Techaisle SMB and Midmarket SaaS adoption data comparison from 2015 to 2019, illustrates that US SMB SaaS adoption went from widespread to practically ubiquitous. In 2015, less than 60% of microbusinesses and only 62% of all US small businesses were using SaaS, though the balance reported an intent to adopt software-as-a-service. In 2019, microbusiness use of SaaS has reached 77%, and overall small business SaaS use is up more than 29% to 80% of all US firms within the 1-99 employee segment. Looked at another way, growth from 62% to 80% means that within four years, over 47% of small businesses that weren’t already using at least one SaaS service adopted the technology.
The relative increase in the midmarket is even more striking. In 2015, 83% of US firms with 100-999 employees were using SaaS; by 2019, this figure has reached 98%, meaning that 88% of the 17% of midmarket businesses that hadn’t adopted SaaS in 2015 began using SaaS in the 2016-2019-timeframe, and leaving only 2% of US midmarket businesses without any SaaS services in use.
Data gathered from Techaisle SMB and Midmarket SaaS adoption survey suggests that the immediate planned progression of SaaS portfolios will be measured in the US but not so in most other regions. European SMB SaaS adoption is still tepid at 49%, Asia/Pacific is not far behind Europe at 46%, and Latin America is still only 36%.
As is generally the case with cloud solutions, SMB buyers who have purchased or plan to acquire SaaS applications most often approach the ISV directly. While SPs/MSPs have traditionally been the most common alternative source of SaaS solutions, new SMB customers are increasingly turning to consultants – and to specialized cloud brokers – if they are not engaging directly with the ISV. The data indicates that these cloud service brokers are emerging as an important force in the SMB SaaS market.
Add-on services represent a large and essential source of revenue for SaaS suppliers; license spend represents less than 25% of total SMB customer spending, while non-license spend on services accounts for over 75% of the total. Support for analytics/dashboards and system integration are the two most widely adopted add-on services. Current SMB users are looking to invest in systems integration, sales process design, disaster recovery and deployment services, while new SaaS buyers are adding maintenance and operations, systems integration and analytics/dashboards to their new SaaS solutions. Some services are ‘stickier’ than others. Survey also found that SMBs often drop services after initial deployment is complete, but backup/DR, data cleaning, security, and analytics support are each retained by at least three-quarters of initial SMB SaaS buyers.
Stickiness, however, is mainly a function of company size. Very small (<10 employees) businesses tend to dramatically reduce annual spend after deployment, while small and mid-sized businesses report relatively flat year-over-year spending.
System configuration (including designing reports, dashboards and analytics), customization, data and/or application integration, consulting (including sales process design) and training are the top five non-license services acquired by SMBs, as measured by percentage of total services spending.
Let us drill down into services usage with the adoption of CRM.
Nearly 100% of SMBs purchased one or more services along with CRM solutions. In fact, most SMBs used four different types of services – top service was the development of analytics and dashboards followed by systems integration including data migration.
Data also shows that SMBs do not think it necessary to purchase these two services at the time of CRM deployment but they decide to add them after using CRM for a period of time. SMBs using Salesforce purchased an average of 5.3 services as compared to 4.7 by the SMBs using Microsoft dynamics. Lack of services purchased at the time of CRM deployment ultimately catches up with SMBs.
Data on add-on services for ERP suggests that current users acquired business process design services - to align processes with ERP features - and system configuration services - screen design, reports, dashboards. In future, this group is likely to also purchase system integration and training services.
Services contracts associated with ERP solutions are generally ‘stickier’ than those purchased to get CRM solutions up and running. In particular, dashboard-related and consulting services tend to be used for multiple years, and five other services - application performance monitoring, security, patch management, production support and data cleaning - are retained by over 70% of SMB firms who acquire them as part of the ERP launch process.
There is no longer a need to persuade the SMB community to embrace SaaS – the focus has shifted from adoption to (more and deeper) use, and marketers are in turn able to rely on increased market understanding of the business impact of SaaS as they develop messaging for a more-experienced target SMB market. And add-on services market cannot and should not be ignored by SaaS suppliers.