Robert: What is the transition to virtualization and the cloud doing in the SMB market?

Meaghan: Virtualization is picking up faster than cloud. Forty-four percent of all SMBs plan to virtualize in the next 12 months. Virtualization offers three advantages: Lower costs: By eliminating the need for additional physical resources, virtualization can reduce a hoster's infrastructure costs by as much as 40 percent. It can also increase resource utilization by 50 percent or more, allowing hosters to use existing systems.

Robert: Why are SMBs moving quicker to cloud-based solutions than larger enterprises?

Meaghan: The cloud helps them reduce and/or eliminate several common pain points, including:

Robert: Why is the SMB market so important to the IT industry?

Meaghan: Very important! Globally 95 percent of all private companies have fewer than 500 employees. Well over half of the world's employed individuals work in the SMB sector. In the U.S. alone, there are 12.5 million small businesses and most of them don't have the appropriate IT knowledge, expertise or infrastructure and are looking at trusted advisors to help manage their IT. Small businesses are laser focused on cost savings and specifically looking at how to use cloud solutions for messaging, collaboration and solutions for customer relationship management.

For HP products in the US, SMBs represent a $57 billion opportunity. We have 20 percent market share and want to get a big slice of the other 80 percent.

Robert: How important will VARs be in the new IT world of cloud computing and technology as a business solutions?

Meaghan: Extremely important. Approximately 60 percent of SMBs in the U.S. purchase through VARs today. The more that a VAR can become the trusted business partner and offer these new technologies for cost savings, the more these SMB customers will continue to purchase products and services from them in the future. We spend over half a billion marketing dollars per annum on channel members who cater to SMBs.

Robert: Traditionally, what has the role of the reseller been in the SMB space?

Meaghan: To recommend software and hardware solutions that help maximize the efficiency of the IT needs for that business. That traditional role will not change any time soon.

Robert: With all the new services, will resellers still be required?

Meaghan: Yes! Absolutely--people are looking for local services and support to help them manage their IT.

Robert: How will the role of the reseller change (product focused to business solutions)?

Meaghan: VARs can take advantage of the cloud by looking at two new business models:

1) They can partner with a hoster and "resell" or "white label" the hosted solutions to small and mid-sized businesses, creating a steady, predictable and very substantial revenue stream for themselves (30-50 percent margins).

2) They can sell the hardware and software solutions needed by hosters, especially those who serve the SMB market.

Robert: Of the 25,000 resellers HP currently works with, how many of them do you think have made the change?

Meaghan: A handful have figured it out and are extremely profitable. However, it took a long time for these resellers to establish themselves with this new revenue stream and become an "early adopter" in terms of coming up to speed.

Some are only doing cloud stuff. Most are starting to do a hybrid model.

Robert: How many do you estimate can make this change?

Meaghan: Most successful resellers will offer both traditional as well as cloud-based offerings. Still see it in early adopter phases and I have no estimate on timing.

Robert: What is HP doing to help facilitate this change?

Meaghan: Coming out with great products for cloud as well as partnering with hosters to help offer solutions to the VAR community (USA.net, Netsuite, etc.). From an HP product perspective, it's the platform that makes the solution great. Running on a platform of HP services, storage and services gives SMBs peace of mind that they are backed by a great company and brand.

Robert: What do you think the traits the successful reseller of tomorrow, who focuses on the SMB market will have?

Meaghan: One who can offer

:

Robert: Moving forward, what type of partners is HP looking for?

Meaghan: Loyal partners that want to be "all in" with HP. We have the broadest portfolio of products in the industry and the brand/reliability. Our PartnerOne program rewards VARs that sell across the portfolio. The deeper you partner with HP, the more profitable you will become.

Robert: What role will these partners play?

Meaghan: The role of the VAR of the future will be a trusted business advisor. To just "make it work" so the SMB doesn't have to think about it. Take the HP products suite and wrap up your localized services and support to bring customers the value and ROI they need.

Robert: How will they be compensated?

Meaghan: VARs can charge a monthly service fee to customers.

Robert: Should resellers be afraid of this whole paradigm shift?

Meaghan: No! They should embrace it while it's still in the emerging phase. Become the expert in this area before the competition does.

Robert: What should resellers be doing right now to ensure their success in the future?

Meaghan: VARs need to make sure they know who the hosters are and how to establish relationships with them, understand how their business model works and how they can shape their business around these new services and offerings.

Robert: What advice, if any, do you have for resellers catering to SMBs?

Meaghan: Selling to SMBs begins with an understanding of their worries and needs. Smaller organizations often lack the internal resources and capabilities to address their IT challenges through traditional computing models. VARs need to fill that gap and help SMBs understand how they can lower costs. In order to do this most effectively, VARS need to employ a strategy of:

Robert: What advice do you have for vendors catering to SMBs via the IT channel?

Meaghan: Selecting the best, most productive and ultimately most profitable software and hardware is critical (you can't afford a mistake). Get the right management tools in place to keep operations efficient and productive, and make sure you get the training needed to make the most of the investment. Also, support is crucial -- meaning everything from finance to design, implementation, deployment, troubleshooting and maintenance.

Robert: Any quick advice for distributors catering to SMB focused resellers?

Meaghan: The role of distribution is changing. Distributors can play a much more strategic role in helping the VARs understand the new business models being formed and how they can take advantage of them.

Robert: Any parting comments?

Meaghan: Life is great being at HP right now. I am so lucky to be here working with a fabulous company and with a great team!!!

Robert Cohen, a passionate and enthusiastic channel advocate, is the founder of the ChannelLine Advisory Council as well as president and business editor of Integrated mar.com, publishers of Channel Advisor, eChannelLine and ConnectIT. Since 1980 he has worked with 350 IT vendors, distributors and resellers in developing and implementing strategic go-to-market programs, using a variety of direct, channel and hybrid models. Integrated mar.com, in conjunction with Robert has created the Trusted Business Advisor program.

Robert can be reached at 1-800-465-2059 or by email at rcohen@integratedmar.com.