The End of Profitable SMB Infrastructure Business

The fact that its harder and harder to make money in SMB infrastructure support is nothing new, you’ve read about it here over and over. But now some of you are starting to see it and I’m glad I’m not the only one talking about it. Check out this blog post from Brian Williams on one of the leads that fell through:

“Two days later I followed up via phone to see if there were any questions or concerns, at this point no still getting additional quotes. A week later another follow up to see where things stand, we’re almost done gathering quotes but we’ll be honest you’re the highest bid so far so we’re going to exclude you from our final selection.

One of the prospects informed us that the winning bidder informed them that their existing 4 year old PC’s would not need to be replaced (which we suggested replacing), and the winning bidder quoted a white box server with Intel Dual Core processors not Xeon’s as we had proposed.”

He goes a little further:

“We believe we’re doing right by our clients in quoting servers with SAS drives, Xeon processors, Dell servers with silver warranty for 4-hour on-site support, keeping equipment on a 3-year replacement cycle and much more. We will stick to our guns because when all is said and done if we start to change our philosophy to win bids then we’ll end up with clients who have equipment that is down, lost revenue and an increased stress level for all.”

Now, Brian is an IT consultant so I will defer to him based on the expertise, but I too would have shot down an SMB server with SAS and Xeon drives. Frankly, in all our data centers I have yet to meet a client that has been able to justify a Dual Xeon configuration – from the first time Xeons came out all the way to the current quad core 53xx that people love to spec – do you guys do it just to artificially lift the price of the system so your commission / services look tiny by comparison? Especially if you’re rotating systems out every 2-3 years, unless the customer is pounding the SQL end of the system with some heavy duty LOB or has 50+ users (in which case it shouldn’t be a single server deployment anyhow) I just can’t reason it out. Either way, as I said, I am not an SBSer or an SBS consultant so I am sure Brian had a very good reason for his recommendation.

But what he discovered, and what many of you are discovering, is that its harder and harder to make a buck on infrastructure work in SMB anymore. The entry level dual core servers are so powerful, the SATA2 drives are quite impressive and honestly we are not back in the 90’s and early 2000’s where there was a night and day difference between a server with Celeron and IDE hard drive, today less than $1,000 a server without OS brings more than most smallbiz shops need packed with max amount of RAM.

You are also competing against the “It’s good enough” and “How does Google do it for free?” and the big iron in a small closet no longer flies and any time you are in a sales situation and are trying to defend your solution instead of keeping the client dreaming about the possibilities your solution offers that the others don’t… well, that’s where you lose the bid.

So its time to sit down, figure out if its time to retrain or refocus. One thing is for sure, if you’re looking to grow, you won’t be doing it in the infrastructure business. More on the doom and gloom in the new Vladville Newsletter.