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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.

HPE boldly pivoting headlong into post-transactional market

Recently concluded HPE Discover was different than most other analyst events in more ways than one. First, HPE announced that it has strategically dived into the cloud swim-lane with a confident commitment to offer “everything-as-a-service” by 2022. HPE has plans to offer entire portfolio through a range of subscription, pay-per-use and consumption driven offerings. It is a bold strategy and in direct contrast to its key competitors. Second, the phrase “doubling down” on SMB and midmarket segments was not only mentioned in the HPE Global Partner Summit on the mainstage, but also in the keynote address by Antonio Neri as well as by several senior leaders in their respective breakout sessions thereby targeting SMBs as a priority market segment.

Specifically, “everything as a service” or XaaS is a very astute strategy. As we near the end this decade, it is clear that the IT industry as a whole has been transformed by cloud - by the way it alters IT service delivery options, by the way it impacts the economics & resource requirements associated with that delivery, and by the applications and business opportunities that cloud unlocks for user organizations of all sizes and in all industries. We are increasingly immersed in a post-transactional market, where discrete sales of individual products or integrated systems are replaced by agreements to provide IT capacity and business functionality “as-a-Service.”

No segment of the IT market is immune to this trend. Sales of on-premise hardware and software are declining and will continue to decline; at the same time, leading web service providers, including Microsoft (Azure), Amazon Web Services, Facebook, Google and Alibaba, are building 40 percent – 50 percent of all x86 servers for internal use, and then providing access to these servers on a pay-as-you-go basis, and software developers are creating systems on these platforms to automate sales, marketing, finance, HR and other business functions.

Inexorably, the market is shifting from one defined by discrete purchase-and-deploy deals aligned with refresh cycles to one where businesses take a hybrid approach that blends a limited number of on-premise assets with a growing range of on-demand services. Although hybrid IT is inherently a more flexible and efficient way of providing IT services needed by businesses, it still requires effective planning to address important issues within business operations. There are many different types of hybrid IT solutions, but they all belong to one of three basic types: Solutions that respond to IT department needs, and are adopted by IT professionals; Solutions that address business management needs, where demand is driven by non-IT executives or staff members; Solutions that change both business processes and IT systems, and which require IT/business management collaboration for effective delivery. And these are the hybrid market segments that HPE plans to address.

But Antonio Neri’s ambition is far bolder and greater than simply pivoting to an XaaS business model. His promise is for a zero-friction future in a cloud-less world for all segments of the market. A strong foundation has been laid with HPE GreenLake, an outcome of its acquisition of Cloud Cruiser in 2017. At HPE Discover, HPE extended its GreenLake offerings for the midmarket to enable quick deployments of workloads with right sized and ready to go storage, compute and virtualization. For midmarket firms which do not own and manage their own data centers, HPE has partnered with Equinix and CyrusOne to offer co-location solutions. To help its channel partners that serve the midmarket segment, HPE has developed a new quoting tool that reduces quote time from 18 hours to 15 minutes. In addition, HPE also announced the availability of HPE GreenLake Chatbot - an artificial intelligence driven, automated chatbot that quickly answers partners' HPE GreenLake inquiries.

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The growing importance of IT and Security to SMB business

It is evident from even a casual tour of a modern SMB office that IT has become integral to business activities. Email and communications systems that meld conventional, web-based and mobile phones; and social collaboration tools on the web and within offices provide the basis for connections between companies and customers, across processes and with suppliers, and between staff members. Productivity applications like spreadsheets, graphic presentation packages and word processors enable users to complete tasks, while enterprise applications capture and report on financial data and organize processes.

Given the nearly-ubiquitous nature of IT, it is fair to wonder: are we “there” yet? Have all of the technologies that one needs been deployed? Results from a recent Techaisle survey of 1455 North American SMB IT managers (ITDMs) and business decision makers (BDMs) conducted by Techaisle indicate that there is still a voracious appetite for new IT-based business solutions. Asked to evaluate the business importance of current IT developments, 77 percent of SMB survey respondents reported that new IT systems would have a very high to high impact to their organizations. Only 6 percent believe that new IT products and services will have little impact on their businesses. Clearly, SMB BDMs and ITDMs agree that new technology will play an important role in making their businesses more profitable, and their employees more productive.

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Survey shows SMB and Midmarket BDMs control cloud business applications purchase

Techaisle's SMB & midmarket decision making & buyers journey report confirms that business decision makers (BDMs) – who tend to inhabit the ‘carpeted’ realms of their businesses – are more engaged by discussions about business benefits and objectives than by ‘feeds and speeds’. Cloud business application sales reps will need to develop ‘deep carpet’ language and skills. Techaisle survey data shows that:

  • Determining the need for new cloud business applications is the prerogative of business management. The balance of authority within SMBs is nearly 7:1 in favor of business management except in the case of midmarket businesses where it is nearly 2:1
  • Neither business nor IT have a clear authority within 29 percent of small businesses and 22 percent of midmarket businesses to purchase new business applications, yet, cloud applications do get adopted driven by need, experimentation, and rogue adoption
  • At 32 percent, ad-hoc purchases are more popular within upper midmarket businesses than any other employee size business
  • Business management also has authority over determining the needs for enhancements to cloud business applications. The balance of authority within small businesses is 5:1 in favor of business management and 1.2:1 for mid-market businesses
  • Neither business nor IT have a clear authority within 17 percent of Small Businesses and 21 percent of midmarket businesses to enhance already deployed business applications, yet, these applications do go through significant modifications and upgrades to better serve the needs of business management
  • SMB Business management controls the budget and purchase authority by 8:1 as compared to IT management. However, within the midmarket businesses, the control ratio drops to 2:1 indicating that it is easier to sell cloud technology to small businesses than midmarket businesses since the decision-making units are dissimilar
  • In 15 percent of SMBs budget for new business application is usually created at the time of ad hoc decisions for purchase to meet business needs
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Cloud continuing to challenge SMB MSPs and frustrating VARs but helping CSPs

In a word, the most significant potential disruption factor for the managed services market and channel partners is still cloud. Techaisle data shows that 68% of VARs are offering managed services to their SMB customers but only 46%, that is, less than one-third (31%) of all SMB-focused VARs have been very successful in achieving consistent growth and profitability within managed services. On the flip-side, 83% SMB-focused MSPs have become very successful in their managed services business model. But the MSPs have not achieved the same success in cloud. Only 63% of MSPs are currently offering cloud and although 72% of them have achieved cloud success, it is still, only 45% of all SMB-focused MSPs, slightly less than half of the managed services success. In fact, when extended, data shows that VARs are still caught in a spaghetti junction, they are neither achieving great success in cloud nor in managed services. In the case of MSPs, the overwhelming vendor forces are proverbially narrowing the banks of the river with over capacity.

The success in SMB mobility-focused business model is even lower than cloud and managed services.

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