Small and medium businesses increasingly turn to the Web for applications that fit.
Posted Apr 10, 2008
After years of focus on larger enterprises, the software industry and CRM in particular is beginning to pay major attention to small and medium businesses (SMBs). Recognizing and catering to such companies' needs is an important trend, and Aberdeen Group recently released a report detailing how SMBs are using tailored CRM solutions to acquire and retain customers. At the same time, recent research from AMI-Partners indicates that more and more SMBs are turning to software-as-a-service (SaaS) to meet their requirements.
The Aberdeen study, "CRM in SME: Sized to Fit," states that one of the top growth pressures for the small and medium enterprise segment (SME) is fragmented customer data. (Aberdeen defines SME as companies with less than $1 billion in annual revenue; the average in this study is $36 million to $56 million.) Best-in-class companies, the top 20 percent of respondents in terms of performance, had it as their number-one concern, cited in 32 percent of responses. (Laggard companies, the bottom 30 percent, also placed heavy emphasis on data fragmentation, with 50 percent of responses.) After fragmentation, the best-in-class are equally worried about expanding customer base, increasing market competition, and an expanding sales force (28 percent each). Increasing customer expectations figured in 20 percent of responses.
Interestingly, the best-in-class companies aren't as heavily invested in CRM as one might think. Aberdeen reports that the top technology in use by SME sales teams is individual contact management, indicated by 80 percent of respondents. Lead management is next at 64 percent, with CRM third with 60 percent. Collaboration tools bat cleanup, in place with 52 percent of best-in-class respondents.
These figures are likely to change in the coming year. "Best-in-Class companies plan to address their fragmented customer data and expanding customer base by organizing their customer and prospect information," writes Gretchen Duhaime, senior research analyst for Aberdeen Group and author of the report. "Additionally, the Best-in-Class will develop a sales methodology or culture to deal with their growing sales force and increasing market competition. Coupled together, these strategies provide the framework for continued success, with a formal process for sales to beat their quotas, and access to the most current customer information."
An unrelated study by AMI-Partners (which CRM first reported here) shows that SMBs (defined by AMI-Partners as those with fewer than 1,000 employees) are increasingly seeking to meet these and other needs with SaaS applications. "Currently 21 percent of SBs (small businesses, fewer than 99 employees) and 31 percent of MBs (medium businesses, 100-999 employees) in the United States currently use SaaS solutions, which is double the percentage of adoption in 2004," writes Sau Lam, research analyst and report author. She attributes the increased popularity to the need for ease of use, implementation, and maintenance of IT solutions for companies with limited infrastructure and IT resources, and the greater choice and availability of options.
Despite these causes, and the fact of increased uptake, AMI claims SaaS has not yet reached the mainstream. While established vendors are now being joined by a new generation of SaaS developers targeting small businesses (Lam cites Microsoft, SAP, IBM, Google, and Salesforce.com among the former, and NetBooks, Longjump, and Coghead for the latter), the report states more work is required to propel SaaS to the next level of growth.
"SaaS vendors need to intensify campaigns to educate and spark interest among SMBs that are not yet considering SaaS, identify other needs that existing customers have, and develop and partner to extend their offerings to increase share of wallet," Lam writes. "In addition, they need to build channel programs with partners that can persuade SMBs that are not yet considering SaaS to give it a serious look."
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