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IDC highlights channel for SME outsourcing

Established channel relationships based on trust are crucial to breaking into the growing small medium enterprise (SME) outsourcing market, according to a recent survey by analysts IDC.

"Though most of the large service providers have their eyes set on the SME market, outsourcing has not taken this marketplace by storm the way it has elsewhere," IDC analyst, Aprajita Sharma, said.

"SMEs don't buy just because you've got good technology; they buy because they have a good relationship with a partner. Small, value-added resellers have been selling to SMEs for years so they've earned that level of trust."

A mature and sophisticated channel strategy succeeded in this market, Sharma said, because partners had the reach, brand and installed base of customers within the segment. It made sense for the larger service providers wanting to break into the SME market to partner up with value-added resellers because the cost of direct sales could be high.

The IDC survey found that SMEs preferred doing business with similar sized companies because a loss of control from an unequal relationship was the major fear.

"The smaller companies get a bit intimidated," Sharma said.

A key reason for IDC's predicted growth of up to seven per cent in the SME outsourcing market was due to the need for smaller companies to free up resources to focus on core skills in order be competitive.

The enterprise outsourcing market was experiencing saturation, Sharma said. As a result, companies were beginning to look elsewhere for market share.

IBM's acquisition of Logicalis for its strong SME business was typical of the emerging trend of larger companies buying into the smaller fragmented market sector, Sharma said.

"About 50 per cent of the Australian market is SMEs and that is a big number to be untapped," Sharma said.

The survey involved 204 Australian companies and 50 per cent of those questioned were SMEs. For the survey IDC defined the group ranging from 1-99 as small and 100-499 as medium-sized enterprises.

Strategies for larger companies tapping into the smaller markets, advised IDC, include adopting SME traits, copying the sectors business practices and offering pilots for product deployment.

Product areas IDC identified as a good fit for an SME outsourcing strategy included security and email hosting services.

"It can be difficult finding qualified security people that have industry qualifications so by outsourcing you have given that headache to the outsourcer." Sharma said.

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