almost 30% during the same period. Its net profitability is 2-3 times higher than Dell. By selling SonicWALL’s products to its current customer base, both directly, through Dell Services and through Dell’s PartnerDirect members, this profitability will increase further as selling through Dell will help reduce SonicWALL’s sales and marketing expenses (which account for 35-40% of its total revenues)

Dell has acquired several companies in recent years that had developed products primarily for SMB customers. After acquiring them, Dell has not only increased their sales to SMBs but, in many cases, also sold those products to branches of its large customers. If Dell follows the same strategy for SonicWALL’s offerings, its latest acquisition will be a win-win situation for Dell, SonicWALL, their customers and Dell’s investors.
Anil Miglani

 

This week, Dell unveiled its Ultrabook, XPS 13 featuring an edge-to-edge glass, near “frameless” display, all-day battery life, and the latest innovative technology for a superb overall user experience. Starting at 2.99 lbs and less than a quarter-inch at its thinnest point, the XPS 13 sports the latest Intel technology, such as Rapid Start and Smart Connect, to enable users to be productive, connected and responsive anywhere.

While Dell did not participate in this year’s CES, Dell’s announcementwas a pre-planned set of announcements by Intel’s OEM partners to unveil their new UltraBook PCs, Intel’s response to Apple’s MacBook Air. What made Dell’s announcement stand out was that while the new ultrathin PCs like MacBook Air have generally been targeted at consumers, Dell has added features and functionalities for businesses, including the ability of IT staff to manage the XPS 13 efficiently and effectively. These include features like standard Trusted Platform Module for BitLocker Data Encryption and optional remote and on-site managed services (i.e. ProSupport after-sales service and Configuration Services such as custom imaging and asset tagging) that allow SMBs to proactively manage their IT
devices and applications, avoid downtime and increase their IT infrastructure availability.

Also while, Dell XPS 13’s starting price point is the same as Apple’s MacBook Air, Dell delivers much more at $999 than Apple does at the same price.

The obvious question that arises is why would Dell adapt a (presumably) consumer-focused product launched primarily at a consumer-oriented show, to also meet the needs of businesses? The answer lies in Dell’s increasing focus on the SMB market since the creation of its new SMB Business Unit a few years back. While SMB business lies under the CSMB group (Consumer & SMB), until recently headed by Steve Felice, SMBs’ needs seem to be getting ingrained into Dell’s DNA.

Dell has increased its focus on SMBs on a worldwide basis and this is also being reflected in Techaisle’s SMB tracking studies. In Techaisle’s recentstudy on purchase intention of Ultrabooks, SMBs rated Dell as their number 1 choice for Ultrabooks, even before the products were announced. Techaisle expects that at least 3.6 million Ultrabooks will be purchased by US SMBs in 2012, resulting in 1 in 5 PCs (desktops and laptops) shipped to SMBs. With increased mobility, size and weight of mobile PCs have become important factors for road warriors, who want to be able to work from anywhere and everywhere they go. While Ultrabooks are considered more stylish and cool as compared to other form factors, including tablets, SMBs also value their long battery life, lightweight, built in security features, ability to run Windows 8 and fast boot times.

Techaisle Survey showed that Dell had even a better preferred status for the upper mid-market SMBs, that is, from 250-999 employee size businesses which are less price-sensitive than their smaller counterparts. Additionally, 47 percent of SMBs plan to purchase directly from a manufacturers’ website, which gives Dell an added advantage, given its history of success in selling through the web.

The introduction of Ultrabooks by Dell could not have come at a better time. With increasing mobility among SMB employees, UltraBooks fill in the gap between the lighter (but also somewhat limited in their functionality) tablets and the traditional heavier laptops. Ultrabooks can perform all the tasks (and more) of the traditional laptops but with much greater convenience.

Anurag Agrawal
Techaisle

SAP has agreed to acquire cloud-based human capital management (HCM) offerings provider SuccessFactors for $3.4 billion. Under the acquisition, SuccessFactors' team and technology will be added to SAP's cloud assets and the combination of SAP and SuccessFactors will establish an advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes.

Without a doubt SAP has made a good move and in the right direction. One may argue that paying 13 times the revenue for a loss making company with nearly 66% of revenue going towards SG&A does not make financial sense. However, if SAP can leverage SuccessFactors’ technology and talent to speed up its transition to the cloud, the price would be quite worth paying. In fact, by offering SuccessFactors’ technology to its current customers, SAP could help reduce the cost of new customer acquisition for SuccessFactors, which has been a major concern for many SaaS providers.

SAP has been trying to add subscription-based cloud solutions to its license and services offerings for a long time. A lot has been written about non-success of SAP’s Business ByDesign – a SaaS offering for large-scale business-management deployment focused on growing mid-market companies. SAP needed just the right acquisition to truly begin its journey into the cloud.

SuccessFactors will not only provide SAP with 3,500 customers, but also technology and above all talent. SAP’s task in the immediate future would be use the technology and talent to scale across businesses, in effect a larger customer base. This is something that Cisco does well and has repeatedly demonstrated its capabilities across numerous acquisitions.

While enterprise and mid-market businesses can be targeted through the acquisition, there is still no “S”, that is, small business, within the SAP portfolio. The small business cloud computing market is the most fragmented and among the fastest growing. SAP should continue to look for acquisitions in the area. Possibilities could be Concur, SugarCRM, Zoho and others.

Several companies are ahead of SAP in delivering SaaS to small businesses including Microsoft Dynamics, Salesforce.com and NetSuite. Microsoft also has one of the largest numbers of channel partners that are very conversant with Microsoft cloud solutions and Salesforce.com has its Force.com platform that enables channel partners to develop new solutions for their customers. SAP should also think about expanding its SMB-focused channel partner base and offering PaaS for those partners to develop new solutions for
SMBs.

Anurag Agrawal
Techaisle

SMBs are going through a Transformation, moving from a building block IT adoption to Flat IT in a virtual era. And within this Transformation, PC is still important in its role as the center of IT universe. SMBs need only buy a PC to get started. However, the nature and use of PC as the foundational block has changed. There is and will most likely remain only one block. An SMB today can start work immediately with a server that resides in the cloud, use smart phone that provides access to corporate information anytime and anywhere, a CRM application that resides off-premises, a communications infrastructure that is cost effective, a line of business application that is plug-and-play. All enabled by a simple credit card payment system and a PC.

Global SMB spend on IT is expected to be US$426 billion in 2011. PCs and Servers spend, core businesses of Intel, will be US$80 billion, resulting in 120 million PCs (Desktops & Notebooks) and 3.8 million servers. Despite the slowdown SMB market is still a very healthy market that requires focus and attention. Based on surveys in numerous countries, Techaisle finds that “Refresh of PCs and Servers” is among SMB priorities.

It is more important now than ever for Intel to hit harder at an SMB strategy and messaging.

Recognize Growing Influence of Retail
Importance of retail is continuing to increase across many countries as PCs increasingly become commoditized. 65 million PCs, half of total SMB PC shipments, are purchased by
1-20 employee size businesses that usually shop at retail stores. There are 186,818 dealers/retailers globally who derive 58 percent of their revenue from selling PCs. The retail channel is continuing to grow in number, especially in emerging markets. On the other hand there are 242,010 VARs/SIs globally who are increasingly moving into cloud offerings as they find their traditional services model getting threatened. Intel should work with its OEM partners to offer business SKU PCs through retail stores. A few of Intel’s OEM partners such as Dell have begun selling business SKUs through retail stores albeit in some countries. As compared to retail, VAR/SI channel derives 36 percent of their revenues from selling PCs. This only enhances the importance and influence of retail within the SMB segment for PCs. Intel should also open up vPro sales through all channels including retail. Similar to the messaging of i3, i5, i7, “with vPro” and “without vPro” will a good value proposition for SMBs and create a differentiation between SMBs and Consumers. As vPro adoption grows, different types of channels including neighborhood repair shops will have the motivation to jump in to provide remote support and services.

Facilitate Managed Services Adoption
Global SMB remote PC managed services is estimated to be US$1.3 billion in 2011 and will nearly double to US$2.5 billion in 2015. With vPro, Intel has a huge untapped opportunity to target managed services market aggressively. The technology has been around for a while and has had some success within enterprises. Selling vPro-based PCs through the non-retail channel to SMBs is certainly useful but selling through retail and white-box manufacturers will only quicken its adoption. The scenario today is similar to what the PC industry saw twenty years ago. To accelerate the adoption of PCs, Intel built a white-box channel and started shipping motherboards to them. Concerns were raised that the move would cannibalize market for traditional large OEM vendors but over a period of time both
OEM and white-box channels have learnt to co-exist. In fact there are 69,412 system builders across the world. Intel should be able build a similar program for white box assemblers with a focus on managed services using vPro. Large format retail channels could create their own NOCs or partner with other MSPs to offer remote managed support services (Techaisle had written about this happening in 2009, BestBuy purchasing mindShift has now happened). For small format retailers Intel should either create its own datacenter or allow OEM vendors to provide NOCs for remote managed support. Smaller system builders could use the data centers offered by Intel, its distributors or other large vendors for providing managed services to their SMB customers.

A PC Refresh Messaging – Path to Ultrabooks
Ultrabooks is another potential opportunity for Intel to sell into the SMB segment. However, current price point will inhibit adoption forcing Ultrabooks to be used primarily in corner offices and a smattering of traveling executives. If the price-point does not fall below US$800 this new form factor will follow the swift end like the netbook form factor. Ultra-thin aficionados will continue to adopt MacBook Air series. Initial adoption of netbooks had exposed a burning desire among Small Businesses for a low cost, light weight device with an extended battery life. At the same time huge adoption of tablets by SMBs as an additional device strongly suggests a market ripe for ultrabooks. However, a differentiated PC refresh messaging with Ultrabooks as mainstream notebooks PC is needed in the SMB marketplace. Although some may argue that VDI will replace PCs faster than PCs themselves, however, larger adoption of VDI among SMBs although growing in double-digits still too far in the future.

Cloud – Intel’s Small Business AppUp, Boon or Bane?
Among all of the new priorities that SMBs are driving towards, perhaps the one that most impacts the channel and the vendors is the trend towards increasing adoption of SaaS and Cloud Computing. All leading IT vendors – Microsoft, Dell, and IBM are providing a variety of cloud based platform and application services. Complementing them is a whole host of new companies that are aggressively developing solutions for this space. No doubt over the next 5 years cloud based services will be the new arena of intense competition. In
2011, SMB cloud computing spend will be US$11 billion (excluding spend on cloud
communication services). As SMBs transition investments driven by these new priorities, the impact on the channel will likely be significant. The small business AppUp services rolled out by Intel is certainly noble as it makes available best-of-breed cloud enabling technologies available to channel partners that serve small businesses. And it is easy to see why many cloud enabling technology vendors such as StorageCraft, GFI and many others will add their applications to the catalog. It gives them another distribution outlet. But
their continued commitment remains to be seen. However, Intel cannot just remain a Master Distributor, because it will very soon begin competing with its traditional distributors. More importantly, Intel in its effort to provide cloud services to its channels and small businesses is missing out on a very key issue: best-of-breed applications. No doubt the applications being offered are some of the best in the industry but there are too many of the same category. For example, how many backup and recovery applications will Intel offer before it finds that they are creating more confusion than simplicity? Channels
and SMBs will be forced to once again conduct their own research to sign up and use applications. It should not be a race for numbers but a race for best-of-breed. While its OEM partners may like to be part of the strategy initially they will not benefit in the long run. Within the next 2-3 years Intel’s OEM partners will begin to draw and implement their own SMB cloud strategies, most likely leaving behind Intel’s small business AppUp services.

Transition from IT vs. Non-IT
With growing adoption of cloud computing the role of IT has also been changing. Business departments are making procurement decisions independent of IT, similar to BYOD. In fact, Intel should focus its attention on Mobility vs. Non-Mobility or Cloud vs. Non-Cloud and even VDI vs. Non-VDI businesses. In effect, the old segmentation models do not exist anymore as the work from anywhere, anytime culture gets more ingrained within SMBs. Segments should be defined and labeled based on their business objectives.

Finally
Creating an SMB brand distinction is more important now than ever - a brand that delivers empowering technologies to both SMBs and their channel partners and a set of products and solutions that enable an SMB reach its full potential in the shortest period of time. SMBs will continue to invest in on-premise IT infrastructure while experimenting with, or moving selective applications to the cloud and increasing their reliance on MSPs. As SMBs prefer to procure their IT products and services from same channels Intel should evaluate all of its partners’ expertise areas and create symbiotic partnerships among them with Intel as the broker to serve the SMB customers. At the same time Intel should recruit new retail channel partners to advise, train and thereby help its OEM partners.

Anurag Agrawal
Techaisle