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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.

Evolve Small – a differentiated small business campaign from Lenovo focuses on business mentoring and community outreach

SMBs are an excellent indicator to measure the economy's pulse in any country as they constitute over 90 percent of global businesses. They intricately link to large companies, government departments, and educational institutions as both suppliers and customers. In addition, a large percentage of consumers rely on SMBs for products and services that they consume within their households. Technology plays an integral part in the daily operations of SMBs across all departmental functions, including sales, marketing, operations, finance, and customer support.

Over the last three decades, the global SMB (1-999 employee size) market has been the growth engine for the IT industry at large. The path to business growth, strategy to deal with the competitive landscape, route to profitability were predictable and linear. And the way to adopting technology was also predictable and linear. The business pressures existed, but they were few and came on slowly. But it is not so anymore. Today, business pressures are increasing, coming from all directions - cash flow constraints, access to capital, competitive landscape, need for innovation, digital transformation, erratic revenue, uncertainties, the pace of technology change, and many more. A Techaisle survey found that a typical business leader deals with an average of five business pressures daily.

What is more telling is that 52 percent of SMBs deal with more than five pressures daily. These would be enough to put the brakes on any regular business operation. COVID did just that. Small businesses are struggling with revenue loss, attracting and retaining workforce, and lacking access to capital. As a result, technology has become even more important than two years ago. To manage costs, drive growth and enable resiliency, Techaisle data shows that 41 percent of small businesses have accelerated their digital transformation initiatives. However, for 55percent of small businesses IT budget is not sufficient to meet their needs. In addition, 63 percent of small businesses are actively looking for external guidance on cost-effective technology solutions.

Launched in July 2021, Lenovo's "Evolve Small" is a purpose-driven campaign centered on lending small businesses a helping hand. Founded on the principles of aid, mentorship, and community, the "hug and a hand" approach essentially focuses on three primary vital areas:

1. Financial assistance
2. Business mentoring and consulting
3. Rallying local communities to support their small businesses

The chief architects of the "Evolve Small" campaign are John Bischof (Executive Director, SMB Sales) and SMB Segment Marketing Managers, Megan Wine & Michelle Wiese.

As part of the program, Lenovo has committed US$1 million in grant funding to support BIPOC-owned (Black, Indigenous, and People of Color) small businesses. To facilitate and administer the grants, Lenovo has partnered with LISC, a non-profit organization in the US and a non-profit organization in Toronto, Canada. What is unique about the grants (average of US$10,000 per small business) is that they come with business development support. Techaisle believes that business development mentoring and community outreach is essential differentiation. Techaisle data shows that small businesses prioritizing growth are more likely to thrive in today's unpredictable economy than those focusing primarily on cost reduction or other 'business as usual' objectives. Business growth is more than simply increasing the top line in the digital world – though, of course, expanding the top line is a crucial measure of success. But growth also includes the ability to reach into new markets, identify and capitalize on adjacencies, and identify and integrate with suppliers who can extend the relevance of the small business in new ways. There is also follow-up, built into the campaign, where business development organizations that partner with the non-profit, LISC, help small businesses identify the best ways to use the funds (e.g., prioritize paying off some rent or paying employees) which new technologies they need.

lenovo 321 coffee

The campaign has been rolled out across seven geographically diverse cities, including Raleigh, Chicago, Austin, Minneapolis, Phoenix, Seattle in the USA, and Toronto, Canada.

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Mission, Migration, and Modernization – three pillars of AWS Partner Program

There is no doubt that Amazon AWS has been a cloud leader since 2006. Channel partners are an essential cog in the wheel of success. The AWS Partner Network (APN) is the umbrella under which its global community of partners builds solutions and services for their customers. Over the years, APN has evolved to include an MSP program, distribution program, marketplace channel program, and partner transformation program, amongst many others. Despite the evolution, AWS is not particularly well-known for its partner program, except if the partner is a significant consulting partner such as Accenture, Deloitte, Mphasis, and several others or a technology partner of size, stature, and brand recognition. However, the AWS Partner Network (APN) does include more than 100,000 Partners from more than 150 countries, with almost 70% headquartered outside of the US.

Over the last decade, there has been an industry-wide change in engagement models to support smaller channel partners. Except for top-tier partners, vendors have distanced themselves from direct oversight of channel marketing initiatives, relying on distributors to manage market development resources. The changes have made it more difficult for channel organizations to maintain predictable operational arcs. They have also made it more difficult for vendors to build and nurture high-performance partner networks. As a result, almost every week, we field two questions from the channel partner community. 1/ Does AWS have a partner program for the midsized to smaller partners? 2/ How does its program differ from Microsoft's (and increasingly from Google Cloud) channel partner initiatives?

The questions and reality are on parallel tracks. The overwhelming majority of AWS partners are smaller businesses. AWS has intentionally designed the entry point of its programs to be inclusive of small businesses. For example, consulting or SI partners only need four trained employees, two certified employees, and three engagements with customers. ISVs only need to complete a Foundational Technical Review.

Sandy Carter, Vice President of worldwide public sector partners and programs at Amazon Web Services (AWS), is transforming the program to be inclusive and diversified, at least for the partners focused on the worldwide public sector – government, healthcare, education, not-for-profit, space, federal financials, and energy. Mission, modernization, and migration are the three pillars of partner enablement and empowerment. Mission is not about simply migrating something over or performing an IT function; it is about delivering a business value for the organization, agency, state, or country. There are many examples, such as digitizing a hospital, leveraging supply chain technology to get food to the right place, or leveraging AWS technology to deliver vaccines. Modernization for AWS is about using artificial intelligence, machine learning, and IoT. Finally, migration is more wide-ranging than the other two, with three converging tracks – application migration, mainframe migration, and data-led migration.

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Causation or correlation - The link between approaches to digital transformation and business success

Techaisle’s 2021 US SMB and Midmarket Digital transformation adoption trends research covering businesses from 1 to 4999 employees (collectively named mainstream businesses by Techaisle) shows a correlation between digital transformation and business growth. Unlike many IT market terms, which tie to specific technologies, digital transformation is most often used to indicate an amorphous state. A state in which firms can seamlessly deploy new digital capabilities that streamline current or next-step processes, eliminating the friction inherent in basing these capabilities on manual tasks and physical documents/inputs. SMBs and midmarket firms view digital transformation as a proxy for business process efficiency. For many years, it has been a management goal, embedded, usually without a consistent set of steps and defined outcomes, in the IT plans of a substantial majority of small businesses (1-99 employees) and more than 90% of midmarket (100-4999 employees) firms. The pandemic brought urgency to these plans. The speed reflected the management’s understanding that highly automated processes are essential in a business environment where physical interactions are awkward or forbidden, adding necessity to efficiency as compelling reasons to invest in digital transformation.

Digital transformation segments

To refine the current and planned digital transformation adoption status perspective, Techaisle segmented the market to one of four phrases to characterize organizations’ attitude or approach towards digitalization of existing processes –

  • Holistic: Digitalization is an essential aspect of overall business strategy
  • Inclusive: Digitalization is a meaningful but non-essential aspect of overall business strategy
  • Siloed: Digitalization strategies are underway in some departments, but there is no overall digitalization strategy for the business
  • In the shadows: Digitalization may be occurring in areas of the company, but it is neither a departmental nor overall business strategy
  • Nonexistent: Business has no digitalization activity or plan; firms have yet to begin digital transformation adoption.

Small business adoption of digital transformation is still at a primary stage. In 27% of small businesses (1-99), digital transformation is either “nonexistent, “in the shadows,” or “siloed.” However, this is vastly lower from 51% in 2020, indicating that small businesses drastically improved their approach to transformation within the last year. Midmarket firms, which have higher overall digital transformation adoption rates, are also much more advanced in their approaches. 90% of midmarket firms take either an “inclusive” or “holistic” approach to digital transformation today. Data shows that there has been an increase of 34% within midmarket firms (100-999) and a corresponding increase of 26% within upper midmarket firms (1000-4999) in their approach to holistic digital transformation from siloed or inclusive approaches.

Digital transformation and business growth

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We do not sell, customers purchase - Raju Vegesna reflects on 25 years of Zoho

Zoho was founded in 1996, twenty-five years ago, with a mission to deliver easy-to-use and deploy CRM solutions to the SOHO market segment (Small Office, Home Office). Even the Zoho name was a spin from SOHO. In the last 25 years, Zoho has transformed from a fledgling startup to an enterprise serving small, midsized, large, and public sector organizations. In contrast, Salesforce was founded 22 years ago. It is a similar timeframe as Zoho, but each is at different levels – revenue, awareness, customers, and employees. How does Zoho keep itself grounded with such a lopsided competition? Today's business world admires Unicorns, applauds valuations, overlooks SaaS suppliers' profitability. Not that there is anything detrimental about chasing unicorn status with little to show profitability, Zoho founders have been tracking employee empowerment and customer success. In the last 25 years, Zoho has become well-known for its easily deployable, easy to use, full-featured applications. Recently Zoho is being recognized for its top-down driven, empathetic culture.

What is more critical to Zoho, delivering customer success or empowering organizational culture? Each organization goes through several essential points of decision in its journey. What were some of those decision points? Would a different decision have changed the trajectory of Zoho and on a collision course with Salesforce? Did Zoho ever reach a crossroad, break-it, or make-it stage? Many questions had been swirling in my mind, which I decided to address to Raju Vegesna, Chief Strategy Officer, Zoho.

True to the initial mission of empowering employees, Raju has no regrets. Instead, he describes Zoho's achievements as fulfilling. He has great admiration for Salesforce but quips that Zoho does not sell, customers purchase, and he is thrilled to be on the path Zoho has chosen.

Read on, excerpts from my very detailed interview with Raju Vegesna.

Fulfillment is the name for Zoho's 25-year journey

Can you describe Zoho's 25-year journey in one word? What is that word?
It's tough to describe our journey in one word. There is an internal perspective which is fulfillment. If we do not have that, we cannot have confidence in what we are doing and satisfaction with what we are doing. The feeling of fulfillment started early on and has continued. Even on Zoho's website's homepage, we showcase it as a life's work which is only possible if we inner fulfillment.

Customer success vs. organizational culture

What is more critical to Zoho, delivering customer success or empowering organizational culture?
We cannot separate customer success and organizational culture. They are two sides of the same coin. If we do not have organizational empathy and that culture right, then it will show up on the customer side. And if we do not have one side right then, the other side is not going to work. We often say, when you have a customer problem, it means you also have an employee problem. These are interlinked - one is external facing, and the other is internal facing. And if you have that inner empathy to humility, it will show up as a positive impact when servicing a customer. And this is ingrained and built into the organization. It is a simple mandate. If it is an employee's responsibility to keep the customer happy, the employee should have the freedom to think and act, and so it has to be built into the organization's DNA.

Chasing Unicorns

How do you keep yourself grounded?
We do not pay too much attention to valuations. We do not think about it. We have been through multiple bubbles, up and down cycles, so they do not bother as much. Then we also realize that the market, to some extent, is biased towards public companies. How often do you hear about private companies? For example, Tableau versus SAS, which is a private company. Or Walmart versus Aldi. There is an inherent bias in the market. Bias puts private companies at a disadvantage because they don't have the mindshare. Why didn't someone hear about Zoho earlier, partly because private companies do not get enough exposure? They are not talked about it because there's no inherent gain for other people. But then there are also a few things that are on our side that public companies don't. So, what, how do we play the advantages. For example, we don't have a timeline and a time horizon to operate. Now we can plan out a decade in advance. Some projects have been in the last 6-9 years in Zoho that haven't seen the light of the day. And when you have a public company running on a quarter-by-quarter basis, they don't have the advantage to plan it out. We try to focus on the process and what is in our control and do it the right way.

Critical decision points

What were critical decision points? Do you think those decisions changed the trajectory of Zoho? What would have happened if you did not make those decisions?
I'd say some early lessons helped a lot. Initially, our primary customers were optical companies. When the telecom bubble burst. We had about 305 customers, of which 300 or 301 of them died. Over a year or two, imagine that when 99% of your customers vanish, you might as well. We had zero debt, and we had some savings. And we had very hungry engineers. We took all the savings and invested in the engineers, and pivoted. Even from the beginning, we always believed in zero debt, which is a crucial reason for survival. Another lesson we learned was that diversification becomes vital for the product. Now we are fully diversified - product portfolio, regions, countries. We don't have a customer that is contributing to more than 1% of our revenue. The exciting thing is that not all the products we created back then exist today, but most of the employees who made the products still exist and are just creating new products. One hundred people have been with the company for at least 20 years, and they are just creating new things.

Deciding product roadmap

How did you decide to develop which apps and in which order?
It's one of the extremely simplest ways to decide. What are the apps that we do not use to run our business? What are the apps that we need to run our own business? And, and if there is a missing piece, we build it. So we believe that if we run our entire business on our own products and benefit from it, other companies will have the same benefits. We have 50 apps now, but I look at the road ahead and say we still have a long way to go. More importantly, can we make the boundaries between these applications disappear and appear as a single application? Why should users pick and choose the apps they want? Why can't everything contextually tie together? Why are there walls? A business may not have segregation between a front office or a back office. Why should there be a separation in software, support, sales system, marketing system, and several vendors that serve the needs? As simple as that. And that segregation has to, and separation has to go away. And that is one of the walls. So, it's a journey, but our tools and the missing pieces define our roadmap.

Surviving and thriving

Did you ever reach a crossroad, break-it, or make-it stage?
Survival instinct comes immediately after the break or make moment. I vividly remember when we pivoted, we created a product to address the IP market. And we demonstrated the product at a Vegas show. We were so tense because our future was dependent on that product. As we kept on demoing the product, more and more people started liking it. And that is when we said; now we have a future. Survival was a priority. And then, later, we started focusing on expansion and thriving.

Mentors and learnings

Who do you turn to for learning and mentoring?
We have a tightly-knit team. The management team has been sitting next to each other for a couple of decades. We go through the journey together. We also learn a lot from external companies. We study companies. How did all the private companies become one of the top leaders, for example, Aldi? Or the makers of M&Ms, which have been around for 100 years. Or how has Marvin Window been successful for the last 115 years? Or take a company like Bata. If you grew up in India, it is ingrained in you but is not an Indian company. It is a company out of the Czech Republic.

Salesforce admiration – purchasing vs. selling, small and enterprise customers

Salesforce started with a focus on small businesses but pivoted to enterprise customers. Now it is re-engaging with SMBs. Did you ever want to become a Salesforce?
There is one area that I admire in Salesforce. It educated the market about SaS. I have respect for the Salesforce platform on the technology front because they lead the way. But on the sales and distribution model, we decided to take a different approach. We are primarily an engineering-centric company, so and won't be a sales and marketing-centric company—money matters. We instead re-invest the money in our engineers than on sales and marketing. We like the bottom-up approach, where we started selling to small businesses. We named Zoho itself after Soho, small office, home office market. Slowly, we started serving larger companies. It is the customers pulling us into their organizations and not Zoho selling to those organizations. It's a subtle but essential difference. In other words, in a lot of cases, our products are chased, not sold. And that changes the dynamics. We see lately an increase in mid to large size customers adopting Zoho. If you look at our sister division ManageEngine the target market is mid-sized to large enterprises, and 60% of fortune 500 companies are our customers.

Respect for competition

Do we ever want to become a Salesforce or SAP? We are not sales-focused. We have a good number of salespeople, but it is a tiny percentage of the total workforce. We will continue to be an R&D company. We understand that there is competition, and we respect them. But then we respect our customers a lot more. We will build products, focus on R&D, and have these local, transnational teams, which will be on the ground, looking at customers developing solutions to meet their needs. Our business model is relatively simple, mainly because we are a private company. We only worry about two sets of people – customers and employees - because the third set, investors, are no longer at play.

Next 25 year changes – transnational localism

What will you change in your evolution for the next 25 years?
There are a few things that won't change - culture, values, people, and the investment in R&D. What will change is what we call transnational localism, which means we will have local teams available in multiple countries, geographically. We are strengthening our local presence in every country we are present in to serve the local customers. And that's an important strategy. We are present in about 20 countries, and we will see our team expanding in each of these countries, and that team will be solving the local customer's problems.

 raju vegesna headshot

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