Small and medium-size businesses (SMBs), like their enterprise brethren, are shifting their technology focus from IT to business technology (BT). As their focus on business solutions – as opposed to technology products – continues to grow, SMBs are now investing in their own IT support staff as never before. Now, armed with internal IT support resources, SMBs are not ramping software-as-a-service (SaaS) as fast as large enterprises and are taking greater advantage of open source software.
The lines separating large enterprises from SMBs are becoming blurred. As the Millennial labour pool increasingly permeates the employee ranks of SMBs, the Millennials' tech influence is combining with a new generation of tech-savvy business owners to make SMBs look a lot more like their larger enterprise counterparts - on a smaller scale, of course. The result is an SMB target market that is shifting its tech focus from IT to BT.
Long gone are the days when SMBs bought only an operating system, an office suite, and a bit of security software to meet their business needs. With a keen focus on fuelling new growth opportunities associated with the economic recovery, SMBs are making significant investments in what were traditionally enterprise business application solutions, such as enterprise resource planning (ERP), customer relationship management (CRM), customer service and support (CSS), marketing automation, and business intelligence (BI).
SMBs are now an increasing investment in internal IT support. As SMBs recognize the increasingly important role played by BT in local and global operations, they are starting to expand investment in support staff that can keep their business infrastructures humming. Overall, 20% of companies are increasing their investments this year in internal IT staff. Medium-small (100 to 499 employees) and medium-large (500 to 999 employees) businesses rank on a par with this figure, and small businesses (20 to 99 employees) exceed it by 25%.
However Forrester Research has found that uptake of SaaS among SMBs is slowing. Tech vendors have long thought of software-as-a-service (SaaS) as predominantly an SMB market, due to SMBs' purported paucity of IT support resources. But brimming with new IT staff and suffering from monthly SaaS subscription-fee indigestion, SMBs are now less inclined to increase use of SaaS than are large enterprises/
Forrester Research is also seeing SMBs fully exploiting open source software. SMBs have always been drawn to the "free" aspect of open source software. But the configuration and maintenance chores necessary to make many open source software products relevant to SMBs often meant that the software went underutilised. Now, many SMBs have the ability to customise open source software and are planning to increase their utilisation of open source software significantly over the previous year's usage.
SMBs indicate investment and interest levels in most software categories commensurate with those of large enterprises. As SMBs shift their orientation from IT to BT, they are tracking enterprises in terms of software adoption in many areas, including collaboration, content management, and ERP. But SMBs are also investing in marketing and customer-facing applications to fuel their newfound marketing appetites.
Collaboration and content management lead SMBs' investments. A whopping 44% of SMBs will expand or initially invest in collaboration software this year, and 40% will do so in content management software, continuing the trend from last year.
ERP and vertical-specific applications remain important to SMBs. About one-quarter of SMBs will invest or expand their investments in ERP and vertical applications this year. Indeed, many SMBs expect and need ERP solutions to be "verticalised" by tech vendors' channel partners. Microsoft, Oracle, and Sage - as well as regional players - have been the stalwarts of the SMB ERP market for years, but after many years of diligent effort, SAP is showing up on the SMB market radar as well.
Customer-facing applications represent a high-growth SMB market. The new SMBs are marketing rock stars (or at least see themselves as such) - and they place a high degree of importance on technology to fuel their newfound marketing appetites. CRM, customer service and support, marketing automation, and Web conferencing all rank high in SMBs' software investment priorities.. This reflects the fact that SMBs are boosting their marketing spend much faster than are their enterprise counterparts this year. Moreover, in many respects, particularly in digital marketing, small companies are outperforming enterprises.
SMBs' BI investments are surprisingly high. Medium-size businesses discovered BI a couple of years ago and now represent the largest company-size market segment for BI. But the fact that more than 30% of small businesses will invest in or expand their investment in BI this year is especially significant and bodes well for vendors like IBM (IBM Cognos Express), Microsoft (Microsoft SQL Server Reporting Services, Microsoft SQL Server PowerPivot), QlikTech, SAP (SAP BusinessObjects Edge), Tableau Software, and TIBCO (TIBCO Silver Spotfire) - particularly for those vendors that can enable their channel partners appropriately. SMBs indicate low investment but a high level of interest in several other software categories, such as information access and learning management systems. For tech marketers at these vendors, this represents a lot of heavy lifting in branding, education, and channel development, but the payoff potential is significant.
The information overload problem is not exclusive to large enterprises; SMBs are becoming overwhelmed as well. Forty-five percent of SMBs indicate that they are either interested but have no definite plans or that they are interested in implementing information access software in a year or more.
SMBs see the potential for learning management software to be applied not only to meet traditional new-hire regulations but to address the customer education problem as well. Forty percent of SMBs are either planning to implement learning management software in a year or more or indicate an interest in doing so.
The SMB market, with its increased investment in internal IT staff and business application solutions, is morphing from a transaction business to a more enterprise-like solution business.
This is an excerpt from the "Demand Insights: The SMB Software Market 2010 "report by Tim Harmon, Principal Analyst at Forrester Research serving Technology Product Management & Marketing professionals. Tim blogs at: http://blogs.forrester.com/tim_harmon.