Techaisle Blog

It was once thought that the cloud would reduce the technology deficit SMBs face relative to larger firms – but it is difficult to say that this has proved to be the case. Indeed, the cloud has lowered the barriers to adopting new systems, giving SMBs access to applications and infrastructure resources that would have been well beyond their means five years ago. However, Techaisle’s SMB and Midmarket Cloud adoption trends research data show that cloud, and hybrid IT, has posed other challenges: difficulties in integrating systems with each other and with business processes, and in integrating data across applications (ensuring that data created by one application is input automatically into others); difficulty in securing systems that are based in multiple locations and managed by various organizations, each with their own set of operational rules; difficulty in applying appropriate levels of security and governance to an ever-expanding pool of data that moves at accelerating pace through an ever-more-complex constellation of systems, users and locations. Large organizations have IT teams dedicated to addressing specific issues within this shifting and complex set of requirements. SMBs rely on limited internal resources (often, small groups of generalists), supplemented by fractional headcount support from third-party channel members, to keep pace with the change that results from the constant advance of cloud and hybrid.

Despite these challenges, though, evidence suggests enormous scope for cloud growth in the global SMB segment. Data indicates an apparent leader/laggard dichotomy between midmarket and small businesses concerning IT-enabled innovation. Over 20% of midmarket firms have internal teams dedicated to “finding ‘what’s next?’ technology-driven innovations,” and 40% “have IT budgets specifically for technology-driven innovation;” 11% report that they have embedded IT professionals charged with finding innovations into business units. Small businesses are, on average, about half as likely to have taken these steps; instead, nearly half of firms with 1-99 employees state that their organizations do not expect IT to drive innovation actively.” Making the assumptions that a) midmarket firms will benefit from the express linkage of IT and innovation, and b) that the gap between large enterprises and midmarket firms is likely as significant as the delta between midmarket and small business. Additionally, large enterprises will, over time, capture IT-enabled business innovation benefits even more rapidly than midmarket competitors. Data illustrates the foundations of a cascade, where IT-enabled innovation drives business success and further cloud investments in larger firms, defining success patterns that small organizations then adopt.

The findings also expose the uncertainty that SMBs face as they structure their IT/business strategies. The most significant proportion of SMBs – 42% of small businesses and 32% of midmarket firms – state that they are unsure of what the next 10-15 years will look like for their industry. Other SMBs worry about their ability to cope with the pace of change: an average of about 25% of SMBs report that they “are struggling to keep up with the pace of change,” and nearly 20% state that they “do not know if they will be able to complete over the next decade.” Against this backdrop, a cadre of forward-looking organizations – 15% of small businesses, roughly a quarter of midmarket firms – “are battling barriers to become a digital business by 2030.” The successes that these firms realize over the next several years will increase their appetite for further cloud investments and encourage their peers to commit additional resources to cloud-based business initiatives. Techaisle expects that if and as these digital leaders realize tangible benefits from cloud and hybrid, the cloud will become an essential element of SMB business operations. As a result, SMBs will become a significant force in the cloud market. Moreover, suppliers to the SMB market and the SMBs themselves can align to bring about this positive change. Techaisle believes that mutual benefit will drive commitment and innovation on both the supply and demand side of the cloud equation.

Emerging Trend - SMB IT Specialists empowering business units, blurring the IT-Business divide

Techaisle’s study on “360 on SMB & Mid-Market IT Decision Making Authority - BDM vs. ITDM” reveals an emerging trend of IT specialists with purchase authority being resident within business units and reporting to business rather than IT management. The data is significant enough for marketers to pay close attention as the survey shows that already in 21 percent of small (1-99 employees) and 36 percent of midsized (100-999 employees) businesses IT Specialists are embedded within business units and even more are planning to hire specialists within their business units. Further, the study also shows that these IT specialists are an important influence point for new IT solutions purchase and that in 29 percent of small businesses and 49 percent of mid-sized firms that have “business unit resident IT specialists” these staff members are the primary decision makers for new IT solution purchases. This trend will naturally tilt the balance of decision making authority towards business management by empowering them with knowledge and decision-making agility.

The need for IT and business to work together to ensure that all stages of IT adoption process meet both technical and business process requirements is an important factor in IT solution success. Survey data clearly demonstrates that SMBs have taken this a step further to address the need for what is sometimes referred to as “double deep” employees (with respect to IT and business experience) by positioning IT specialists within business units reporting to business (rather than IT) management. In a way these IT Specialists reporting to Business Management in SMBs are blurring the IT and Business divide.

Small businesses - informal

The trend is widespread and informal in small businesses in the 10-99 employee size categories with 45 percent of firms reporting the presence of IT specialists within business units. In most cases this is an informal connection with IT-savvy employees responsible for IT-dependent processes.

Mid-market businesses - pronounced

However, within mid-sized businesses the trend is more pronounced and is becoming a more conscious strategy with IT support embedded within the line of business departments. As the balance of IT decision making authority continues to shift towards business decision makers the presence of IT specialists who can identify appropriate IT solutions within a mid-market business unit is gaining tremendous relevance. This also means that rogue implementations of solutions may well accelerate. More importantly, in the next 3-5 years it is highly likely that a business unit will begin to think and operate like an IT department as they learn from their missteps.

IT or BDM-led Solutions

To understand an SMB buyer’s journey Techaisle research considered nine IT solution categories and the influence of various stakeholders from needs identification to selection and adoption process. At a high-level the nine IT solutions were found to belong to one of three categories – IT-led solutions, areas where IT is generally seen as leading corporate IT initiatives; BDM-led solutions, solutions in which BDMs provide most corporate leadership, and IT is cast very much in a supporting role; and IT/BDM collaborative solutions that respond to BDM needs, but where IT is important to supporting delivery capacity. The positioning of these solutions is important to shaping the focus of IT vendor sales and marketing initiatives.

It is important for IT suppliers to understand whether their current and prospective accounts have IT specialists assigned within business units, and where they do, to establish strong relationships that will enable the supplier to understand and respond to IT/business solution demand.

About the Study: 360 on SMB & Mid-Market IT Decision Making Authority - BDM vs. ITDM

To understand the current state and implications of distributed IT influence and authority Techaisle conducted a unique survey of SMB organizations where we surveyed roughly equal numbers of business decision makers (BDMs) and IT decision makers (ITDMs) across seven employee size categories, and then analyzed results to create a unified view of the new IT decision authority realities.

The study covers:

• Stakeholders and their roles in end-to-end IT solution adoption

• ITDM vs. BDM : Balance of Authority (Needs, Budget, Purchasing)

• ITDM & BDM: Locus of Leadership in driving different types of IT Solution Adoption

• ITDM & BDM: Leadership roles in securing Cloud, Mobility

• ITDM vs. BDM: Success Attributes and Benefits of Cloud & Mobility Solutions

• SMB & Mid-Market Businesses: Shadow IT Spending

• Business Impact of BDM vs. ITDM perspectives and expectations with respect to IT Solutions

• ITDM vs. BDM: Differences in Business Issues, IT Challenges, IT Priorities

Michael Dell is one of the very few CEOs I know that walks the hallways with almost no posse of overprotective PR and communications personnel. It was therefore no surprise that in my meeting with him he walked into the room unassumingly and on time to discuss his vision and focus on the Emerging Markets.

Much has been written about how happy and relaxed he looks after privatization. For me, however, the tell-tale signs of tranquility and a zip in his walk first appeared two years ago when he announced Dell’s intent to be an end-to-end solutions provider for businesses of all sizes. He had a roadmap to reach the flag at the end of a long, unpredictable race-track. And he knew that he was at the starting gate with the right set of acquisitions. He just had to make everyone believe in Dell.

Fast forward to present, privatization has emboldened Michael Dell and his entire leadership to take their message on the road that the new Dell is “100% customer focused, providing best value, ease of use & flexibility” aligned to the four tenets of Dell solutions – Transform, Connect, Inform, Protect.

Michael Dell is “Investing to Accelerate” around five key areas, one of which is the emerging markets, the topic of our meeting.

1. Invest to expand solution offerings (R&D plus M&A plus Venture Fund)

1. Enhance & Simplify customer experience

1. Increase pressure in emerging markets around the globe

1. Grow PCs, tablets and virtual computing services

1. Expand sales force and channel relationships to better serve and support customers

Dell as a company made several major announcements at its recently concluded Dell World 2013:

• Public cloud ecosystem partnerships with Google Cloud, CenturyLink, Microsoft Azure

• Dell Red Hat OpenStack partnership for co-engineered enterprise-grade OpenStack private cloud solutions

• Partnering with Dropbox to enable businesses and their employees work in a mobile work-environment while providing the security and manageability with Dell’s data protection solutions

• Dell FluidCache for  SAN storage delivering over 5 million IOPS in a converged infrastructure of storage, server and networking

• Revamped PartnerDirect program giving partners bigger profit opportunity than ever before – access to tens of thousands of Dell accounts

• US$300 million Strategic Innovation Venture Fund to help identify, fund and fuel visionary technologies that anticipate and address future IT needs

Not all of the above announcements are applicable to and can be used by businesses in the emerging markets immediately. Therefore, I began our conversation by asking him if there is a difference in his strategies for established and emerging markets and what top characteristics defined his emerging market strategy.  Michael Dell recognizes that in many emerging market countries, there are essentially two markets (upgrade in automated environments, greenfield in businesses that are not yet automated) and therefore he has to gear up to address their needs accordingly and investing in localization of products and services for the emerging market buyers.

Looking back at my discussion with Michael Dell, I see one strategy but three approaches that are critical to Dell’s growth in emerging markets.

PC Led Go-to-market Approach

Regain its hegemony in end-point devices (excluding smartphones): by building innovative end-user computing products at extremely competitive prices. In countries like China, India and Brazil. Dell is aggressively opening its own Dell stores for customers to experience the products first-hand. Michael Dell does not view todays IT landscape as a post-PC era. He reminds me that when the term was first coined in 1999, approximately 100 million PCs were sold, but in 2012 over 300 million were sold, defying the very notion of the PC fading from view. “It certainly is not a post-PC era”, he insists.

Techaisle Take: It is certainly the right entry-point into most businesses. With global PC market slowdown, PC market penetration will continue to be driven by emerging market countries with new business formation and increase in PC to employee density. Our research shows that there are 1.26 billion addressable households in emerging markets but only one in four have a PC. Similarly, there are 44.7 million SMBs in emerging markets, but only two in five have a PC. Both of these figures indicate a huge opportunity for new PC sales as there are still 26.4 million SMBs and 994 million households that have yet to buy a PC – a huge gap indeed. Dell will need to exert more pressure than other PC OEMs in terms of customer pull: creating demand through marketing, and relying on its own stores and channel partners to close prospects after they are engaged.

Many of the emerging market countries are embracing mobility faster than established markets which create unique challenges for Dell to push its Tablets in the face of high adoption of Android and iOS devices. Market share of Android and iOS tablets vs. Win8 would seem stacked against Dell but one should not discount Dell’s expanded tablet portfolio including Android OS and Dell Chromebook plus well-received Win 8.1 tablets. Dell also has had emerging market success with Dell Wyse cloud clients and new opportunities with ultra-mobile cloud devices (Project Ophelia/Dell Wyse Cloud Connect) – all of which create customer entry points for Dell. Additionally, Dell’s mobility strategy extends beyond Dell-branded devices and includes software and services to ensure that any device is secure, manageable and reliable, part of the end-to-end solutions strategy.

Channel Partner Led Go-to-market Approach

Grow with channel partners:  Channel partners are the essential cogs of the IT landscape, especially for the SMBs that are so important to PC growth – and this is truer in the emerging market countries than established markets. Dell plans to continue to recruit channel partners that align with Dell’s value proposition and can add business value to a customer’s needs by giving the customers choice of best-of-breed solution components. The recent announcements of the revamped PartnerDirect program and the corresponding re-organization of its channel organization were made to address the changing needs of the channel partners across all geographies. Apart from growing the channel base, Dell is also planning to increase spending on sales/marketing within the emerging markets thereby creating enough pull in the marketplace to enable channel partners not only sell more but also sell more effectively within and across its channel friendly solutions - PowerEdge VRTX, Storage, Networking, Software, Thin Client, Workstations, and SecureWorks. However, not all solutions, especially, software solutions, can be sold without proper localization; Dell recognizes this, and is investing in R&D to make sure that products and solutions are enabled for the emerging market countries.

Techaisle Take: As per Techaisle research there are over 340,000 channel partners in emerging market countries. To support growth Dell has to have a rich landscape and integrated fabric of channel partners that are moving in unison with Dell as its trusted supplier. As Dell moves to create better alignment with the channel, it needs to be mindful of two interesting changes that are occurring within the emerging market channel partner community – members now refer to  themselves as solution providers, (not as VARs, SIs, or resellers), and they have started calling their customers “clients” much like a consulting organization would do. To be successful in emerging markets channels, Dell has to capitalize on these changes. It also has to quickly develop a timeline for the roll-out and implementation of its new PartnerDirect Programs and Incentives for countries outside of North America. Dell may not be able to make bold statements of how many accounts have been opened up (similar to the US) for collaborative sales efforts with channels but at a minimum it has still to identify named accounts that are being transitioned to channel-led, and a compensation accelerator to incent direct sales force to work with channel partners.

Solution & Services Led Go-to-market Approach

Provide end-to-end solutions for businesses of all sizes: No end-to-end solution portfolio is complete without software and applications. After a long slog, Dell software is finally coming together with its systems management offerings covering BI for IT, mobility management, data center management, cloud management as well as “connected security” that reduces the seams in a customer’s infrastructure. The software solutions are being complemented by Dell Services (which was given more visibility at Dell World than ever before, with keynote sessions led by services). Dell has achieved some great successes in countries like India within the healthcare segment, but it has still a lot to work on. In emerging markets as in North America, the mid-market segment is the primary target for Dell’s end-to-end solutions.  As Michael Dell said, “it is not easy to put feet on the ground effectively and uniformly across all countries”. He also said, “Many new change vectors are going on and Dell has the ability to understand where the puck is going”. Taken together, we at Techaisle view these statements as outlining an approach where Dell will commit resources selectively to high-growth segments within the emerging economies.

Techaisle Take: Dell is almost at the finish line with its converged solutions that include storage, security, servers and networking, the services needed to deliver end-user solutions that help businesses compute in environments with pervasive data access. Growth in sales of this type of sophisticated solutions in emerging markets cannot be cracked without the support of channel partners. Dell has to articulate a message that serves the needs of customers of hybrid solutions that combine server, storage and networking hardware with systems management and security software to seamlessly support application delivery, data protection and backup. By offering a wide range of product types, and focusing on making the selling motion as clean as possible, Dell can enable its partners to focus on customer requirements rather than product silos.

One early indication of the force of this direction is the fact that Dell has finally been able to put a stake into the ground with its cloud strategy. To put forth the point more forcefully Michael Dell said, “When you go with Cloud, go with Dell”. Dell’s mobility strategy has also started to take shape with aggressive roll-out of devices and its EMM (Enterprise Mobility Management) solution that includes both end-point and container management. Dell is still working on its Big Data/Analytics strategy. But more importantly, Dell clearly hits 7 out of Top 10 2014 SMB IT priorities and addresses 7 out of Top 10 2014 SMB IT Challenges. It is also in a strong position to speak to the Top 10 2014 SMB Business Issues.

Final Techaisle Take

Emerging markets are more complex than we usually imagine, having a mix of mature and very immature segments based on local infrastructure. For example, Tier 1 cities are akin to US as a country – they are advanced in their infrastructure development and employment and have a high GDP while Tier 4 cities are fast developing, less populated, in some cases even rural. When we analyze our SMB (a segment that Techaisle tracks globally) survey data across cities we see that SMBs in Tier 1 cities are the early adopters of cloud whereas Tier 3 and 4 cities although aware of cloud are constrained in their adoption by channel competency and vendor penetration. Reliable and high quality bandwidth is a critical factor in bringing the benefits of cloud to local business, one that underscores the importance of central government investment in telecommunications infrastructure and Internet access. Dell recognizes these challenges and short-comings, and the new Dell is primed to aggressively address the challenges.

There is yet no clear leader in the emerging markets in cloud, mobility and Big Data solutions. Specifically with respect to the SMB segment and the channel partners that serve it, the new IT solutions of cloud, mobility, social media, virtualization and analytics are rapidly moving SMBs from enablement to empowerment. Using technology, SMBs are reaching their full potential in the shortest period of time possible. The process of an SMB’s growth and steps to absorb IT are no longer steady and predictable as compared to five years ago. Understanding the drivers of SMB transformation and the relevance of cloud-based IT, and marketing to both customers and channels accordingly, will be critical steps in enabling Dell and its channel partners to achieve market success.

Over the last 2-3 years, Dell has heavily expanded and calibrated its enterprise solutions capabilities and more recently doubled down on further investment in its PCs and Tablet business. As the company has adjusted the levers of these key drivers for its business, it appears that these two critical areas for Dell are coming further into balance. Post-privatization Dell has begun the process of finding its feet on the ground and it knows where it wants to land. It will be a year before we will know if Dell has managed to land firmly or has caught the slippery slope.