IBM bets $35 million on small business segment

IBM Canada Ltd. Thursday said it will invest $35 million over five years in new centres and services catering to businesses that are small and mid-sized, a market that’s worth billions in Canada.

Working with more than 70 business

partners, Big Blue announced 15 services to be offered at newly opened centres in London, Ont., Toronto and Calgary, including high-growth areas like managed services, security, business continuity and resiliency services.

The company also plans to open a fourth one likely in Montreal that will begin running later this year, as well as additional ones in other locations next year. IBM chose these cities to debut its small-business services because its internal research last year showed many such organizations operating here, explained Shannon O’Connor, director of IBM global services channels in Markham, Ont.

Its research indicates this market, made up of companies that spend about 60 per cent of their IT budgets on services, was valued in 2003 at up to $5.6 billion, compared to $9.4 billion spent by large firms on IT services.

Small and medium-sized companies “”enjoy and prefer to deal with regional and local providers,”” said O’Connor. “”And secondly, they place priority on price.””

NexInnovations, a Mississauga, Ont.-based IT infrastructure provider, began working with IBM in maintenance services and is expanding this relationship to offer more assistance to smaller firms.

Todd Irie, director of market management at NexInnovations, described the centres as a great opportunity to give its customers a broader range of services in the areas of servers, storage and business continuity.

IDC Canada expects IT services spending by smaller firms to grow faster than the overall IT market during the next three years. Large corporations that routinely show up in the Financial Post 500 have for the most part implemented the latest technologies and “”hot applications,”” which is typical of most technology trends, said Denis Vance, group vice-president of products and services research.

“”So it’s almost a cascading effect, and now we see that bubble, if you wish, or that activity, is moving to the medium and low end of the market,”” said Vance. “”It’s also very much a function of some of the competitive pressures that small and medium businesses are encountering.””

Vance said most major IT vendors, recognizing the slow growth of large firms, realize they must address smaller customers if they want to expand their businesses at “”anything approaching double-digit growth.””

Serving this often ignored market is being done in different ways, but IBM’s tack is “”the most comprehensive approach to the market that we’re aware of”” because it has spent a great deal of time and resources trying to understand the needs of businesses and potential partners, he concluded.

He said a more traditional strategy would be classified as a company working in a “”distribution channel environment”” to purchase a product or service.

IBM’s $35-million investment is the latest addition to its program for small businesses, which earned the corporate headquarters US$19.8 billion in revenues last year and that represents 20 per cent of its overall business, she said. Citing proprietary information, however, O’Connor cannot disclose how IBM’s new facilities are predicted to boost this division.


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