Techaisle Blog

Techaisle's latest SMB and Midmarket Digital transformation adoption trends research shows that 37% of small businesses (1-99 employees) and 46% of midmarket firms (100-4999 employees) expedited their digital transformation efforts due to pandemic. On the flip side, 27% of SMBs (1-999 employees) slowed down their digital transformation to prioritize their business's essential aspects, such as revenue generation. 27% of upper midmarket firms (1000-4999 employees) either changed their approach to transformation or kept the same pace as before the pandemic.

Investment in digital transformation has been underway for several years and was poised to be an essential factor in the IT and business market in the early 2020s. The pandemic lent urgency to digital transformation – but having arrived in a hurry, the changes wrought in response to the pandemic do not appear to be leaving as abruptly.

The accelerated pace of transformation will result in US$1,163B worldwide spend on IT (excluding telecom services) by SMB and upper-midmarket firms in 2021.

Unlike many IT market terms, which tie to specific technologies or technology capabilities, digital transformation is most often used to indicate an amorphous state in which an organization can seamlessly deploy new digital capabilities that streamline current or next-step processes, eliminating the business friction.

Organizational restructuring to hasten pace of transformation

Generally, firms consider digital transformation as a proxy for process efficiency. For many years, it has been a management goal, embedded without a consistent set of steps and defined outcomes in the IT plans of a substantial majority of SMBs. The pandemic brought urgency to these plans: there are numerous anecdotal reports of IT leaders being told, "you know that three-year digital transformation plan? Can you deliver it in three months instead?" For the most part, these requests tended to have a minimal additional budget attached to them, generally came without requisitions for new IT staff. These requests reflected management's understanding that highly-automated processes are essential in a business environment where physical interactions are awkward or forbidden, adding necessity to efficiency as compelling reasons to invest in digital transformation.

To change the transformation pace, 17% of SMBs are restructuring their entire organizations, and 24% are creating new functions dedicated to digital transformation. The changes will be more pronounced in the midmarket and upper-midmarket firms, which are quickly putting together dedicated groups and departments to digitize, digitalize and transform their organizations. Nearly one-fifth of SMBs are relying on their employees to guide transformation initiatives.

Changing digital transformation drivers

Global SMB SaaS survey adoption data shows that 68% are already using more than 5 SaaS categories with numerous SaaS applications in each category. SMBs’ immediate and long-term plans (spanning 6 months – 1 year) shows that 80% are planning to expand their scope of SaaS adoption and may likely add applications in 5 to 10 SaaS categories.

The increase in SaaS adoption will result in US$76B in global SMB SaaS spend in 2021. Despite the pandemic, due to more reasons than one can imagine, global survey data of 4700 SMBs shows that the year 2020 will see SaaS spend growth of 19% over 2019. Asia/Pacific and Western Europe regions will see the largest adoption and spend growth rates as compared to the US.

The increase in SaaS spend and adoption is fueled by acceleration in customer-focused, vertical/line-of-business applications, productivity and collaboration applications. By far, the biggest adoption jump is and will be in the vertical-focused apps - a reason why Microsoft in its latest Inspire event made a case for partners to increase their marketing and deployment initiatives for vertical/line-of-business SaaS applications.

Techaisle worldwide survey of 2427 SMBs shows that collaboration, cloud, security, mobility and PCs are the top five areas where small businesses are increasing technology investments. Each of these address current business challenges and lay the foundation for the five pillars of small business digital transformation: 1/ achieve cost efficiencies, 2/ initiative innovation, 3/ enable operational efficiency, 4/ drive business growth, and 5/ empower organizational productivity.

Collaboration: 66% of small businesses are increasing investments in collaboration solution as compared to 19% who are either decreasing or delaying investments. Collaboration is a critical solution priority. The enormous reliance on mobility, the trend towards flexible work within small businesses and the general trend of including customers within the framework of collaboration solutions have all contributed to much broader demand for collaboration solutions. Use of collaboration solutions within small businesses started as file-first but has quickly transitioned to person-first. The central requirement for a collaboration solution is the ability to share files from desktop or mobile devices, the second is to enable online interaction, and the third is to provide richer media and media escalation for person-to-person communications.

Cloud: 64% of small businesses are increasing investments in cloud. Cloud is no longer a trend that is discrete from mainstream IT. This shift in cloud’s positioning has brought with it a shift in the kinds of insights needed to help connect suppliers and buyers to address common interests in deployment, integration and expansion strategies. Small business buyers are needing help in moving past initial cloud pilots and applications to integrated cloud systems that provide support for mission-critical processes. Vendor suppliers need to adjust their messaging to address the needs of early mass market rather than early adopter customers.

Security: 61% of small businesses are increasing investments in security solutions. Although data shows that small businesses are more optimistic than they ought to be about their current security profiles, security is an important constraint on mobility within the small business segment. Vendor suppliers need to help small businesses to establish frameworks that protect against both external and employee threats to information security.

Mobility: 59% of small businesses are increasing investments in mobility solutions. If the “office” is defined by devices, so too is “workplace” defined by the ability to work from wherever those devices (and their users) are located. Small businesses are investing in mobility because it contributes to both cost savings and increased market reach, with “improved productivity” and related answers connected to establishing “better ways of working” viewed as the greatest benefit of mobility within SMBs. Techaisle’s data shows that there are inherent challenges in supporting the mobile workforce: struggle with the “on ramps” to mobility (such as finding appropriate suppliers and solutions) and concerned with security/data protection and mobile management.

PCs: 56% of small businesses are increasing investments in PCs. PC is where work gets done. PC is still the centerpiece of business productivity and buying a new PC is likely to have a more significant impact on productivity than any other technology. Modern PCs deliver more than an incremental improvement in performance, manageability and security features and even price conscious small businesses benefit significantly from replacing older PCs with modern PCs.

There is a strong connection between cloud, mobility, collaboration. Mobility, cloud and collaboration are all important trends in today’s IT market, and Techaisle data indicates that they are tightly interconnected. Mobility is a key driver of collaboration demand, with worldwide total of 292 million small business mobile workers looking for framework technologies enabling them to connect with suppliers, customers and each other. At the same time, collaboration is seen as a key attribute of successful cloud solutions, with more than one-third of small businesses citing “the ability to provide or support collaboration” as a key success factor in cloud solutions.

Techaisle has released its annual research infographics on top 10 IT priorities, business issues and IT challenges of SMBs (1-999 employees), midmarket firms (100-999 employees) and small businesses (1-99 employees) for 2019. In its detailed SMB survey Techaisle investigated 21 different technology areas and several technology sub-categories, 23 different IT challenges and 21 different business issues. This is the 9th year of Techaisle’s annual survey research initiative that probes for top business issues, IT priorities and IT challenges. Tracking history provides a fascinating evolution in which new business goals drive new IT priorities and uncover challenges that must be addressed to enable progress on business objectives.

Primary research was conducted among senior IT and business decision makers from Techaisle network of 1.2M B2B IT professionals spread across 30+ countries.

There are some interesting differences in IT priorities as compared to 2018. IoT and VR/AR fell below top 10 (but still within top 15) and replaced by Voice/Digital assistants as well as Open source solutions. Across all regions (US, Europe, Asia/Pacific, Latin America) digital unified workspace and software-defined are becoming a priority for both SMBs and midmarket firms. Security many places within the top 10 IT challenges in different forms – cloud security, mobile device security, data protection/recovery/business continuity – with Cloud security as the top IT challenge.

Global SMB & Midmarket IT spend (excluding telecom services) in 2019 is projected to be US$665B and corresponding cloud spend is expected to be US$115B. Research also found that IT budget growths in 2019 will be the highest in Asia/Pacific (6.2%) and lowest in Latin America (1.8%). While IT budget constraint is not the top challenge within SMBs in the US and Asia/Pacific, it is the top concern in Latin America.

Managing data growth is continuing to pose challenge for SMBs and when probed further Techaisle research found that only 11% of SMBs and 29% of midmarket firms have evidence-driven culture with data-driven decision-making business processes in which data defines requirements or opportunities and management then determines the best option for moving forward. In the US, 17% of small business and 34% of midmarket firms consider themselves to be innovative.

2019 Top 10 SMB business issues, IT priorities, IT challenges