April 21, 2019

The Yin and Yang of Open Source Commerce - page 11


  • November 1, 2005
  • By John Terpstra

The SMB customer generally can not afford to have full-time IT staff. They rely heavily on independent consultants, and on contractors. Possibly a third of this market has a favorite vendor (consultant or contractor) whom they will call if there is a problem. There is little pro-active IT planning, systems are added when needed, and updates/upgrades mostly happen under crisis management conditions.

Consultants who support the SMB market report that most non-critical servers are in active service for 5-8 years without significant upgrade. Newer hardware is purchased for use in the most critical roles, displaced hardware is usually recycled to a lesser demanding role. Most servers function in a particular role for about 18 months before being redeployed for another purpose. Consultants generally help specify hardware configurations and help the SMB customer to make the purchase from a hardware vendor or reseller. Only under duress will they sell a server.

The VAR who sells to the SMB/SME is still a strong supporter of whiteboxes. The advantage of the whitebox is that components can be hand selected to create the right machine that the customer demands. If VARs start to specify more whitebox Linux servers the problem of Linux driver support will disappear. Soon retail stores will actively embrace the resale and support for Linux supported products. Whitebox systems are built ans sold by hardware low-end systems resellers, but they produce huge volumes of systems. A small whitebox reseller who has three employees in the San Francisco Bay Area ships 20-25 machines per day. VARs and consultants interviewed will send their customers to such vendors because they sell a low cost product.

The SMB customer is most likely to purchase 30-60 days from first request/contact, and often want the solution to be fully deployed within 14 days of confirmation of the order. SMB customers who have had good experiences with a VAR tend to be loyal, those that have had a series of bad experiences show no loyalty at all and of draw out payment terms. One VAR has had the same 51 SMB clients for over 15 years and wants no new problems (customers).

SMB customers who have had bad experiences resulting in lost business tend to whine and grumble at the VAR, even when the job went very well. These are the most cost conscious and will often ask if there is a lower cost solution. Most do not care what the IT solution is, they just want it to work. Two of VARs interviewed already install FreeBSD or Linux systems so they can make more money out of the deal than if Microsoft Windows had been installed. The remaining VARs all install Microsoft software because they do not have time to learn Linux.

VARs mostly sell solutions following being invited to a vendor demonstration of how the software works.

Consumers purchase their IT needs from retail stores and on-line, or per phone, from companies like Dell, Gateway, and HP. The retail assistance in stores such as CompUSA, Best Buy, Circuit City, Frys Electronics, etc. is often the sole source of advice.

Retail outlets do not actively offer a Linux desktop or server solution. The key to changing that is to gain a toehold on the SMB market. The means to getting the SMB market is the VAR, the consultant, and the contractor.

In this part of the series we have drilled deeper into the nature of the IT market, and while it is large, it is also complex. It will take time and effort to convert the SMB market to focus on Linux- and OSS-based business. Above all, if we want to enlighten the minds of the VAR and to remotivate him to do more profitable business, we must help him to see the future with glowing and compelling demonstrations. It will be necessary to nurture the VAR until he is self sufficient, and above all, we must build trust--the sole basis of customer loyalty.

Lastly, we must recognize that channel conflict is the kiss of death on trust.

Channel conflict results in loss of business for VARs. When this happens the VAR understandably becomes irritated because the supplier to the VAR has effectively declared war on business relationships that took time and effort to build. In effect then, channel competition undermines trust between the supplier and the VAR and also between the VAR and the customer. In the end, both the VAR and the supplier lose credibility.

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