HP, IBM - Stuck in the 'midrange' with you

Something smaller than small

An aside: I was listening to Austan Goolsbee, a professor of economics speaking on the radio the other day as he discussed the economic plans of then presidential candidate Barak Obama, whom he advises, and he threw out this little factoid: 98 per cent of the small businesses in America have less than $250,000 in revenue. We tend to think of midrange shops making lots of money, but historically, I always placed the midrange between $10m and $100m in annual revenue, maybe sometimes stretching it to $250 million.

Above that, you are an enterprise. But I think there needs to be another characterization of business size, something smaller than small that talks about those 98 per cent who are just paying a few salaries. I have proposed the term pissant. So we have P, SMB, and L. If you don't want to curse, you could spell it puissant, which is French for "strong, mighty." These pissants are the workers of the small business space, no doubt about it.

Having said all that, there is something that makes the midrange still the midrange, regardless of the headcount in IT or at the company at large or the expertise level inside IT. "Competition is much more heated in midrange companies," says Renggli. "Large enterprises are chasing their business from above and small companies are nipping at their ankles from below. Midrange companies are looking for competitive advantage. They are not just trying to keep their IT operations running as well as possible."

Renggli says that about half of the sales in the company's Industry Standard Server and StorageWorks divisions, which respectively sell ProLiant and BladeSystem servers and disk and tape products, go into the SMB space, and that HP is projecting a 7.4 per cent compound growth rate in sales in the SMB space for these products over the next five years - almost double the rate of the market at large.

"There is a lot of outdated IT in midsized companies, and there is a lot of pressure to innovate," he says. "Also, IT is not as hard any more and equipment is not as expensive as it once was."

As an example, Renggli talks about the new SMB blade server setup, nicknamed "Shorty," which runs on normal wall power and packs all the IT a typical SMB shops needs into a space that a big tower server used to take up. He adds that SMB customers are not really all that interested in software as a service, that they are still very keen on IT gear on their premises supporting their businesses. "Making IT simpler, making it more affordable, is what these customers really want."