Yankee Group Says Dell Leads SMB Market

According to the Small Business Administration (SBA) there are more than 22.9 million small businesses in the United States. Home-based businesses account for as much as 53 percent of all U.S. small businesses.

The way a medium-sized business with 500 employees buys laptop and desktop computers is completely different than the way a home-based entrepreneur procures products. With this in mind, the Yankee Group set out to determine if one particular hardware vendor dominates the mindset of the SMB market.

A new study from Yankee Group research indicates that U.S. small- to mid-sized businesses spend approximately half of their annual IT budgets on new computers. The hardware vendor that is perceived as offering SMBs good quality products at a competitive price will dominate the market, which is just what Dell has managed to do, according to the Yankee Group.

Of the SMBs surveyed, 80 percent view Dell as either the perceived price leader or at least competitively priced. Regarding quality, 82 percent of SMBs view Dell as the quality leader or maker of good quality computer products.

While the new Yankee Group study reveals that Dell not only has the most widely recognized brand but is also seen as the price and quality leader in the U.S., the hardware marker may find it difficult to maintain its market dominance in the future.

Michael Lauricella, program manager for the Yankee Group’s small and medium business strategies advisory service, said Dell’s dominance in the SMB market did not surprise him, but that the margin of victory over Dell’s rival vendors is startling.

“It is clear that Dell’s strategy has served them well in generating brand awareness and creating a positive perception in the SMB market,” Lauricella said. “Dell is the definitive price leader in SMB market and the perceived leader in quality of products sold. This all adds up to offering a good price-for-quality value ratio, and SMBs know a good value when they see it.”

However, Dell is not without its challengers. HP placed second in low price perception ratings among SMBs and IBM placed second for quality. Dell’s strength in the SMB market to this point is a direct reflection of its successful direct sales strategy. Lauricella said that a growing number of SMBs are looking for more comprehensive computing solutions — direct sales might not be enough to maintain Dell’s leadership of the SMB market.

“As SMBs require more complete computing solutions, channel partners will play an increasingly critical role. Services from local integrators will be needed to implement more complex IT systems,” Lauricella said. “This could hinder Dell’s ability to effectively serve this very competitive market in the long run.”

As more and more SMBs become increasingly dependent on hardware vendors for technical know-how and on-going support, vendors are finding it increasingly difficult to effectively serve this diverse market segment.

IBM has a strong reputation for building quality computers. Lauricella said that if IBM were to focus more on smaller businesses and less on enterprises, it could make major headway in the SMB market.

“If IBM tweaks pricing to be more SMB-friendly, it definitely has a measure of brand recognition that could make IBM a success in the SMB market,” Lauricella said. “But there’s never going to be one silver bullet to reach this market. It takes a mix of direct sales, and retail outlets, and channel partners to make strides in serving SMBs.”

Computer technology is a double-edged sword for many small businesses — both a competitive advantage in terms of productivity and a drain on resources when it comes to capital. In order to win over the SMB market, computer makers must be prepared to offer more than one way to procure products.

Companies included in the survey were Acer, Apple, Dell, Gateway, HP, IBM, Sony, and Toshiba. Questions were asked on a four-point scale and respondents were permitted to report no opinion in the event they lacked awareness of any of the respective companies.

This topic and the technology challenges facing small and medium-sized business will be discussed at the upcoming Yankee Group SMB 2004 Forum in San Francisco on March 15 and 16, 2004.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

Must Read

Get the Free Newsletter!

Subscribe to Daily Tech Insider for top news, trends, and analysis.