SMBs Take Advantage of the Web
Online marketing and advertising, the continued momentum of on-demand software solutions, and security and backup continue to represent the most critical factors in adoption of IT software for SMBs, according to Yankee Group's SMB Survey Suite.
The suite includes results from three separate surveys, including the 2005 SMB Applications and Web Survey, the 2005 SMB Communications, Broadband, and VoIP Survey, and the 2005 SMB Infrastructure Survey. It draws results from data gleaned from companies with two to 1,000 employees, and defines SMBs as companies with two to 500 employees with the midmarket representing organizations with 500 to 1,000 employees.
In general 2005 spending on IT solutions ranged from $16,500 for two-to-19 employee companies to $821,000 for midmarket enterprises. In addition, the U.S. SMB and midmarket Web-hosting market was $4.4 billion and growing at a rate of 6 percent. This in comparison to the market for online marketing and advertising being $1.3 billion but growing at a high rate of 49 percent. According to Sanjeev Aggarwal, SMB strategies senior analyst at Yankee Group, this is proof of the power of the Web. "Seventy percent of SMBs and midmarket companies now have a Web site, but most of them still have simple Web sites and aren't yet taking advantage of search engine marketing and email advertising," he says. "The growth opportunity is still very large because more and more companies are beginning to shift their dollars from the Yellow Pages and print advertising to Web-based advertising."
SaaS also continues to sway SMBs into purchasing IT solutions. According to the studies, more than 60 percent of SMBs attribute lower expense rates and increases in productivity as driving factors for adopting SaaS. The biggest advantage to SaaS is that companies, especially those with less than 100 employees, don't need any full-time IT resources. "They might have a guy that can keep the servers and printers up and running, but they don't have anybody who really understands the applications, like CRM, ERP, or accounting software," Aggarwal says. He also cites fast and affordable implementation, less training, and the ability to cancel a subscription at any time as other big advantages.
Last, Yankee Group found that security and backup of IT data were the two most challenging IT issues facing SMBs, with the primary obstacles being the price of security, high implementation time, lack of IT staff, and concern that one upgrade will trigger others. "Price is big because smaller companies don't have a lot of cash to spend on what can be some very expensive security solutions," says Gary Chen, SMB business strategies analyst for Yankee Group. "In addition, identity theft and data theft are their biggest concerns. We also found that backing up to an off-premise site is becoming much more important due to natural disasters like Katrina."
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