SMBs could be the way forward for outsourcing providers

Typically in this space, we look at very large outsourcing arrangements and consider the implications and trends that emerge from those deals. However, given that 99.8% of employers in the U.S. are small and midsize businesses, according to U.S. Census data analyzed by The Yankee Group, we should also examine outsourcing options for SMBs.

InfoWorld CTO Chad Dickerson, wrote in his June 7 Weblog about the benefits that he has found outsourcing the “mundane yet important tasks associated with day-to-day IT.” Interestingly, he finds Centerbeam’s reference to “‘fractional ownership’ of IT services” to be accurate but would like to bring back the ideas of ASPs.

However, longtime readers of this column will know that ASPs buckled under the overblown hype that surrounded them during the Internet bubble. Nonetheless, the economies of scale and value of expertise applied to specific services delivered to multiple organizations is clear, compelling, and current today.

Considering the size of the SMB marketplace, many of the largest technology companies in the world are focusing efforts to deliver products to it. Microsoft, IBM, HP, and others have dedicated resources looking for ways to deliver their products and services to this historically underserved market.

Recently, while working with a smaller, early-stage technology company, I was surprised to find that IBM was interested in considering providing outsourcing services to a company of fewer than 50 people. While there are some limitations to the customization and products that such an arrangement would have available, the simple option of IBM considering such a small company shows the changes afoot. As these outsourcing organizations continue to work on understanding how to best address the needs of these businesses, convert them to more standard platforms to reduce the overhead per customer, and develop effective mechanisms for remote management and performance accelerators, both the business of the outsourcing firms and the benefit to the broad spectrum of SMBs will be significant.

The nearly ubiquitous nature of high-speed Internet access is a principle component of the explosion of services available. It is now reasonable to run core services like e-mail and file sharing over Internet VPNs or low-cost private lines that also serve as Internet access connections. As a result, it becomes cost-effective for service providers to create virtual hosting environments for core business functions much as they did with Web hosting during the e-commerce heyday.

Believe it or not, this proves that much of the promise that resulted in the Internet bubble was actually true. Widespread access to sufficient bandwidth does change customer behavior. “New” concepts like on-demand and virtual computing, together with the always-on connectivity now emerging as a result of advanced wireless technologies, demonstrate the geography is immaterial and locality of service delivery a non-issue. As a result, for the next few years we will continue to see imaginative and visionary service providers developing solid, profitable business models based on economies of scale and effective specialization. In other words, the bubble burst too soon and the Internet visionaries were right.