SOHO: an untapped goldmine?

SOHO: an untapped goldmine?

Squeezed by falling margins on hardware, resellers are looking at the small office/home office SOHO market as a potential revenue stream.

Not surprisingly, the vendors have been more than happy to see them move in this direction, delighted by statistics that indicate there are thousands of small businesses in Australia with more than one PC, and nothing to link them together.

Recently we've heard about the push to get networking products onto the shelves of retailers, both mass merchant and shop front alike. But while making hubs, NICs and routers into commodity products may be good for revenue, how to deliver network services represents a greater challenge.

It is here that smaller computer and networking resellers come to the fore. But when you speak to dealers that have successfully tackled this end of the computer business, it becomes clear that although there are dollars to be made, they may not be easy to come by.

Take, for example, Adelaide-based CPM&S. Sales and marketing manager Geoff Boase says his company has enjoyed rapid growth in the SOHO market, due in part to the value the company can add between the vendors and the buyers.

"Because Adelaide has correspondingly less larger companies than Sydney or Melbourne, we get a lot more SOHO business," said Boase. "Our experience is that while most SOHO buyers think they know what they are doing - they can't manage."

Boase blames the computer vendors. "They sell this technology to people telling them it's no more complicated than an electric toaster - you just plug it in and play. We all know there's more to it than that."

"The smarter SOHO buyers know they have to pay for someone to look after the IT side of their business," said Boase. While many SOHO buyers realise the value of getting some expertise from a reseller, he said many others were still "in dabble land".

"You can't make a business selling boxes. You've got to sell services and solutions." This has seen a dramatic growth in the services business of CPM&S, said Boase. The company has put on 20 extra support staff - many of them Novell and Microsoft certified - in the past 12 months, taking its headcount to more than 60.

Noel Weeks, a director of Brisbane-based IT Bytes, agreed that while more resellers were looking at the SOHO market, it is a market that is extremely cost-conscious and relies heavily on hype from manufacturers.

"The problem is that some major vendors don't know the true, total costs involved in getting their products working," Weeks said.

"We find the SOHO market also wants to know the real return on an investment in IT. They want to know the benefits and all the costs - including installation and maintenance.

"If a router breaks down in a large organisation, the chances are it'll have a spare standing by to replace it," said Weeks. "The SOHO buyer won't have that option."

He said his company's approach to SOHO buyers is to bring the service costs into the conversation very quickly. "They are frequently shocked, but then many of them have had an unpleasant experience in buying computers in the past," Weeks said.

"If you tell them exactly what it's going to cost, you get a customer that is more loyal," said Weeks. "And you also have a higher chance of being paid promptly."

IT Bytes is now busily establishing itself in the small network market. "For example, the new small routers have two extra ports that can be used for a fax and modem. It makes them an ideal product for the SOHO market," said Weeks.

Harold Weeks, services manager at Choice Connections, agrees that service is an important component of the SOHO business.

"The SOHO buyer can be surprised at the price of services so we make them aware of such items as extended warranty," he said.

Weeks says the SOHO market has been growing steadily for the past three years. "It's a tough market but it can be very rewarding," he said.

Apples and mass merchants

Weeks believes the PC buyer is more price conscious than the Mac buyer, a sentiment which is echoed by Power Lan Technologies' Michael Goldring.

"I see both sides of the SOHO market - PC and Mac," said Goldring, technical account manager at the Sydney-based dealer. "Because more information is out there on the Intel platform, the SOHO buyer in that market is better informed."

He said that it was too early to tell the effect of Apple's retreat from the mass market. "It's an interesting move," he said. "It could lead to the PC grabbing a larger share of the market.

Power Lan Technologies focuses on the corporate and government markets. "We get the occasional SOHO user," said Goldring. "Some of them are just interested in price and I tell them they're probably better off going to a mass retailer like Harvey Norman or Dick Smith," Goldring said.

"Others can see where we can add value to what they are after and where it will fit in with their business. We can help them," said Goldring.

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