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Don't Forget the Little Guy
Demand for a technology in the small-business segment depends on installed base, perceived need, and business size, according to a Jupiter Research report.
Posted Feb 6, 2007
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It's obvious that small businesses have substantially smaller tech budgets than their enterprise counterparts have. They do, however, have technology needs; if you market the right product at the right price they'll gravitate to the technology. The introduction of a growing number of technologies designed for small businesses is making the market a vibrant one, according to the Jupiter Research report, "Small-Business Technology: Assessing Spending and Needs." The report is based on the results of a June 2006 Jupiter Research/e-Rewards IT executive survey of 103 IT decision makers from small businesses, defined by Jupiter as those with fewer than 100 employees. As to be expected, the smallest companies expected to shell out the least amount of their budgets on technology spending in 2006: 77 percent of small businesses with fewer than five employees planned on spending less than $25,000 and 11 percent planned on spending between $25,000 and $49,999. Thirty-six percent of respondents from companies with between five and 24 employees intended to spend less than $25,000, while 26 percent expected to spend within the $25,000 to $49,999 range. The largest set of the small business sector was most attracted to $100,000 to $249,999 range; 22 percent of IT decision makers from small businesses with 25 to 99 employees revealed that their planned 2006 technology spend fell within that bracket. Vendors in this space "believe that the small business market has typically been underserved by technology vendors," says Sonal Gandhi, lead Jupiter analyst on the report. "A bunch of companies are coming out with products. There is a lot of opportunity there." The report also examines what Gandhi classifies as "four adoption categories" for small-business technologies: upgrades and additions, wider adoption, nascent adoption, and saturation. Upgrades and additions technologies have a strong adoption rate and a high installed base. Some of these solutions, according to Gandhi, are desktop operating systems, desktop productivity suites, and server operating systems. These technologies "have been around for a while," she says, but "either they're upgrading to better versions...[or] as the businesses are growing they're buying more licenses or they are adding new users."
Wider adoption technologies have considerable demand, but a low installed base. "We know that Web hosting, Wi-Fi, and CRM have been around for enterprises for a while and to certain extent small and midmarket businesses, but we're seeing it's really starting to pick up now in this market," Gandhi says. She adds that wide adoption offerings are "the growth opportunities." Nascent adoption small-business technologies are those with low demand and a low installed base. A partial list includes VoIP-based PBX or other telephone system, online meeting software, payroll software or service, and ERP software, according to the report. "Marketers must push for greater adoption through education and incentives," the report states. Saturation technologies for this market are technologies with high demand, but a low installed base. The report notes some examples as messaging software or services, security software, accounting software, and database software. "We feel the market needs to either offer better products or look at different segments and target them differently in those categories," Gandhi says. When it comes to making tech purchase decisions, Gandhi contends that companies should take advantage of online resources available. And, like many industry analysts, she notes the continued interest in on-demand software as a way to get your foot in the door without a hefty upfront investment. As for vendors that are looking to gain more traction with small businesses, Gandhi recommends they understand the market and the needs of small businesses, and to demonstrate that understanding. "Make it simple for them to use the right technology solution for their business," she says. "Give them tools that they feel empowered using because small business owners or decision makers, they are running their business; they are people that like to take control, so it's important to make them feel that way." Related articles: ERP for the SMB Right in the Midmarket Middle Hosted or Housed?
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