Small businesses want simplicity. And vendors are responding by developing networking products with integrated services, such as routers with virtual private networking and voice-over-IP functionality. But are small and mid-sized businesses (SMBs) ready for these products and will they really make

their lives easier?

Over the next 12 to 24 months, a new breed of small business and branch office multi-service devices will emerge, according to In-Stat/MDR, a Scottsdale, Ariz.-based research firm. These products will comprise a new category, dubbed the “”business gateway.”” Fixed-configuration, multi-service devices are expected to dominate the residential and small business markets.

SMBs want to simplify their networks and reduce spending, says Chris Lewis, enterprise practice leader with London-based research firm Ovum.

“”Everybody says this is the big opportunity for telcos and the equipment guys,”” he says. “”The fact is no one knows this market very well.”” SMBs are more likely to trust their local resellers than carriers or equipment manufacturers, he adds.

“”There is still a message to the equipment guys that they need to get away from the speeds and feeds and start getting a lot closer to a simplification of everything – of management, of installation, of upgrades,”” he says. “”The reason it’s particularly important at the moment for the SME market is the fact it has stabilized around Ethernet, around the switches and hubs.”” This means small businesses are a prime target for the converged network – for making IP telephony a reality.

Two or three years ago, IP telephony was not on the radar for SMBs. But the technology has matured considerably, says Lewis, particularly Cisco’s CallManager. What’s more of an issue is the fact that many SMBs don’t have multiple sites.

Therefore, he said, SMBs tend not to be concerned with linking separate offices with virtual private networks.

“”But the remote access piece of people working at home is absolutely critical – also for allowing your customers to get into your network.””

Products targeted at SMBs have to be simple, with the ability to be managed by a third party, and they have to be able to support voice and mobile applications.

Last year, Cisco announced its 1800/2800/3800 Integrated Services Routers that include built-in VPN hardware; the 2800 and 3800 include VoIP software. Cisco says SMBs can replace their private branch exchanges with these products.

But SMBs are not necessarily looking for integrated services routers just yet, says Chris Liebert, senior research analyst with the Yankee Group. “”SMBs are not early adopters of these technologies,”” she says. “”[Cisco] can develop products like nobody else but certainly not for the two-to-20 users,”” she says. “”In my experience, the mid-market SMBs – 500 to 1,000 employees – are much closer to an enterprise. They’re a scaled-down enterprise.””

Mid-sized firms usually have IT staff and might outsource some IT services, so these kinds of products offer a compelling argument, she says, where the return on investment comes out positive. “”For the very small and up to 100 [employees], these products aren’t quite as compelling,”” she says. This is because SMBs are acting in more of a reactionary mode and not necessarily spending resources on IT staff.

“”The IP PBX, as far as integrating it with their CRM systems and so forth, that’s not of particular importance to the SMB,”” she says. “”They don’t get it, it’s not mainstream, it’s still quite expensive for them and they’re not about to do a forklift upgrade.”” If they’re looking at new switches, she says, it’s going to be hard to justify spending more than they normally would on a technology they haven’t even bought into.

HP will be moving toward integrated services with its ProCurve line of switches, but starting with medium to large enterprises.

“”SMBs are very much value-driven, so the trend from a manufacturer perspective is to start integrating those services in the mid to large enterprise, and that integration comes down to the SMB,”” says Darren Hamilton, ProCurve category business manager with HP Canada. From an SMB perspective, he says, costs are still too high for some of these services, but many small businesses will want to be able to buy hardware and add more functions as they scale.

“”We’re really trying to drive that overall cost of ownership for the SMB down to something that allows them to get into newer technology on a more regular basis,”” he says. “”It’s the cost to keep that switch going that often exceeds the initial capital cost of the switch – and that’s the type of thing that doesn’t sit well with the SMB.””

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