NATIONAL HARBOR, MD — Red Hat is in the middle of transforming its go-to-market in the SME space, and it shared its progress and its plans with partners at its North America Partner Conference here this week.

In a session on “SME 2.0,” Ryan Thomas, senior director of midmarket sales for North America at Red Hat, said the company recognized three years ago that it needed to “think differently about this space,” and set out to change how it segmented, partnered, and worked with the SME space.

In the past, the company has divided it into midmarket and SMB, and it has seen “solid success” with growth of 25 per cent year over year on average.

“But we have challenges,” Thomas admitted. “If you look at the footprint we have in the true midmarket, there are about 30,000 accounts [in North America], and about 5,000 of those are actively purchasing technology and services from Red Hat through all of you.”

So far, it has redefined SME in three tiers — SMB at 100-999 employees, “core” at 1,000 to 2,500, and Upper SME, from 2,500 to 5,000.

Its strategy has shifted to going largely hands-off on much of the SMB market, focusing on building better digital marketing awareness and demand generation, and working with SMB-focused solution providers to get those out there. 

That’s part of a broader shift in marketing for Red Hat in the whole of the SME space. The company, Thomas said, has to get comfortable with talking outcomes, especially where its sellers are focusing at the top of the SME market.

“Midmarket customers are buying outcomes, and we’re used to selling products,” he said. “It’s about having the right solutions specialists and the right partner ecosystem.”

That’s not a comfortable position for a passionately product-driven company like Red Hat, Thomas admitted, but it’s one the company has to make to succeed in the space — and fortunately, it’s one where partners, who often bring vertical or specific customer knowledge to the table.

“We’re about 50 per cent of the way there, but we have a lot to do to align our go-to-market behind this model,” Thomas said.

Red Hat is also working as fast it can to get people with deeper SME experience on-team to help with the required sales culture changes.

The company is also being clear that SME is a channel field, and is asking its account team to “start driving a plan with partners.” Today, the company says 91 per cent of its bookings in the SME space are through, influenced or serviced by partners, compared to 81 per cent in the enterprise space.

“This market, with this opportunity, cannot be a direct sales model. We will fail,” he said. “We have to bring the right partners in to the right customers. SMB customers want someone to consult with, to talk to their needs, and to buy a hosted solution to meet their required outcome.”

Thomas described the company’s partner ecosystem in the space today as “good, but it could be a lot better.” In particular, there just aren’t enough partners actively engaging with Red Hat in the SME space, suggesting the roadmap the company has to re-think how it’s going after the market.And it’s a market where the company’s “emerging” products are under-represented, he suggested. He urged partners to think beyond its flagship Enterprise Linux offering when working with SME customers.

“We’ve got to keep talking about RHEL, but there’s all these other places where we play, and we’re missing those opportunities while they’re making purchases,” Thomas said.

To combat that gap, he said the SME team will work with partners to create “simple bundles” to address common desired outcomes for partners, and will work with partners on closer account plans.

“We’re creating new muscle here, so it will be a little bumpy as we get there, but it will be big,” Thomas said. “[SME customers] don’t have the understanding or expertise to do digital transformation themselves. They need your help.”