IBM Stakes $1 Billion on Hope of Spurring Small Business Buying
Well, Mr. and Ms. Entrepreneur, your friends at IBM are thinking of you today. Big Blue will today announce the availability of $1 billion in new financing options specifically aimed at small and medium businesses to pay for purchases of new tech hardware, software and services.
Now before you roll your eyes, harrumph, and restrain yourself from saying “Who cares about small and medium businesses anyway?” allow me to answer: You do. In the U.S., small businesses account for a huge swath of the economy, accounting for about two-thirds of new jobs created over the last 15 years, and they hired 40 percent of high-tech workers. They also employ roughly 90 percent of the workforce of the entire world.
And get this: According to IBM, the total amount spent on technology each year by small and medium businesses — IBM defines them as having fewer than 1,000 employees — amounts to a quarter of a trillion dollars.
Compared to that, well, a billion is a little slice. But when credit is hard to get from ever-more-cautious banks in a tough economy, CIOs will see it as a welcome move. Half of small businesses crash and burn within five years because they can’t get access to capital.
Not only is IBM making the cash available but it is making it easy to get. Most of IBM’s small and medium business customers interact with Big Blue not directly, but through business partners — third parties like CDW and Ingram Micro — who sell IBM gear and do the heavy lifting associated with getting different bits of hardware and software working right. They also tend not to have huge IT departments as larger companies do, says Andy Monshaw, the general manager of IBM Midmarket Business. “It’s a really fragmented market with literally thousands of local players,” he says. “It’s a market based on long-term local relationships.”
Entrepreneurs are running up against expectations of the so-called “consumerization of IT.” They have easy-to-use technology at home, but the stuff at the office is older and not cutting it. One big thing these companies are looking at is cloud computing. An IBM survey found that 60 percent of them are shopping around for cloud services. That got the attention of IBM’s Global Financing unit, which helps customers pay for new gear and services in much the same way that car dealers help people buy cars — by providing attractive financing packages.
On top of that, IBM has come up with a long list of products and services that are priced in ways that make sense to smaller companies — stuff that gets charged on a per-user or consumption basis. IBM has hacked together a list of products and services to fit with the effort, including cloud services, analytics and security, as well as products from recent acquisitions like Netezza, Cognos and Cast Iron.
Certainly there’s a lot of hand-wringing going on, especially in the U.S., about what it will take to get the economy creating jobs again. In fact, the president of the United States is going to talk about that very subject in an address to Congress and the nation tonight. And a survey done by Pepperdine University and Dun & Bradstreet found that 35 percent of small business owners say their biggest impediment to hiring more workers is access to capital.