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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.
Anurag Agrawal

SMB SaaS adoption growth creating new services opportunities

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.

Anurag Agrawal

Techaisle data reveals SMBs regressing in their cloud security adoption

Techaisle’s 2019 US SMB and Midmarket Security solutions adoption trends survey research indicates that 55 percent of US SMBs suffered a security incident in the last one year. 20 percent of SMBs reported but as high as 70 percent did not formally report yet experienced PC security & data theft breaches in the last one year. In many ways data suggests that SMBs are regressing in their adoption of security solutions to protect their corporate and mobile environments. For example, in the 2019 study, 32 percent of SMBs believe that their IT security budgets are sufficient to meet their needs, which is substantially down from 43 percent in 2017 and 22 percent assert that they are better prepared than others when it comes to IT security, considerably lower than 32 percent in 2017. Even the presence of formal security protocols in case of a breach and/or security incident has gone down from being present in 34 percent of SMBs in 2017 to 26 percent in 2019. However, the belief that cloud usage/services puts them at a higher risk of a data breach has remained virtually unchanged from 40 percent in 2017 to 38 percent in 2019. To make a fair trend comparison Techaisle surveyed same number of SMBs in 2017 and 2019 with exactly same quota sampling.

It is not that SMBs are not concerned about security risks. Cloud security is the top IT challenge in 34 percent of small businesses and 42 percent of midmarket firms. 41 percent of SMBs feel vulnerable in the cloud and 34 percent worry about cyber-attacks and 39 percent consider password compromise to be a security risk to their business.

A review of cloud security threats to SMBs illustrates the fact that while cloud brings unique challenges. Data highlights many different points of security exposure that arise when applications, data and access extend outside the corporate facility. 38 percent of SMB survey respondents are concerned with data exposure during transfers to remote locations, 37 percent are concerned with the potential for cloud-based accounts to be hijacked. Similarly, other concerns are unauthorized access to or breaches of data repositories in the cloud, insecure interfaces used to access cloud-based systems, the potential for insiders within a cloud service provider to exfiltrate information, and denial of service (DDoS) attacks – all of which represent cloud-specific threats.

Anurag Agrawal

Google Anthos - a big deal for the midmarket - if a partner strategy emerges

Today, at Cloud Next 2019 in San Francisco, Google’s annual industry conference, Google announced its Cloud Services Platform, Anthos, for managing hybrid clouds that span on-premise and cloud data centers, and across multi-cloud environments. It is a big deal. It uses Kubernetes to enable migration across environments, is hardware agnostic, supports Amazon AWS and Microsoft Azure, and is subscription-based with a starting list price of $10,000/month per 100 vCPU block.

There is a thought that Anthos is a shot across the bows of AWS and Azure – and certainly, an approach that abstracts functionality from underlying cloud architecture will impinge on the ‘data gravity’ customer retention approach being used by these vendors. But IBM is at risk with Anthos as well, as the positive reception of its recent Red Hat acquisition is rooted in the promise of a single-vendor approach to providing hybrid and multi-cloud management and orchestration capabilities.

Clearly, Anthos has been developed with large enterprises as the target segment; some enterprise accounts are already early beta customers. To ease the addition of cloud as a core infrastructure platform in these accounts (by simplifying migration across in-premise and cloud environments) Google introduced Anthos Migrate, a service which will auto-migrate VMs from on-premise or other clouds into containers in the Google Kubernetes Engine.

It’s important to note, though, that hybrid cloud management is not only a point of pain within enterprise customers – it is a challenge (and arguably, a more acute issue) within midmarket (100-999 employees) firms. Consider these stats from Techaisle study of 510 US midmarket firms:

  • 52% of midmarket firms are using multi-cloud
  • 45% of midmarket firms have hybrid cloud environments
  • 38% of midmarket firms are using multiple public cloud providers for IaaS and PaaS
  • 27% of midmarket firms are planning to adopt G-Suite
  • 25% of midmarket firms are challenged by how to migrate from one cloud platform to another
  • 18% of midmarket cloud workloads are on hybrid clouds

Data for Europe and Asia/Pacific also very interesting current and planned adoption percentages for hybrid/multi-cloud.

The multi-cloud, hybrid-cloud journey began within midmarket firms much before it became fashionable within enterprises.

Anurag Agrawal

SaaS delivering digital automation for US SMBs and Midmarket – forecast to spend USD26B in 2019

Techaisle’s US SMB and Midmarket SaaS adoption trend data shows that 73 percent of small businesses (1-99 employees) and 97 percent of midmarket firms (100-999 employees) are using one or more SaaS application categories. 37 percent of SMBs (1-999 employees) are using < 5 SaaS categories, however, 28 percent are using more than 10 SaaS categories (driven by midmarket firms). Overall 72 percent of SMBs are currently using 10 or less SaaS application categories but planned adoption indicates there is room to grow for the SaaS market within the SMB segment. The pace of SaaS automation is being governed by business & IT challenges, security posture, deployment and integration capability and point of purchase. Initial SaaS adoption has been for non-core business processes; however, 57 percent of mature adopters are using SaaS for core business processes. Techaisle survey data also shows that 64 percent of SMBs are using collaboration-focused SaaS solutions and 60 percent finance focused, however, future plans indicate that 62 percent will use customer-focused SaaS solutions.

As per Techaisle, US SMB and midmarket firms are forecast to spend US$25.6 billion on SaaS solutions in 2019.

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