Techaisle Analyst Insights

Please click through for a quick snapshot of Current Adoption and Purchase Intentions for Marketing Automation within the US Small and Medium Business (SMB) Market:

In India, SMBs’ awareness of cloud computing trails only slightly behind mature markets. Predictably, awareness is significantly higher among mid-market businesses than small businesses. However, awareness of the term increases significantly among companies with 20 or more employees suggesting interest in cloud computing jumps once businesses grow beyond a certain size. In addition, mid-market businesses with 250-999 employees have the highest awareness about cloud computing as these firms have are still building their in-house IT infrastructure and are evaluating all options to meet their IT needs. SMBs also agree largely on what the term means – about half of all SMBs surveyed agreed that the term included all of the following aspects.

• Subscribe to IT services that are hosted by third-party

• Subscribe to Servers hosted by a third-party

• Subscribe to applications hosted by third-party

• Access applications using a web based interface

• Subscribe to storage and security hosted and provided by third parties

Over the last few years, as the market has evolved and more vendors have entered the fray, a number of new terms have become commonplace each meant to either truly represent a component of the market or a marketing gimmick by some vendors to try and create and legitimize a niche for themselves. The rising sophistication of SMBs is evident in that they are at least familiar with the various terms being bandied about. This is not to say that SMBs do not differ in their views of what each term actually means.

Familiarity with the term cloud computing is rising among SMBs suggesting vendors’ evangelism activities are having some effect in terms of recognition and awareness. However, a good understanding of the benefits of cloud computing varies significantly among the SMBs. More importantly, awareness among channels that serve the SMB segment is limited with pockets of misinformation. Even if the SMBs and channels know about the benefits of cloud computing they still worry about security and data privacy.

Cloud computing has been touted as the next big thing but as far as the Indian market is concerned while there is a lot of hype and interest generated around this technology the ground realities reflect a more sobering truth: that SMBs in India are still some way off from shifting to the cloud in a big way and that the initial vendor push is more oriented to the upper mid-market businesses and large enterprises.

In India, Infrastructure, also known as IaaS, has the potential to change the way IT hardware is purchased, designed and used. With its promise of infinite scalability and a pay-as-you-go pricing model, the primary benefit that cloud IaaS services extends to the SMBs is efficiency at lower IT costs. It lowers the barriers to market growth by lowering technology costs and upfront investments. This is true both for small and mid-market businesses for many applications. The picture is substantially different for mid-market businesses and small businesses taken separately. Mid-market businesses display a greater willingness to adopt hosted infrastructure and platform solutions than small businesses which is understandable.  Small businesses prefer business appliacations and industry vertical solutions. Cloud platform vendors should therefore actively seek partnerships with such vertical ISVs in order to drive utilization of their own services and data center resources.

Gitika Bajaj
Techaisle

Techaisle’s SMB Mobility adoption research and corresponding segmentation shows that there are three distinct SMB segments of mobility solution users.

Aggressive Adopters: Mobility is Strategic to their business; these form 13 percent of SMBs

Steady Movers: Mobility is enabled in their business; by far the largest segment at 49 percent of SMBs

Fence Sitters: Mobility is a convenience for their business; these form 19 percent of SMBs

It is imperative for IT Vendors and channels to understand the segments' different attitudes towards mobility, current and planned usage of mobility and firmographics to create an actionable marketing strategey. For example, Techaisle’s SMB Mobility Segmentation shows that for 13 percent of SMBs that fall into the Aggressive Adopters segment mobility is strategic to their business growth and survival. A deep understanding of the three segments will help IT vendors and channel partners identify their target markets and how to sell into them.

Sales Strategies for SMB Mobility Segments



Even in terms of spending, aggressive adopters are spending a higher percentage of their IT budget on mobility solutions. Interestingly, Fence Sitters are spending comparatively higher percentage on mobility consulting assessments looking for advice on the most appropriate solutions before adopting mobility enterprise-wide.

BYOD Policy and Use of Tablets & Smartphones

Not only Aggressive Adopters were the first to use tablets and smartphones but they also have the highest density (mobile devices per employees) and highest average number of tablets and smartphones being used at all employee size levels among all three segments.



There are twice as many SMBs in the Aggressive Adopters segment as Fence Sitters that use Tablets and Smartphones.

Aggressive Adopters have also moved quickly to implement a BYOD policy whereas a large percentage of Steady Movers do not have a BYOD policy but they also do not stop their employees from using their own devices.

 

Aggressive Adopters also have a very healthy attitude towards employees using consumer applications at work as they feel it is a good way to learn about technology that their employees find useful and can be officially integrated into their business.

Adoption of mobility solutions has also led to a positive effect on work-life balance of their employees. Aggressive Adopters have also seen improved productivity, higher employee satisfaction and improved quality of work.

With improved productivity and quality of work there will be a continued proliferation of mobile devices and corresponding solutions that will drive new forms of collaboration of content and communication. As devices become increasingly small, smart, connected and powerful, the server and network become less visible progressively moving offsite both physically and from a management perspective, simultaneously serving more computing power, storage and bandwidth; mobility will revolve around collaboration delivered through an enhanced browser. Therefore, todays Aggressive Adopters will look for integration of communication channels, content and workflow as the foundation on which to build their strategic mobile solutions.

The responsibility lies with the IT Vendors and their channel partners to effectively mine the Aggressive Adopters’ segment at the same time using realized proof points to move each of the other two segments (Steady Movers and Fence Sitters) to the Aggressive Adopter segment.

In terms of market opportunity, Aggressive Adopters show the highest growth rate for mobility spending requiring sophisticated solutions whereas Steady Movers have the biggest size due to sheer volume of SMBs falling into the category.

In 2012, a total of 47.2 million households and 1.9 million SMBs purchased a PC for the first time (Techaisle estimates), increasing global PC penetration by 2% in both the consumer and small business segments as an average of 5,200 small businesses and 130,000 households per day purchased a PC for the first time.

According to IDC, a total of 350 million PCs (desktops + notebooks) were shipped worldwide in 2012. Assuming that each first-time buyer in both the consumer and small business segments bought one PC, a total of 49.2 million PCs were first-time purchases. Therefore, the remaining 300 million PCs purchased in 2012 were either for increasing density or for replacements.

There are three elements that contribute to PC shipments. These are:

1. Increasing Penetration: businesses or households that purchase and use PCs for the first time

1. Increasing Density: purchase and use of PCs for either additional members of a household or employees within a business

1. Replacements: replacing older PCs with new PCs

Increasing Penetration

PC market penetration will continue to be driven by emerging market countries. 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!.

It is true that many of these households and small businesses may choose to purchase a tablet first rather than a PC if the planned usage is focused on consuming content through activities such as emailing, browsing, playing games, following news and watching videos. However, it is also true that PCs will
remain an important part of the device market. A tablet’s weight, portability and convenience cannot be ignored, but Techaisle believes that the tablet market may reach the same set of conundrums – lengthening replacement cycles and fully saturated addressable density – that are affecting the PC market today, causing tablet sales to skid. Since 1982 when the first PC was introduced, a combined one billion households and small businesses have yet to purchase a PC. It is hard to say that tablets will fill that void, especially when the market gets flooded with too many configuration choices and a profusion of different brands with unique value propositions; for a majority of buyers, the tablet purchase decision process will become as difficult as for PCs.

Increasing Density

Increasing density is certainly a problem area within mature markets as the household PC density is more than 1 in most countries. However, in emerging markets the household PC density varies from 0.5 to 0.9 devices per person depending upon the country. Similarly, in the case of small businesses the density is also almost 1.0 in mature market countries and varies from 0.4 to 0.7 in emerging market countries. There is therefore potential for PC vendors to increase density in emerging market countries both within households and small businesses. But here again, we may find that tablets become a device of choice thus impeding density increase. However, these conditions will also hold true for tablets in the next 3-4 years when the number of tablets within a household and a small business will reach a density saturation point beyond which no new tablets will be purchased for additional employees or household members.

Replacements

This is where the most brouhaha is currently. PC replacement cycles are getting extended and users – both corporate and consumers – are buying tablets. Notwithstanding the tepid acceptance of Windows 8, the PC buying process has become a daunting task even for the most technological savvy individual. PCs are variously categorized as Ultrabooks, ultra-thins, light and thin, long battery life, anti-glare screen, Premium HD screen, SSD, HDD, All-in-ones – it makes one’s brain dizzy. So the consumer ends up either pushing back the decision or continues to shop for a suitable configuration at an affordable price. “A PC in hand is worth two in a bush” begins to hold true. The consumer may then default to a tablet, which is still a novelty device. But the question remains, at least, within the context of small businesses – are the tablets they are purchasing really replacing PCs? Let us look at Techaisle survey data below based on total sample size of 9,500 SMBs.

Above data (will not add to 100 percent due to multiple responses) clearly suggests that while there are some incidences of replacements, consistently over 60 percent of SMBs either currently use tablets or plan to use tablets as additions to PCs. However, it is interesting to note that the density of tablets in many small businesses is not always 1.0. For example, a small retail store may have 4 employees but uses 6 tablets and 2 PCs. These tablets are used for point-of-sale, display advertising or self-serve terminals. So in effect tablets are doing the work of PCs with more convenience and a smaller foot-print. It is debatable whether retailers would have used PCs for these tasks in the absence of tablets.

This brings us back to the point that we started with. If 300 million PCs were purchased for either replacements or density increase, are tablets then really replacing PCs, or is the PC market itself getting saturated, with fewer compelling reasons to purchase additions or replacements? Are the PC vendors sufficiently targeting the first time buyers, as this group would have the highest potential for increasing penetration and driving increasing density? IDC also said that a total of 128 million Tablets were shipped in 2012. Approximately 32 million Tablets were purchased by SMBs assuming that SMB share was 25 percent. The two charts above when combined with IDC data gives a rough number of 5 million tablets displacing PC sales. The data for SMBs demonstrates that tablets are not replacing PCs, but are being used in addition to PCs.

Techaisle’s bottom line: PC vendors should therefore market PCs to new users and current users with two very distinct messaging to open up the market.