Service providers cater to lucrative market-space

First it was CLECs, then came the cable industry, and now even incumbents are getting into the act. The small- to medium-sized business market has become the hot turf for competitors to claim.

Most of them, of course, call it “the underserved small- to medium-sized business market.” But how can a market be underserved when there are so many competitors out to serve it?

Major national CLECs — Covad Communications, New Edge Networks, Speakeasy, XO Communications and more — have been targeting SMBs for some time. Regional players including Cbeyond do as well. The cable industry is making its major push into business services by targeting smaller businesses and small locations of larger entities, particularly those with regional orientations, such as school districts, hospitals and governments.

Now Verizon Business is specifically targeting smaller distributed outlets of larger corporations such as banks, insurance agents and retail stores with a new managed service based on Cisco Systems' Integrated Services Router. Seeing that 70% of corporate IT resources were being consumed by branch offices prompted the new initiative, said Chip Freund, director of managed services product marketing for Verizon Business.

“What has happened is that small businesses have gotten a little more sophisticated in their voice and data needs,” said Cindy Whelan, an analyst for Current Analysis. “Service providers are realizing it's a big market. There are hundreds and hundreds of small businesses, whose needs are increasing. The opportunity is there to sell them more than a voice line.”

But small businesses are still hard to reach in a cost-effective manner. “It's such a harder market to crack,” said Jeff Wilson of Infonetics Research. “There's a lot of money to be had, but from many different smaller sources, so it's tougher to get at.”

IT consultants, value-added resellers and agents remain a major part of the SMB sale, analysts say, as do retail channels. That's one thing on which Speakeasy, now part of Best Buy, aims to capitalize. (See story on page 19.)

SMB owners will benefit from more choice and price competition, but Whelan and Wilson admit they might find themselves confused by the choices.

“In the end, it will come down to how much attention they get from the service provider,” Whelan said.