Movement under the radar

My February column on utility computing generated responses from utility computing providers that serve small and midsize businesses, and vertical industries out of the spotlight of the trade press and analyst firms. The growing acceptance of utility computing as a new outsourcing model at the low end of the market also should be encouraging for larger companies that are considering these services for their branch offices and remote workers.

A recent Gartner survey of 43 business process outsourcing providers found that while they continue to focus on large corporations, the proportion of midmarket companies with revenues of less than $500 million taking advantage of their services grew from 25% in 2001 to 36% in 2002. The finding confirms the experience of UCPs that also are finding SMBs more receptive to outsourcing a portion of their IT operations on a subscription-fee basis.

UCPs vary in origin, target customer and services, but all benefit from the growing demand for their services. For example, Perimeter Internetworking in Trumbull, Conn., has taken a vertical market approach, offering packaged network infrastructure and security services to community banks that generally have limited internal IT/network staff but face growing regulatory requirements for disaster recovery and business continuity. The Telluride Group in Newton, Mass., has evolved from a typical onsite IT services business helping companies with fewer than 50 employees to delivering most of its desktop and network services remotely. CBE Technologies in Boston offers a variety of turnkey onsite and remote desktop, security, storage and network services to SMBs and government agencies. All these companies have experienced a significant surge in customers over the past year.

This trend also is timely in light of the recent announcement by BellSouth and IBM of a new joint utility-computing venture focusing on SMBs. I wouldn’t be surprised to see the other carriers partner with companies such as Computer Sciences Corp., Electronic Data Systems, HP and IBM to attack the SMB market. This effort would include a greater push to serve the branch offices and remote workers of larger companies that are trying to reduce the cost of supporting these peripheral IT users.

As in any buyer’s market, SMBs and larger firms can benefit from this growing competition. However, don’t be fooled into selecting the UCP with the lowest price or biggest name. Relying on a UCP to perform an IT and/or business function is a major decision that puts your organization at the mercy of your provider. Beware of UCPs desperate enough to undercut their competitors to win your business but not financially stable enough to survive. And be careful of telephone companies and IT vendors experienced in serving large companies that might not be able to scale down their services to meet the needs of SMBs.