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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.

2013 SMB & Channel Outlook, Trends & Predictions: Techaisle Take

All predictions below are compiled based on SMB and channel surveys conducted in 2012 covering Cloud, Mobility, Virtualization, Business Intelligence, Marketing Automation, Managed Services, Business Issues, IT Priorities, Channel Challenges across several countries.

SMB focused Predictions

  • As SMBs continue to adopt cloud computing aggressively they will continue to move away from capital budgets; Revenue will become the focus rather than tight cost control. The buyer will move toward the department that is responsible for delivering business results and thereby revenue. The CMO becomes increasingly important as this unfolds.  Further, countries are coming out of economic slump which was a major factor in the initial move to the Cloud, as firms were scrambling to reduce capital outlays and reduce OPEX. But SMBs are now priming themselves for growth, and the Cloud is firmly established as an important tool to build the business.
  • SMBs’ emphasis on front-office, revenue-generating applications will continue with CRM at the hub and with more marketing automation and business intelligence applications. The base of marketing automation vendors will continue to consolidate as start-ups fail and pure-plays are acquired and big players roll out integrated solutions. Cloud CRM spend will continue to grow at a healthy rate of 21 percent.
  • Communications, Collaboration, Content and Context will be the primary computing scenarios of SMB IT departments, driven by Mobility, Cloud-based Applications and Process Optimization. Virtualization, Cloud, Mobility, Managed Services will together form the Four Pillars of IT that will support the transformation of SMB, enabling them to reach their full potential in the shortest period of time. The foundation for these four pillars will be the datacenter, both off-site and on-premise depending upon SMB segmentation. Techaisle forecasts that global SMB Cloud spend will grow by 22 percent in 2013, Mobility by 14 percent, Managed Services by 15 percent, Virtualization by 25 percent and datacenter by 8 percent.
  • The adoption of cloud-based productivity suites among SMBs will accelerate which will begin to balance usage of collaborative and individual SaaS applications. Office365 will go main stream along with increased usage of ERP and more sophisticated applications, offering new customer and other value-added opportunities in data and application integration. We expect SMB Cloud productivity suites spend will almost double from relatively slow adoption through 2012.
  • There will be a significant increase in emphasis on data integration rather than application integration; data will be combined from several sources to power different application blocks and embedded business intelligence functionality, as we first predicted in 2008.
  • The SMB server and network will start becoming less visible as they progressively move offsite physically and from a remote management perspective. Cloud-based server spend will likely grow by 40 percent as compared to on-premise new server spend growth of 5 percent, the benefits of remote management overwhelming the on premise for headcount-constrained firms.
  • Although social media will gain importance, SMBs will continue to struggle to determine ROMI from their social media initiatives and its usage will be considered a “productivity drainer” by many lean-staffed and short-skilled SMBs, unless they are in a local business that requires high customer intimacy to grow and build business. Aggressive SMB adopters will realize benefits but many others will be disillusioned unless advised, encouraged and shown a path by early adopters. The market will be inundated by advisors causing more confusion, especially as big data analytics start showing strong results for Enterprise-level companies.
  • ISVs will focus their attention on developing client applications that integrate email, context and workflow to build other productivity applications. New business models and solutions from ISVs and Service providers will appear for SMB mobile apps that will deliver content based on context, beginning with a few verticals and then spreading horizontally.
  • BYOD will be the new normal; with priority for SMBs on data and applications management rather than managing devices.
  • The next generation of business intelligence and Mobile BI will be widely adopted within SMBs; Upper mid-market firms will experiment Big Data using combinations of Hadoop and other technology (e.g. Greenplum) whereas lower-mid-market and small businesses will look for insights from federated big data deliverables provisioned by cloud application vendors.

Channel Partner focused Predictions

  • There will be an accelerating trend to vendor direct through development of remote integrated-service interfaces and inbound marketing initiatives. To counter, channel partners will aggressively develop outbound sales capabilities to compete with vendor direct sales and rise of the Independent Consultant to prevent from being cut out of the distribution chain.
  • Successful Channels will finally realize and pursue their individual respective competencies and roles as consultants, business process advisors, integrators, aggregators or plain vanilla cloud deliverers.
  • Expect that channel partners will be more successful going deep with integrated suites or a few applications that they integrate rather than trying to provide a complete infrastructure, communications, applications and vertical solutions.
  • Channel partners will begin to put together a repeatable, profitable SMB solution that will include proprietary integration value-added services or software, accelerated with productivity suites and collaborative combinations, such as Office 365 and SharePoint, or Google Apps, or the new Citrix ApplicationMe@Work or XenDesktop.
  • Cloud aggregators will continue to enter the market, however, few will be profitable as aggregators will need to be able manage reseller relationships with structured sales and marketing programs, implementation and post-implementation support for the channel, and tier-2 customer support for end users.
  • Mid-market focused channels will look up to their vendor partners to help combine mobility, cloud, virtualization offerings while others will rely on a partner-to-partner network

Tavishi Agrawal
Techaisle

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Global SMB IT Spending in 2016 - Infographic

How big is the SMB IT market opportunity? What is the potential market size of mobility, cloud, datacenter, PCs/Tablets? What is the growth in spend in regions? What are average the spends per business? What are the key business issues?

That is the topic of our Infographic. Click the image to download.

Global SMB IT Spend is poised to reach ~600 Billion dollar by 2016. Worldwide, there are still 26 million SMBs yet to buy a PC, 30 million SMBs do not have a server; some of these may directly move to cloud. They are already using internet to a very large extent. Granted that many of them are less than 20 employees but they are not going to be static. Approximately 560,000 new businesses were started each month in 2012. About 10,000 of small businesses become mid-market businesses each year.

North America and EMEA are infrastructure, software and services driven while Asia/Pacific is product driven. North America has the highest average IT spend per business spend while Asia/Pacific and Latin America the lowest. There is a vast difference between emerging market and mature market SMBs in terms of average spend per business. It is also useful to note that while Asia/Pacific has the highest number of SMB cloud users, average spend per user is less than 1/5th of SMB user in North America.

In terms of business issues, SMBs in the US are focused on collaboration and communications. The three business issues feeding into this focus are reducing operational costs, focusing on new markets and improving effectiveness of sales and marketing. On the other hand Western Europe SMBs are concerned about workforce efficiency with focus on costs was a key driver for SMBs in in that region, improving workforce productivity (getting more out of the workforce) and reducing operational costs. On the other hand Asia/Pacific SMBs want to grow faster than the market and are constantly worrying about market penetration. If they do not act now, they think that the opportunity will slip by.

Download the Infographic (click on image) to get a great snapshot of SMB opportunity including spend on PCs/Tablets, Mobility, Cloud, Data Center, Security.

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SMB Managed Services Forecast tops $44B by 2016

According to our latest forecast, which takes into account the first three quarters of 2012 research, the SMB Managed Services market will grow from $27B to $44B between 2012 and 2016, compounding at over 12%.  Remote management monitoring services will cross US$15B during the same time period. Key points of the update include:

Techaisle SMB Managed Services Forecast

The most attractive segments are shown in the chart and sorted based on opportunity (2016 value>$1B), and growth (arrows are relative), so the largest and fastest growing segments are shown. Rank based on revenue opportunity is listed in the left hand column.

13 of the 19 sub-segments are expected to reach over 1B$ in opportunity by 2016, with over half growing at double-digit rates,

The Remote Services segments are generally growing faster than onsite, with notable exceptions in India where the labor market and domestic bandwidth contribute to a viable onsite market, and China, where second and third tier markets are expected to adopt remote services more slowly than the combined remote/onsite increase.

While at 12%, the market is not growing quite as fast as in Cloud Computing, the robust increases will be a very good opportunity for SPs and MSPs in the market. The difference in fulfillment and delivery between cloud computing and managed services is thinning rapidly. Channel partners and managed services providers are quickly cross-migrating their skill sets to serve both technology areas. The path being chosen by Channels to move from one offering to the next is strongly dependent upon their current offering.  Those that are in the mobility space are moving to cloud, while those in the cloud are moving to managed services. The point being that understanding the channel dynamics and current offerings can provide  clues in the direction they will move. Similarly, within managed services, the channels are moving from one offering to another; vendors wanting to partner with Channels must identify the ideal cluster of services to take advantage of Channels outreach and capabilities.

Techaisle offers forecasts for all the above sub-segments by Region, Country, SMB company size and Channel flow share, customized to your needs. Please contact us if you would like more information on how this information can be combined with your internal market model to offer a clearer view of  opportunity and resource allocation to best increase market share share during 2013 and beyond.

Target Market Attack Strategy

 



Larger SMBs = Easier Sell: Larger SMBs with more complex needs are more likely to be receptive to using managed services. While the adoption varies by service, a “safe” rather than a sweet spot to target are businesses with 20 – 249 employees. Younger IT managers and business decision makers that are growing up in the "work from anywhere, anytime, any device" era are more likely to consider managed services as a first response rather than an after-thought. Improving mobility solutions (devices, bandwidth and applications) is also creating a favorable environment for managed services. IT Vendors should be careful to note that they are running a service business and as such, buyers tend to set a higher bar. Loyalty to a particular vendor is driven by quality of service, reliability and uptime, responsiveness and customer service (no different from any other service business today). However, the provider market today is very fragmented. After so many years, there is still some confusion among SMBs in understanding what managed services really means and how it is different from cloud.

Many SMBs still have their channel partners “manage” their network and other IT infrastructure on site by sending support staff over. Small businesses in particular are seemingly gravitating towards service providers, many of them are single–person individuals. In some other cases, large service providers are also motivating small businesses to use their services as “hosters” as opposed to monitoring and management. Backup and Recovery services are increasingly gaining ground with small businesses with many new offerings being introduced by service providers including large IT vendors. Traditional server backup methods are being shunned by small businesses, as once-a-day backups leave them vulnerable to data losses and trouble recovering data quickly in the event of a data corruption, virus or other disaster. Lack of adequate IT staff also results in inconsistent backup procedures and failed data recovery. This is one area where remote backup managed services show a higher usage than combination (onsite/remote).

Techaisle research shows that many of the factors that drive SMBs towards Managed Services are very similar to the benefits they seek from cloud computing:

    • Strategic (Focus on core business, Reduce risks, Improve competitiveness and reaction time)

    • Tactical (Cost control, Lack of IT staff, Better IT response time and proactive management)


The combined benefits are increased agility and lower business risk, which translate into a more competitive posture and less stress for the SMB owner. It is therefore not surprising that Cisco has led the way by combining its managed services and cloud computing channel programs.

 
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SMB Channels Mobility Solutions Snapshot

Having the right information in the right context in the right format at the right time is critical to making business decisions these days, and increasingly that means access through mobile devices – whether it is the roughly 30% of consumers who own tablets or those tens of millions who get information from a Smartphone. A recent Techaisle survey of over 600 channel partners uncovered several important similarities and differences between how SMB channels are approaching three of the most important trends in the market: Cloud-Computing, Mobility Solutions and Remote Managed Services. In this post we will offer a snapshot of some characteristics of Mobility in the SMB Channel.

SMBs Requesting Mobility Solutions from the ChannelFrom a demand perspective, 60% of partners reported having SMB customers request Mobility Services, with almost 80% of ISV customers topping the list. Not surprisingly, email – the killer app, is the most used and offered service with about 50%, followed by Payment Processing with over a quarter. As we have found in other surveys, the front-office, revenue-related applications of CRM, especially among ISVs, and SFA, especially among SPs and Social Media Marketing, especially among SPs, were all being adopted by almost a quarter of respondents. We expect a rapid uptake in 2013 in the area of Mobile Analytics, which is being embedded into many front office SaaS applications in the form of dashboards and self-configured KPI management with proactive communications, or from the several cloud-based pure-play BI vendors in the market. As mentioned following the recent Citrix announcements, we also believe the market is ripe for adoption of Cloud-based Productivity Suites, which will also drive adoption of mobility among SMBs.

In many areas of Cloud Computing and especially Remote Managed Services, the big inflection point in both adoption and average spending does not happen until the 100-249 employee segment, but not so with Mobility; approximately 60% of the demand comes from the 1-9 and 10-49 employee segments, with the increase in email (across the board) and Social Media Marketing and Mobile Advertising (ISVs, SPs) driving the trend.

SMB Partner Mobility ChallengesThere are differences in the approaches, needs and challenges between SMB channel types when offering Mobility Solutions to customers, typically falling into Cost and Complexity, Management and Employee, Network and Device and Security categories. In this example, we see some key differences between the VAR/SI and SP partners related to the provision of Mobility solutions. Poor Network Service is the biggest challenge for VAR/SI partners, followed by Insufficient Network Speeds, Lack of Integration/Compatibility, and Immature Platform Choices. Both were challenged equally by Slow Performance of Mobile Apps and Device Management issues. SPs biggest challenges relative to VAR/Sis included Lack of Applications Availability, followed by Poor Mobile Web browsers, and Network and Device Issues.

As the market matures, these challenges should dissipate with increased mobile responsiveness built into websites and applications, more affordable device and data plan pricing and wider adoption of smart mobile devices. For now, the perennial SMB issue of cost and complexity of new technology balanced against perceived and demonstrated return on investment remains the most important barrier for channels to overcome.

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