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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.

2015 WW SMB IT spend nearing US$600B

Techaisle forecasts that global SMB IT spend could very well reach US$597 billion in 2015 which is an average of US$700 per full-time employee and slightly over US$8K per SMB business. Corresponding US SMB IT spend will most likely be US$180 billion in 2015. Techaisle defines SMBs with 1-999 employees.

At worldwide level, 42% of SMB employees will be mobile by end 2015. US will have the highest percent of SMB mobile employees at 53% and Asia/Pacific excluding Japan will be at 45%.

Going back a year, the 2014 combined cloud and managed services spend by US SMBs was US$48 billion representing 27% of total US SMB IT spend.

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The global small and mid-market businesses, SMB (1-999 employee size) market has been the growth engine for the IT industry at large. The reason is quite simply that SMBs account for over 80 percent of businesses in any country – developed or developing. And over the last few years there has been an ongoing change in SMB IT priorities – Techaisle calls this as “Value Shift”. It signals the change in priorities from Enablement to Empowerment and refers to the new priorities among SMBs to invest in tools and technologies that allow their employees to make better business decisions, improve market reaction time and better serve their customers. In other words, SMB business executives are looking to improve return on Human Capital as a way forward.

No doubt the trend is towards increased spending on cloud and mobility but there are some other key spending trends to note:

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Dell’s desirability increases within SMBs and Channel Partners

Techaisle’s latest SMB and Channel partner research shows that Dell more than doubled its approval scores among channel partners since 2013, and improved 15% among SMB tech buyers compared to 2014. 52% of US SMBs say they like Dell, which is up from 45% in 2014 and 53% of SMB channel partners, up from 26% in 2013. Dell is still vying to acquire a seat at the enterprise CIO table but at least within SMBs and midmarket firms Dell’s impact is being felt.

Dell is in a good place. Bolstered by its decade of purposeful targeted acquisitions and thrust into the center as its competitors disintegrate and regroup. Perhaps, without the confluence of these fortuitous events Dell may have been the engine that could but did not. While it has some ways to go before it reaches its destination, Dell’s end-to-end solutions train is on the move, on the right track and making good progress. Faster, stronger, better infrastructure solutions that span from the center of IT to the edge of network can only fuel growth to a certain extent. In an industry which is vying for the mindshare of buyers, Dell has to rise above with expanded branding and general awareness initiatives, including thought leadership campaigns, and not rely exclusively on its massive sales strengths. There is some good work being done by Dr. Jai Menon, Chief Research Officer & Vice President on technology evolution such as SBDC (Software-based Data Centers), HVC (High Velocity Clouds), NVM (Non-Volatile Memory) and DLP (Data Loss Prevention). Dell is also doing a great job of leading conversations on the importance of entrepreneurship around the globe to help spur innovation, employment and economic growth. Dell acquired more patents in 2014 (20+% growth) than any year in Dell history. However, most SMB buyers are yet unaware about Dell’s full capabilities and investments in these areas and how they affect the future readiness of SMB and midmarket firms' own IT.

Let us break down some key areas of SMB IT investment and Dell’s relevance.

Mobility

Mobility is a top IT priority for 76% of global SMBs and in US alone SMBs spent US$50B on mobility in 2014 (Source: Techaisle 2015 global SMB and Midmarket Mobility Adoption Study). There is no doubt that Dell has a strong presence in the mobile device segment with its laptops (especially XPS13), and Venue tablets. Dell has chosen not to participate in the Smartphone segment and rightfully so. But question remains: How does Dell stay relevant in emerging economies such as India which have moved overwhelmingly to the mobile phone and are moving rapidly to the smartphone, where Dell is not a significant player? The answer may lie in Dell’s focus on commercial PC segment where the market is both under-penetrated and has low PC to employee density.

SMB mobility is usually defined not by devices but by the workplace where those devices and their users are. Accordingly, SMBs are not only planning to adopt mobility applications, but are also seeking mobility solutions that enable their mobile workforce - specifically solutions that provide management, security and infrastructure needed to connect mobile devices and applications into corporate IT environment. Mobility solution is Dell’s strongest suite of offerings built from various components such as Dell KACE, Dell SonicWALL, Dell Cloud Client Computing (Wyse thin clients), Dell Data Protection software and Dell Mobile as well as Desktop Workspace (Wyse vWorkspace).

However, Dell is not the first mobility solution supplier that comes to mind. A category that is in high growth mode today, which responds to a rapidly-growing SMB market need and drives high spending levels within SMB accounts is clearly attractive to a wide range of potential suppliers. Ordinarily, one would expect to find that large horizontal IT vendors like Dell with its portfolio of mobility security and mobile management offerings have staked out the high ground in a market of this type, and that channel members are acting as guides to their SMB clients. However, data from Techaisle’s SMB Mobility Adoption survey shows that SMB buyers are predominantly turning to specialized firms for mobility solutions.

Recognizing the need to be front and center Dell is investing in training its channel partners on mobility solution offerings but to be really successful Dell must define its offerings in more commonly understood categories - Mobile device management, Enterprise mobile management, Windows-as-a-service, thin clients and mobile app security.

Cloud

Cloud is no longer a trend that is discrete from mainstream IT. Techaisle’s global SMB and Midmarket Cloud Adoption trends survey data shows that cloud computing is viewed as an IT priority by 96% of US SMBs and a similar percent globally. Within the US alone, SMBs spent US$30B on cloud in 2014. Cloud is established as essential IT infrastructure for SMBs and Techaisle expects cloud momentum to continue as cloud addresses some of the key IT issues faced by SMBs.

Data shows that the larger SMB cloud trend is towards deeper use of SaaS. There is still scope for additional use of cloud infrastructure to replace and/or supplement physical back-office gear, but there is a limit to how much infrastructure is required by an SMB. Dell is a cloud infrastructure supplier with a formidable set of offerings and services which includes its converged infrastructure solutions, cloud client computing capabilities, and infrastructure management and integration solutions for cloud environments. But again, despite its investments, Dell is not the most widely recognized suppliers of converged infrastructure by SMB end-users and SMB channel partners (Sources: Techaisle SMB Converged Infrastructure Adoption Study & SMB Channel Partner Trends study). Nor is it mentioned among the top 5 IT suppliers for cloud infrastructure solutions by SMBs as per Techaisle’s recent survey.

But for those SMBs and midmarket firms that are moving rapidly to private or hybrid cloud deployments Dell combines the scale and efficiencies of its PowerEdge FX portfolio with solutions like Active Systems Manager and Dell Cloud Manager to deliver the infrastructure building blocks and management capabilities needed for private or hybrid environments. Furthermore, Dell works closely with partners, such as VMware (for EVO: RAIL) and Microsoft (for Azure) in delivering tightly integrated and engineered cloud solutions. There is tremendous merit in what Dell is doing and specific SMB segments are paying attention. As per Techaisle’s SMB attitudinal segmentation, Dell is becoming a go-to supplier of on-premise cloud infrastructure for “growth-aspiring” and “innovation-driven” SMBs and Midmarket firms.

Big Data

Techaisle’s study on SMB and Midmarket Big Data Adoption and Trends shows that 7 percent of small businesses and 20 percent of midmarket businesses are currently using Big Data solutions and that another 17 percent & 38 percent respectively is planning to adopt within the next 1-2 years. The promise of superior data-driven decision making is motivating SMBs to invest in Big Data technology. This represents a sizable opportunity considering that the segment is relatively new, it requires a certain level of IT sophistication and a history in linear investment in IT enablers to be successful. In 2014 US SMBs spent slightly over US$3B on big data. Specifically, midmarket attitude towards Big Data has transitioned from “over-hype” to must-have technology with the increase in employee size.

Dell has certainly dipped its toes into big data analytics with its acquisition of StatSoft and its Statistica advanced analytics solution. Its other two big data products Dell Kitenga and Dell Toad Data Point are incidental yet complementary to Dell’s big data solution stack. It is not out of place to mention that both Kitenga and Toad Data Point came from acquisitions. But the overarching anchors of Dell’s big data strategy are its partnerships with Cloudera & Intel (integration of Dell’s in-memory appliance with Cloudera Enterprise) and Dell’s professional services. Statistica may have one leg up on SAS due to its visualization capability and another leg up on Tableau with its statistical functionality. But it will be interesting to see where and how much of resources will Dell commit to drive its big data solution stack adoption beyond the healthcare vertical (where it has tremendous strength due to acquisition of Perot Systems). For now, most SMBs and midmarket firms are turning to Dell for their big data infrastructure platform. In a most recent set of depth interviews conducted with midmarket firms, Techaisle found that almost 9 out of 10 big data implementations were on Dell platform. Techaisle’s expectations are that, in true Dell fashion, Dell may be best positioned to commoditize big data solution and bring it out from the farmers’ market to the freezer aisle for SMBs to accelerate adoption.

Supplemental to big data, IoT is another relevant area for SMBs. Techaisle’s most recent global SMB technology adoption study shows that 52% of US midmarket firms and 18% of small businesses are either currently investing or planning to invest in IoT predominantly for security, fleet management, asset tracking and supply-chain visibility. Dell has a new IoT division and its first product is a US$500 gateway (re-purposed Wyse Thin Client) which supports Ubuntu, Wind River and Thinkworks PTC. Although one may argue that Dell is going back to its product DNA and building commoditized IoT solution but Dell may well have an advantage. By combining security from SecureWorks, analytical engine of Statistica and wrapping with Dell professional services, it may be well ahead with an end-to-end IoT solution. At least, Dell’s IoT offering is easy to understand and deploy for small and midmarket businesses.

Security and Virtualization are two other areas of importance for an SMB organization. Dell is present in both these areas. In security Dell has its own IP whereas for virtualization Dell is platform agnostic and has designed a set of blueprints that works with VMware, Citrix and Nutanix. However when the security market is growing at double digits, Dell’s software security growth in the area has been 7% (Dell does not disclose its entire security revenue details). Dell may well be suffering from a 1 vs. 1 selling as opposed to wider knowledge of Dell’s security offerings.

Final Techaisle Take

Dell has successfully put together a full set of flexible and scalable technology solution building blocks. Its sales organization is learning how to use these “blocks” successfully to build robust and future ready IT solutions for its SMB customers. Dell’s channel organization has also been focusing on equipping its channel partners with the same level of understanding. Dell has also set up cross-functional teams as Centers of Excellence that are empowered to educate and guide channel partners. These blocks may look very easy to assemble but articulation of their capabilities is very tough unless a complete picture of the end outcome is shown beforehand. And Dell has its homework assigned – demonstrate business outcomes through use cases and show thought leadership by expounding forward thinking because within the eyes of many SMBs and SMB channel partners, Dell still lags other IT suppliers on innovative and cutting edge technology front (Source: Techaisle 2015 SMB survey). That said, Dell Blueprints, for integrating piece parts into whole solutions, may just be the answer that SMBs and channel partners are looking for.

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Small Businesses exhibit remarkable consistency in their business Value-Statements

Across geographies (US, Germany, Australia and India) and across different years, small businesses are showing remarkable uniformity and consistency in their response to which value statement best describes their business.  We first asked small businesses in 2010 (for India in 2012) to tell us which one of the following statements best described their business success:

    • Business success depends upon a strong relationship with the customer & being responsive to their demands

 

    • Business success depends upon implementing highly efficient & optimized processes to deliver products/ services at the lowest possible cost

 

    • Business success depends upon implementing cost effective IT solutions to improve productivity, efficiency and profitability

 

    • Business success depends upon ability to consistently innovate and bring cutting edge products to market



We did expect customer relationship to be garnering highest number of responses. What we did not expect was the rapid rise in efficient process implementation with the size of business. We certainly did not expect the same sentiment to be represented across four different countries – US, Germany, Australia and India.

In 2014 we repeated the question to a completely different random sample of small businesses and we got similar responses across all countries.

The data clearly shows that for very small businesses, business success is dependent upon customer delight whereas for 50-99 employee size businesses, process efficiency and optimization also become important. The data consistency exhibits that irrespective of size or maturity of country, small businesses have similar mindsets in what defines their business success. With this foundation in place small businesses systematically build their business but the rate at which they are able to truly scale and achieve their value statements becomes dependent upon the absorption of IT. In fact, the role of IT has increased by an average of 38 percent between the two years of comparison. In today’s market, IT is generally delivered in the form of systems that improve sales process efficiency and visibility, collaboration, project management, analytics and social marketing systems that capitalize on connectedness within an economy that increasingly relies on person-to-person, cloud-enabled communications.

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There is tremendous future interest within SMBs in cloud-based marketing systems, sales systems, and solutions supporting business operations. Availability of cloud-based business solutions will drive tremendous growth in automation across seven functions:

1/ Marketing solutions
2/ Sales systems
3/ Customer service solutions
4/ IT Operations solutions
5/ Solutions supporting business operations
6/ Solutions supporting financial operations
7/ Solutions supporting HR/talent management

And when we further consider that each solution area can (and often does) incorporate multiple applications, and that some cloud applications are outside of these seven areas, we will see that both the scope and depth of cloud workloads will increase to support small business value-statements.

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Lessons from a Business Focused CIO of an SMB

Jagdeep RandawaI first met Jag Randhawa at Dell World. It was a meeting organized by Dell Analyst Relations to showcase Dell’s Cloud Business Applications. Unbeknownst to Dell Analyst Relations, we hardly discussed Dell. What struck me immediately was his smiling demeanor and an earnest desire to be a champion of business innovation and his views on what IT could do to spur growth through employee involvement and implementing new technology ideas.

We re-connected, ten months later at his office.

Jag Randhawa is the VP of IT at CAMICO Mutual Insurance Company, an SMB with slightly less than 100 employees. And he is the quintessential CIO who loves his job, his company and his fellow colleagues. He also showers high praise on Dell’s customer intimacy, likes VMware’s virtualization solutions and embraces Open source.

Specifically, he uses Dell for Network, Switches, PCs, Servers, Storage and is purchasing Microsoft Software. From VMWare, he uses their server virtualization technologies and software like VMotion and inventory management software for managing all the VM servers.

Cloud Focus

His is a Dell shop, to the extent that he has replaced all existing storage and security solutions with those from Dell. He and his IT team of twelve do not work with any channel partners. His philosophy – whichever applications that can be pushed to the cloud without compromising security of his customer data, just do it. And he has done it; CAMICO is using 12 cloud applications which are:

    1. SalesForce.com – Sales Management

 

    1. SilverPop – Marketing Automation

 

    1. Nexure – Agency Management Solution

 

    1. Acuity – Legal Partners Expense Management

 

    1. DocuSign – Electronic Signature

 

    1. LearnLive – Webinar Broadcasting and Training

 

    1. ADP/HCM – Payroll and Human Capital Management

 

    1. Skype – IM and Video

 

    1. Paypal and Total Biller Solution – Credit Card Payment Gateways

 

    1. Concur - Travel Expense Management

 

    1. RingCentral – Telephony

 

    1. MailRoute – Email Spam Filter



Business Perspective Focus

To increase employee engagement and help grow the business, he created a Bottom-up Innovation Program at CAMICO, in which employees submit ideas to grow the top-line, increase operational efficiencies, improve customer service, enhance business processes, and reduce cost. This program has generated many valuable ideas, and as a result he is embarking on two of his most ambitious business focused IT projects.

    1. Using Open Source for eCommerce solutions

 

    1. Developing a Big Data Proof of Concept



Both of the projects are still in infancy stage and they are both being developed using Open Source. To explain further on the eCommerce solution initiative, he says, “We currently host our website and members-only extranet using Oracle Portal, and now we are planning to use Drupal for our website and another open source software for extranet, which is yet to be determined. Our website and extranet also have eCommerce capabilities embedded in it, so we will be porting our eCommerce into this new Open Source portal”.

He is most excited about the big data project which is his initiative to provide actionable insights and perspectives for the business management at CAMICO. When I asked him about the key objective of working on a big data project, he said, “We are experimenting with Big Data using many of the Open Source software to analyze and find correlations among loss trends. The first objective is to find loss causes in our current data and subsequently use these findings to better underwrite future risks.”

Employee Engagement Focus

As mentioned earlier, The Bottom-up Innovation Program was his brain child. The program encourages all employees to submit ideas that could add value to customers or the business. Employees observe their environment, listen to customers, and bring their outside experiences as consumers to generate ideas that could benefit the company or customers. These ideas are validated, refined and prioritized by a committee of fellow employees. For every accepted and implemented idea, employees are recognized for their contributions through intrinsic and extrinsic rewards. This program makes employees more an integral part of the company, thereby increasing employee engagement and retention. The program has become such a success that he is invited to speak at several industry events for the benefit of other organizations. He not only speaks about the concept but also explains the implementation mechanics and expected outcomes of the program.

Overcoming business challenges

Similar to most other CIOs, he and his team have a long list of IT initiatives but the top four initiatives for 2014 and beyond are:

    1. Replace Website, Members-Only and eCommerce platform

 

    1. Use Big Data for analyzing current and future risks

 

    1. Move more infrastructure solutions into the cloud

 

    1. Build targeted Mobile solutions



But there are enough challenges that his team (he detests the word “staff”) has to overcome. As per Jag, the biggest challenge for any IT department is money and talent. He elaborates on his statement, “There is never enough money to do everything we want to do. However in my view, if there is a business justification for an expense, money is never an issue. The definition of business justification is, for every dollar spent how much money the new solution is going to make or save? There are times when you cannot find direct or immediate benefits, so you have to find creative ways to show value and sell new ideas. Cloud applications make it easier to try new solutions without heavy upfront commitment”. To qualify, he quickly states that the big data project was unscripted and not budgeted but he was able to create a business value which catapulted it to be among the top four IT initiatives.

Business Focused CIO

He is very clear in his mind that there has never been a better time to be a CIO. And he has a message for other IT leaders, “Technology has become an integral part of the business. IT leaders should always be thinking of how they can leverage technology to create competitive advantage, grow the business and create operational efficiencies.” As if on cue, he recites what he practices:

    1. Partner with business peers. Look for ways to help them achieve their goals faster using technology.

 

    1. There is no IT project; every project is a business initiative. If you want funding for any initiative, figure out how it adds value to the business.

 

    1. Find partners who will help you showcase the value of technology.

 

    1. Above all, build credibility with your peers by providing excellent service.



Way to go.

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