VARs Under the Influence?

Microsoft has a new strategy for capturing the small-business market: capture the hearts and minds of consultants, integrators, and value-added resellers.

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Marketing Watch

Your technology adviser has a new best friend. Its name is Microsoft

October 28, 1997, was a big day for Bill Gates. His age went up one year, to 42. The value of his Microsoft holdings went down $1.76 billion, the result of a precipitous stock-market dive. And with un-Microsoftian subtlety, he kicked off a campaign to capture a long-sought-after quarry: the small-business owner.

From his sprawling campus in Redmond, Wash., Gates spoke to a crowd of small-business attendees who had trickled into a dimly lighted, cavernous room in a Washington, D.C., convention center. A satellite hookup beamed the tycoon's trademark smirk and Master of the Universe aplomb onto three gigantic wall-mounted monitors. It was as though Big Brother himself had come to address the technologically unwashed.

Gates's message was familiar: Customers-want-everything-faster-and- you'd-better-get-on-the-Net-before-the-competition-eats-your-lunch. But this time it was anchoring Small Business Crossings, a one-day event that Microsoft Corp. recently took to 13 cities in four months. With nearly every Fortune 1000 desktop awash in Microsoft products, Crossings is part of Gates's sharpened focus on the millions of small companies that have yet to purchase the latest version of, well, everything. "The small-business market is probably the largest for computer software, and we haven't really cracked it," says Paul Bazley, general manager of small-business marketing for Microsoft.

As Microsoft campaigns go, Crossings is pretty quiet; compared with media events like the launch of Windows 95, it's practically a whisper. And if you happen to miss the festivities when Crossings rolls through your town, you might never notice that Gates has mobilized a massive effort to grab the lion's share of your technology budget. That's because Microsoft's latest strategy, for the most part, isn't directed at you. Rather, it targets the people and organizations that you depend on most for technology advice--what to buy, and when.

"You're never going to sell directly to small companies," says Bob Kazarian, Ph.D., president of Charles River Strategies Inc., a consulting and research firm in Wellesley, Mass. Consequently, Microsoft is attempting a more circuitous route. Last August, it launched a multimillion-dollar campaign to reach 150,000 small-business technology consultants, systems integrators, Internet service providers, value-added resellers (VARs), and training firms (what Microsoft has dubbed "value-add" providers, or VAPs). The bait: a level of support and training so unprecedented that it becomes difficult not to sell Microsoft products.

On the face of it, Microsoft's new strategy looks like a good thing for everyone. Microsoft increases sales. Resellers and consultants increase their expertise. And small-company owners get newly thought-out software and services that are more closely tailored to their needs.

But there's also a risk. "Few others can reach as deep into the channel as Microsoft," says Kazarian. That means whatever competition remains among software companies looking for a piece of the small-business market may end up being choked off. "Smaller players often have very limited shelf space, speaking both literally and figuratively," says John Carpenter, director of research for Channel Information Services Research and Consulting, in Waltham, Mass., an independently owned business unit of CMP Media Inc. "If Microsoft penetrates them, it naturally leaves less room for Corel, Novell, and others."

There's also the danger that small-business owners, unaware of Microsoft's largesse, may misread their advisers' growing enthusiasm for Microsoft products. For that reason, it becomes important that they make sure those advisers are offering them the best solutions for their particular business needs. "Now, more than ever, small companies must apply the same reviews to their technology partners that they would to any other partner," warns Heather Clancy, editor of Computer Reseller News, a CMP Media publication based in Jericho, N.Y.

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