Survey shows SMB and Midmarket BDMs control cloud business applications purchase

Techaisle's SMB & midmarket decision making & buyers journey report confirms that business decision makers (BDMs) – who tend to inhabit the ‘carpeted’ realms of their businesses – are more engaged by discussions about business benefits and objectives than by ‘feeds and speeds’. Cloud business application sales reps will need to develop ‘deep carpet’ language and skills. Techaisle survey data shows that:

• Determining the need for new cloud business applications is the prerogative of business management. The balance of authority within SMBs is nearly 7:1 in favor of business management except in the case of midmarket businesses where it is nearly 2:1
• Neither business nor IT have a clear authority within 29 percent of small businesses and 22 percent of midmarket businesses to purchase new business applications, yet, cloud applications do get adopted driven by need, experimentation, and rogue adoption
• At 32 percent, ad-hoc purchases are more popular within upper midmarket businesses than any other employee size business
• Business management also has authority over determining the needs for enhancements to cloud business applications. The balance of authority within small businesses is 5:1 in favor of business management and 1.2:1 for mid-market businesses
• Neither business nor IT have a clear authority within 17 percent of Small Businesses and 21 percent of midmarket businesses to enhance already deployed business applications, yet, these applications do go through significant modifications and upgrades to better serve the needs of business management
• SMB Business management controls the budget and purchase authority by 8:1 as compared to IT management. However, within the midmarket businesses, the control ratio drops to 2:1 indicating that it is easier to sell cloud technology to small businesses than midmarket businesses since the decision-making units are dissimilar
• In 15 percent of SMBs budget for new business application is usually created at the time of ad hoc decisions for purchase to meet business needs

“Determining the need for” a new cloud business application or a meaningful enhancement to an existing application is not, of course, identical to signing off on the purchase of a new system. When Techaisle extended our coverage to ask about having “budgetary control and authority,” Techaisle discovered two interesting findings:

• The proportion of organizations where budgetary control and purchasing authority for new applications rests entirely with BDMs increases in all e-size segments, relative to the statistics for determining need in these segments. This means that BDM control over the final purchase decision is even higher than the “determining the need for” statistics suggest
• The proportion of respondents reporting that responsibility resides entirely with either IT or business – but is not shared between them – increases in five out of seven e-size segments (missing only the 10-19 and 20-49 employees groups). This suggests that needs identification may be more collaborative than final purchase decisions.
  Both findings point to the same conclusion: that BDMs are extremely important to suppliers of software.

Data also shows an interesting trend that unlike determining needs for new business applications where IT takes authority for 20-100 employee size businesses, business management continues to have authority over budget irrespective of employee size. And although in nearly 3/4th of SMBs business management has control of budget for purchase of new cloud business applications, in 15 percent of SMBs no single group or person really controls the budget.

As an SMB grows and an IT department begins to take shape it also assumes authority but as soon as a business crosses 100 employee segment, the balance of authority shifts again to business management. This is because of three reasons:

1. IT gets more involved in keeping the systems running than in strategic initiatives
2. Business is responsible for driving revenue and immediately looks for solutions that support the business initiatives
3. Ad-hoc, experimental cloud implementations by business happens and success leads to full implementation

Once the applications are implemented IT gets involved and takes a proactive role in soliciting inputs for customization, enhancements and upgrades. Due to an almost equal balance of authority between business and IT management, the decision-making unit becomes considerably larger than in small businesses making it imperative for IT suppliers to target both buyer segments - IT to prove technology capabilities and business to relate technology solutions to business issues.

The midmarket businesses with higher percent of ad hoc purchases are typically smaller in size in terms of number of employees and belong to verticals such as services, real estate and manufacturing

Survey respondents who reported that that neither ITDMs nor BDMs had complete control over new application expenditures, Techaisle researchers were told that in many cases, this response reflected ad hoc purchasing, with verbatim responses along the lines of “nobody knows [who has final authority], but things get purchased and used. Depending upon the type of purchase sometimes IT is forced to pay while other times business pays from its own budget.”