Techaisle Analyst Insights

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.



 

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.

Techaisle’s unique SMB research to understand the current state and implications of distributed IT influence and authority shows that today, the DMU (Decision Making Unit) is much bigger, much more diverse, much more difficult to inform, and can be much slower to take action. Business decision makers (BDMs) are an intrinsic force within DMUs in most SMB organizations, and are the primary decision makers in some high-growth areas. These BDMs have different objectives for technology, different perspectives on adoption drivers and impediments, and tend to be influenced by different information sources. The resulting diffusion in responsibility/authority and information channels has created an environment where buyers and sellers struggle to develop the cohesion needed to promote or embrace new IT/business capabilities within existing IT and business process structures.

The study shows that both ITDMs and BDMs play important roles in the (formal and shadow) acquisition of IT products and services. However, Techaisle’s research has found that the distinctions between these roles are not evenly applicable across all types of IT-enabled solutions: in some areas, the business will look to IT for leadership, and in others, it will take direction from BDMs.

Figure below illustrates the extent to which ITDMs and BDMs are seen as solution leaders within small and medium businesses, and across nine major solution areas. The solutions have been assigned to three groups: those on the left (virtualization, managed services and IaaS) are labeled “IT led,” and represent areas where IT is generally seen as leading corporate initiatives; they are focused on the core infrastructure used by IT to deliver corporate services to users. The ones at the right (collaboration, social media and analytics) are labelled “BDM led,” and are solutions in which BDMs provide most corporate leadership, and IT is cast very much in a supporting role. The solutions in the middle – Big Data, SaaS and mobility – have been labelled “IT/BDM collaborative.” These are solutions that respond to BDM needs, but where IT is important to supporting delivery capacity.

The positioning of these solutions is important to IT vendor sales and marketing strategies. Solutions in the “IT led” category need to have strong IT-focused positioning, with detailed information on product attributes; this material should be supported with a second layer of collateral containing information on the business case for the solutions, and aimed at BDMs.

Solutions in the “BDM led” category require very different positioning: here, vendors need to make a strong case for the business benefits and relevance of the solution and orient these messages towards BDMs, supporting this campaign with accompanying technical information designed to provide clear deployment and integration guidance to ITDMs.

The “IT/BDM collaborative” category is the trickiest to address. It requires deep information on business benefits and the process steps required to capture those benefits targeted at BDMs, and deep information on how to assemble, deploy, integrate and support/optimize these solutions targeted at ITDMs – and an understanding of how to position and convey the messages to each audience.

During the survey, Techaisle explored one other solution issue that is important to understanding the different perspectives of ITDMs and BDMs. Each respondent was asked to categorize the nine solution areas as having one of two primary impacts: driving growth or containing costs/”increasing the bottom line.”

The comparison of small and mid-sized ITDM and BDM perspectives provides an instructive view of the differences between the two communities. Looking first at the small business results the survey finds that in six of eight areas (IaaS and SaaS combined into a single “cloud” category), BDMs are more likely to view a solution as contributing to growth, and ITDMs are more likely to view a solution as helping to control costs; this may reflect a fundamental difference in how each group approaches its business objectives. In the mid-market findings study reveals that the perceptions of value of ITDMs and BDMs are very closely aligned in mobility, virtualization, Big Data and managed services. ITDMs are more likely to believe that cloud will drive growth than their BDM peers, while BDMs are much stronger believers in the growth contributions of the three IT-led solution areas (collaboration, social media and business intelligence/analytics).

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

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

Techaisle’s latest Cloud Computing Adoption study, a survey of 2,675 SMBs shows that CRM and ERP are approaching somewhat similar levels of adoption but are facing very different growth trajectories. Further analysis of the data from the survey shows an intriguing connection between the two applications.

Techaisle analyzed the extent to which use/intended use of each of these applications is connected with other applications captured in the survey. We found that SMBs using/planning to use both CRM and ERP have some common characteristics: in each case, buyers are looking to deploy vertical applications, Business Intelligence, project management – and the other solution (i.e., those using/planning use of CRM are also likely to be adopting ERP, and those using/planning use of ERP are also likely adopters of CRM).

This helps illustrate the importance of the types of suites that leading vendors like SAP, Oracle, Microsoft and NetSuite have assembled: buyers are consistently looking for a combination of capabilities, and will likely look as well for integration across these applications. The CRM side of this equation shows that marketing automation is an important attached application for CRM, which highlights the importance of recent investments in this area from Salesforce.com, Oracle, Microsoft and IBM, and the probable need for competitors to invest to match this offering.

Techaisle believes that the figure above (from the survey) helps illustrate the go-to-market challenge faced by SaaS suppliers. Buyers will certainly shop for individual applications, but will also look to cluster these applications into broader systems that integrate multiple requirements. We expect to see suppliers address these issues in one of three ways:

1. Through acquisitions, enabling core solution providers to bolt on needed extensions

1. Through alliances linking providers of complementary applications

1. Through adherence to standards allowing for integration between individual applications.

At present, Salesforce.com’s Force.com is a clear leader in the third category (and we are seeing acquisitions within the Force.com community – such as FinancialForce.com’s purchase of Vana Workforce – indicating expansion across functions within the standards-led community). It will be interesting to see if other development platforms emerge to challenge Force.com in this area.

NetSuite Changing the Conversation to management of Customer Relationship

We all know that NetSuite is a clear leader in Cloud ERP solutions category. However, not many (beyond some of the users and customers of NetSuite) know that it also has an integrated CRM solution. Zach Nelson, CEO, NetSuite took the opportunity in his keynote address at SuiteWorld 2014 to emphasize that NetSuite’s solution enables any business to manage the entire customer-lifetime-value-cycle from lead generation to order fulfilment. His keynote certainly succeeded in shifting the conversation in two different but converging directions.

First shift in conversation: introducing NetSuite’s Suite Commerce Advanced for the omni-channel world, Zach Nelson emphasized that NetSuite (with its integrated ERP/CRM) helps a business manage complete customer relationship irrespective of the customer’s point-of-entry: online, in-store and/or catalog/call center. NetSuite is therefore putting equal importance to both being a Cloud ERP and CRM supplier. This is definitely the most vocal shift in conversation yet from yester-years. Granted that there are several important pieces missing such as marketing automation but current popular solutions such as Marketo, SilverPop (now IBM) and Act-On have already built integrations with NetSuite. And in all fairness, marketing automation in its present form will most likely go through a transformation as evidenced in Techaisle’s SMB Marketing Automation Adoption Trends study.

Second shift in conversation: NetSuite raised the question on the traditional definition and usage of CRM as we all know it, making the definition narrower rather than more-encompassing. CRM in NetSuite’s view is akin to SFA (Sales Force Automation). There is nothing wrong with this view except that this is not how most SMBs view their customer facing applications. CRM is the core application for SMBs and we have already seen that Sales Force Automation and Marketing Automation functions have been quickly incorporated along with Business Intelligence. All of these provide a 360 degree view of the sales and marketing process. After the SMB CRM base has been built (or simultaneously), the order of implementation depends on the SMB’s focus but survey data shows that it is usually Financials, HR/Payroll, customer service, ERP, fulfillment (SCM), industry vertical applications such as retail, communication, manufacturing, etc. The SMB buyer for applications is also moving increasingly toward the department that is responsible for delivering business results and Cloud CRM usually gets placed in middle of the SMB cloud application stack as sales revenue becomes the focus rather than tight cost control enabling rapid growth and agility.

NetSuite may have the Last Laugh

Irrespective from where the cycle starts, from CRM to ERP or vice-versa if there is a single unified database (with little requirement for data integration) that powers different application blocks: front-office driven by a single view of the customer (leads, sales, and service), tying these to accounts, billing and fulfillment, along with resource planning, materials and supply-chain management will make for a compelling value proposition for NetSuite. But NetSuite has a long way to go to convince a new customer base to be the Cloud CRM vendor of choice.

Most SMBs that have used CRM, SFA and ERP systems within the past few years are familiar with the dashboards that are available with many of these applications, either embedded or purchased separately. Dashboards continue to evolve and be dynamic in several ways; the way they use data from subsystems like ecommerce and other real time feed sources, the way users can personalize the layout of their dashboards and the ability to build KPIs “on-the-fly”. While several SaaS vendors allow this kind of metric building and start the user at a dashboard, we have yet to see anything targeted to the mid-market or SMBs that connects front office, production, fulfillment and customer service the way that NetSuite does almost out of the box. NetSuite is on the right but a long winding path.

The Fear

With NetSuite’s growing market share its applications have also become complex to support the requirements of multi-country global businesses. NetSuite started from a base of SMB customers but over the years has moved upstream making inroads into enterprises. The implementation timelines, although not in years, is still counted in several months not exactly suitable and palatable to a large majority of SMBs that are planning to adopt cloud ERP and CRM. Even the channel partners that are currently offering and planning to offer ERP/CRM solutions do not have the necessary skill-sets and the manpower to provide support. The SMB ERP market is still open and available. Question is how NetSuite will address this market segment. Fear is if this is even a priority for NetSuite.

Techaisle’s SMB & Midmarket Collaboration adoption research found that apart from traditional collaboration solutions of file sharing and communication, SMBs need SaaS business applications to have collaborative properties. 34 percent of SMBs and 44 percent of midmarket businesses say that SaaS applications should have built-in collaboration properties out-of-the-box. They say that the success of a cloud business application is its ability to provide /support collaboration, including email and/or hosted telephony.

Techaisle survey data shows that there is a strong connection between SaaS applications and collaboration. In some ways, these connections are intuitive: SaaS is a resource that can be accessed simultaneously by multiple individuals located anyplace where there is a network connection and cloud is inherently supportive of collaboration, and many applications are either explicitly focused on collaborative activities (ranging from SharePoint to CRM) or embed these capabilities (as with productivity applications like Office 365 or Google Apps).

Techaisle’s SMB research found quantitative support for these perceptions. When SMB respondents were asked, “what are the key attributes of a successful cloud solution?” As would be expected, security, scalability, and data management (including disaster recovery) were prominent in these responses. However, the most common answer was “the ability to support mobility,” which speaks to the requirement to enable mobile collaboration. And the fifth-most common response was “the ability to provide or support collaboration.” As the figure below shows, this is an important issue across size categories: it was cited as an important cloud success attribute by nearly half of near-enterprise (500-999 employees) firms, and also by companies with just 10-19 employees.

Further analysis of current and planned SaaS workloads underscores the importance of collaborative capabilities within SaaS applications. Techaisle asked small business and midmarket respondents who are currently using or planning to use cloud to identify the top SaaS workloads in use today, and those that are in current adoption plans. The results, that collaboration plays a role in most SaaS applications:

Workloads explicitly focused on collaboration

• Hosted VoIP (used today by 52 percent of midmarket businesses, with 35 percent planning adoption)

• Content publishing (used today by 53 percent of midmarket businesses; 56 percent of SaaS using small businesses are planning deployment)

• CRM (in use or planned by 93 percent of midmarket businesses and 71 percent of SaaS using small businesses)

Workloads where collaboration is a key differentiator, attribute or outcome

• Office suites (both Google Apps and Office 365 emphasize intrinsic collaboration capabilities. Office suites are the most commonly used SaaS application type within small business, and the third most commonly used application type within midmarket business)

• Project management (most commonly used SaaS application type within midmarket business, and the third most commonly used SaaS application type within small business)

• Business Intelligence (53 percent of midmarket businesses and 44 percent of small business are planning adoption)

Workloads where better collaboration or reporting within/across departments/functions and/or with external stakeholders is a key outcome

• Accounting/financial management and ERP (accounting/financial management is the second most widely used SaaS application type within small businesses)

• HR management (deployed by more than half of midmarket business SaaS users)

• Marketing automation (highest rate of planned adoption within midmarket business SaaS users)

These findings underscore trends that are apparent in the SMB SaaS and collaboration markets: that increasingly collaboration is important to SMBs (as a means of boosting productivity), and that cloud-based systems – including file sharing systems, and extending to SaaS applications as well – are expected to provide support for many forms of collaborative activities.

Deployment scope further impacts SMB buyer requirements

As Techaisle observes the evolution of collaborative solution capabilities within SaaS, it is important to also consider the scope across which these applications and solutions are expected to operate. Solutions that connect workers within a group or department benefit from a common understanding of context and source applications; those that connect users across groups/departments exist within a single company, and can focus on supporting IT-approved devices with reference to IT-defined security policies. Solutions that extend beyond the organization’s own staff may well offer more business impact than internal-only systems by speeding communications to customers, prospects and/or suppliers – but they come with increased issues in terms of support for seamless connectivity across multiple platforms, and potentially, may raise security concerts as well.

In the research, Techaisle asked respondents to specify the scope of their collaboration solutions. The results help clarify the strong demand for collaboration within microbusinesses, and provide insight into why businesses view collaboration as an essential solution investment area. More than 40 percent of microbusinesses, and 39 percent of all SMBs, extend their collaboration infrastructure to support for customers. Midmarket businesses are more likely to focus on internal collaboration, but they join smaller peers in having a roughly 20 percent incidence of supporting supply chain relationships (suppliers/vendors) through their collaboration systems.

Looking at the above chart, one sees that there is the potential for missed connections within the emerging panoply of collaboration-enabling systems. Social media, mobility, BI and cloud all have important collaboration extensions. But how can businesses ensure that these technologies will connect internally once they are in place? Techaisle believes that collaboration is evolving in response to this market condition. IT vendors have traditionally tried to position collaboration solutions as a platform on which businesses can create new capabilities and integrated processes. However, data shows that businesses are instead acquiring collaborative capacities as part of other applications: social media, mobility, cloud and BI all provide discrete and important – but potentially disconnected – collaboration capabilities. Moving forward, Techaisle expects that collaborative technology solutions will increasingly be positioned as a framework that integrates and extends the value of these discrete system capabilities, rather than as a “first step” platform.

Related Blogs:

SMB and Midmarket File Sharing & Collaboration Adoption to Grow by 52 percent

SMB Content Management & Collaboration Solutions Adoption: Seven Key Trends

Report details:

360 on SMB & Midmarket File Sharing & Collaboration Solutions Adoption Trends