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Gartner's SMB guide to vendor management

Behind all the hype about large vendors serving SMBs, small shops are still at a disadvantage. Here's a vendor management game plan for getting the most bang for your buck.

ORLANDO, Fla. -- It's true. Vendors have trained their sights on small and midmarket businesses (SMBs). You can't boot up your computer without seeing another promise of a product that has been sized just right for small shops. But don't let the sweet talk go to your head. SMBs are still at a real disadvantage when it comes to vendor choices, said Gartner Inc. analyst Brian Prentice.

Speaking at Stamford, Conn.-based Gartner's Symposium/ITxpo 2005 this week, Prentice, a former marketing manager for IBM/Lotus, Novell and Apple Computer Inc., offered a tutorial for executives at small IT companies on how to get around a system that remains biased against the little guy. First step: Know the enemy.

All about the heavyweights

Why are vendors wooing the SMB market? Because they have to. The large, enterprise-wide projects so popular during the boom years are evaporating for a number of reasons, Prentice said. Many companies became disenchanted with the big gig when projects proved more complicated and costly than anticipated. In addition, today's large enterprise "is starting to look like you," Prentice told SMB executives.

Large companies, once centrally organized, increasingly operate as a federation of relatively autonomous organizations that each need to make a profit. Today's push by major vendors to offer products and services for the SMB space is as much about getting to the federated enterprise as it is about serving SMBs.

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Know thy channels

If dealing with a reseller is your reality, Prentice suggests you get a grip on the channel guys. Today's channel partners are essentially professional account managers who sell services. The hardware and software are there to keep you from going elsewhere. Like any service business, resellers need to optimize utilization rates. In their case, that often means keeping as many warm bodies busy on projects for as long as possible. Do they get any downtime for training? Not likely, Prentice said. "They wait until you buy the product and learn on the job, at your expense," he said.

And keep in mind that a reseller can't negotiate a license agreement on behalf of the vendor. Discounts have to pass muster with a vendor committee. Christopher Browne, a Gartner Expo attendee and IT asset manager at PEMCO Mutual Insurance Co., said his company did hear from sales reps, not resellers, when it came to replacing a legacy system at the $350 million independent insurer in Seattle. Browne had dealt with sales reps from Accenture Ltd. and other large vendors. But that didn't take away the pain. "It's very difficult to gain the knowledge you need to deal with the large companies. What's the adage? There's no teacher like experience," Browne said. "We just don't have the sophistication."

Take heart. You can make help yourself, by making it easier for your reseller to help you, Prentice said. Below are his lessons and game plan for beating the system:

Lesson One: Beware the blended service agreement. When a vendor promises you will not have to suffer through another botched deployment because the contract comes with a skilled person who -- for a price -- will transfer his knowledge to your employees or resellers. What's wrong with that? Prentice said you need to make sure the vendor is not playing games with blended rates, passing off unskilled people as experts. Ask very pointed questions. How were they trained? For how long? How many people have been trained? Make it clear that you are unwilling to pay program management fees for people who are learning on the job.

Lesson Two: Value, what value? As large, multiyear projects evaporate, resellers now offer value-added services to keep your business. But do they really? Ask your reseller if research and development is available. Can you meet the reseller's dedicated engineering staff? If not, exactly what value is being added?

Lesson Three: Less is more. The fewer vendors your reseller represents, the better the quality service. Ask your resellers if they are minimizing their vendor relationships.

The smart SMB game plan:

Get real. Get the A team. A vendor's systems engineers are dedicated to direct sales customers, but they can be made available to channel customers if the reseller can make the case for their time. Don't dribble out your concerns. Prentice suggests that you lump all technical issues in one pie, and make sure they are serious, so your reseller can present them as deal breakers.

Reap value by becoming a valued shill -- er, reference. You can win discounts and good will by offering to serve as a case study. Salespeople love companies that help them win deals. Volunteer to be a reference check. Finally, offer to do vendor-speaking engagements, and make sure you get paid for the trouble.

Nobody likes an RFP. Requests for proposals, which are often long wish lists, can lead to you getting massive enterprise-type products that are a nightmare to digest, Prentice said. The better route is "process-based sourcing." Diagram the process the technology is supposed to serve, and measure the value of improving that process, a calculation that will mean talking with the business side. Then tell your reseller this is the return on investment you need to make a deal.

Deployments can win you discounts. Be brave. Big companies rarely want to be the first to try out a new product. Get a discount for going bleeding edge. You can also make the case that your little job is really a big job for the vendor. If the product is going to be used by all 200 people in your organization, that is a large breadth deployment and deserves a discount.

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