Techaisle Blog

One of Techaisle's SMB surveys' annual highlights is exploring top business challenges and IT priorities for small and midmarket organizations. They are here - Techaisle's annual SMB and Midmarket Top 10 IT Priorities, IT Challenges, and Business Issues infographics, 11th year of Techaisle tracking at a WW level, and is sought after by IT vendors, channels, and media. In all sectors, 2020 was a challenging year – and as a result, 2021 is challenging from a market planning perspective. The disconnect between 2020 and 2019 was so severe that it rendered forecasts effectively useless: IT suppliers reacted to shifting market trends in real-time. As we enter 2021, IT product and service suppliers look to create a context for understanding the range of outcomes that the new year may bring. Techaisle's "2021 in Focus" research series illuminates issues and requirements in the vast SMB market to support that effort.

Techaisle surveyed a total of 5720 SMBs, quota sampled to ensure adequate coverage of four small business (1-9, 10-19, 20-49, and 50-99 employees), three midmarket (100-249, 250-499, and 500-999 employees) and two upper midmarket (1000-2499, 2500-4999) segments. The data represents a robust and reliable sampling of the SMB market for IT products and services.

There is an ongoing trend – in both the buy-side and supplier communities – towards positioning IT initiatives and expenditures in a business context. By providing insight into the most pressing business issues, IT priorities, and IT challenges faced by small, midmarket, and upper midmarket businesses, Techaisle's research helps readers position their go-to-market strategies and offerings with core market drivers.

For 2021, Techaisle investigated 30 technology areas, each with several sub-technology categories, 30 IT challenges, and 30 business issues.

View and download Top 10 SMB Business Issues, IT Priorities, and IT Challenges
View and download Top 10 Midmarket Business Issues, IT Priorities, and IT Challenges
View and download Top 10 Upper Midmarket Business Issues, IT Priorities, and IT Challenges

In 2021, data shows that hybrid/remote work enablement is either the 2nd or 3rd top IT priority depending upon the segment. Collaboration, which Techaisle researched as a discrete category, is the 2nd top priority within SMBs, 3rd in the midmarket, and 6th in the upper-midmarket segments. Collaboration is already an established framework in most midsized businesses, hence a lesser priority in the enterprise-level mid-sized firms. There is a wide-ranging trend towards seeing collaboration as part of the fabric of business activity, rather than merely a means of enabling connections between discrete tasks. It is a core component for midmarket firms' digital transformation. For these firms, VDI and analytics are a greater priority.

The 2021 business challenge findings depict a wide range of objectives: expansion of the customer base, improved top-line, and bottom-line results, cost control (within IT and across the organization), competitiveness, improvement of existing operations and processes, product and process quality, workforce and regulatory issues, and (perhaps as a nod to the pandemic) a need for enhanced ability to manage the unknown.

It is a diverse list. But what is remarkable is that analytics solutions can help address all of these issues – and that, indeed, SMBs are using analytics to manage each today, which gives marketers who sell analytics solutions an enormous advantage. They can position their products as addressing strategic business priorities.

By far, within the SMB segment, the highest adoption growth rates will likely be in 5G, SD-WAN, containers/Kubernetes, UCaaS, VR/AR, AI, HCI, Customer experience tools, and Open-source solutions.

View and download Top 10 SMB Business Issues, IT Priorities, and IT Challenges
View and download Top 10 Midmarket Business Issues, IT Priorities, and IT Challenges
View and download Top 10 Upper Midmarket Business Issues, IT Priorities, and IT Challenges

Techaisle's latest SMB and Midmarket Digital transformation adoption trends research shows that 37% of small businesses (1-99 employees) and 46% of midmarket firms (100-4999 employees) expedited their digital transformation efforts due to pandemic. On the flip side, 27% of SMBs (1-999 employees) slowed down their digital transformation to prioritize their business's essential aspects, such as revenue generation. 27% of upper midmarket firms (1000-4999 employees) either changed their approach to transformation or kept the same pace as before the pandemic.

Investment in digital transformation has been underway for several years and was poised to be an essential factor in the IT and business market in the early 2020s. The pandemic lent urgency to digital transformation – but having arrived in a hurry, the changes wrought in response to the pandemic do not appear to be leaving as abruptly.

The accelerated pace of transformation will result in US$1,163B worldwide spend on IT (excluding telecom services) by SMB and upper-midmarket firms in 2021.

Unlike many IT market terms, which tie to specific technologies or technology capabilities, digital transformation is most often used to indicate an amorphous state in which an organization can seamlessly deploy new digital capabilities that streamline current or next-step processes, eliminating the business friction.

Organizational restructuring to hasten pace of transformation

Generally, firms consider digital transformation as a proxy for process efficiency. For many years, it has been a management goal, embedded without a consistent set of steps and defined outcomes in the IT plans of a substantial majority of SMBs. The pandemic brought urgency to these plans: there are numerous anecdotal reports of IT leaders being told, "you know that three-year digital transformation plan? Can you deliver it in three months instead?" For the most part, these requests tended to have a minimal additional budget attached to them, generally came without requisitions for new IT staff. These requests reflected 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.

To change the transformation pace, 17% of SMBs are restructuring their entire organizations, and 24% are creating new functions dedicated to digital transformation. The changes will be more pronounced in the midmarket and upper-midmarket firms, which are quickly putting together dedicated groups and departments to digitize, digitalize and transform their organizations. Nearly one-fifth of SMBs are relying on their employees to guide transformation initiatives.

Changing digital transformation drivers

Five years ago, I flew in from Newark into Mineta San Jose International Airport. At the baggage claim carousel, I noticed a massive advertisement of Zoho with the tag line – operating system for the business. I was both intrigued and non-committal. It was my first introduction to the company. Before that day, I had either not paid attention or had not come across the name. When I reached home, I sent an email to my team with a question, does Zoho appear in any of the surveys as a cloud business application that SMBs and midmarket firms are using. Two hours later, nearly midnight, I was pinged by my overseas team with an answer. Zoho's penetration had been increasing since 2009. I still did not give Zoho the serious consideration that it deserved. In 2019, during my several visits to Dell Technologies' events, I began noticing the remarkably colorful Zoho banners at the Austin, TX airport. During the same timeframe, the number of inquiries from our SMB panel of respondents seeking our take on Zoho increased. I knew I had to call Zoho's analyst relations, and I did. It was a turning point. I contacted a company where customers come for the products and get enriched by Zoho's ethos.

I first met Sridhar Vembu, CEO, Zoho, in January 2020. Unassuming, unpretentious, and unassertive, he was standing in his "chappals" and "bush shirt." He poured out his passion for building a company that cares for the underserved communities, hires, educates, and develops talent from underprivileged families. He is committed to keeping Zoho private and debt-free, fiercely protect its customers' privacy and security, and spread its offices in the rural areas of India, the US, Europe, and Japan. I knew I had to learn more. Soon enough, I also got swept up into Zoho's product portfolio. A collection of 50+ apps running on single database architecture and purpose-built on Zoho technology stack consisting of services, software infrastructure, network infrastructure, and hardware infrastructure deployed on Zoho's data centers to ensure performance availability, security, and privacy. It is not for small businesses only. Zoho's fastest-growing market segment is the midmarket. Salesforce, Microsoft, and SAP are the established brands within the midmarket; Zoho is the challenger, not by deliberate design but by a sheer and silent commitment to customer success. I have interacted with many Zoho senior executives, product evangelists, and customers in the last year. The pervasiveness of genuine fondness to learn, desire to challenge the status quo, develop themselves as great human beings and develop solutions that exceed customer expectations is palpable. Zoho has as many micro-cultures as there are apps, fifty.

Zoho has been 25 years in the making. With 9000+ employees, 60+ million users in 180+ countries, annualized 5-year revenue growth of 34%, and a 97% customer retention rate, Zoho seems to be just getting started. Using a hub and spoke model – major city and adjacent rural areas – Zoho has opened 15+ small offices in the past six months to support local economies and partnerships. Sridhar Vembu, the recipient of Padma Shri, one of India's highest civilian honors, calls the model a cloud-enabled rural revival. He returned to India from the US in September 2019 and has settled in a small rural village, Tenkasi, where even the street lights are non-existent.

Sridhar is setting the tone for the next 25 years. He aims to continue enhancing a vertically integrated technology stack (from the data center to applications) and building horizontal integration where different groups, micro-cultures, and departments feel empowered and collaborate seamlessly. The deep-seated culture is evident in the enthusiasm of Zoho's empathy and responsiveness to the pandemic. It instituted a 6-month subscription waiver for small businesses. To meet remote workers' needs, it launched Remotely, a suite of 11 free productivity tools. To enable workplace re-opening, it has announced the BackToWork app, free for a year. For Zoho, free does not mean using customer data for monetization. Zoho does not run on public clouds, has removed all adjunct surveillance, and does not collect or store any customer data.

Zoho's latest versions of Zoho Projects and Zoho Analytics (with 1500 built-in dashboards) are comprehensive, customizable, secure, scalable, and intelligent. Zoho's universal NLP (Natural Language Processing) search – across all apps and data pillars - provides contextual answers, processes 16 million search requests a day, and performs 150 million indexing jobs a day. Zoho's offering is the Low-code platform to empower citizen developers with last-mile customizations. It incorporates many new functionalities, including Zia (Zoho's AI platform), assisted development, and sandboxing. Zoho's other recent notable offerings include the Employee experience platform and Marketing platform.

Agility is essential to managing business uncertainties. It also translates into business process automation and rapid deployment, and enhancements to business applications. Specifically, the smaller a business is, the less likely it is to have dedicated staff developing custom applications to support unique processes. From pro-code to low code to no-code, Zoho Creator Platform can appeal to a broad swath of citizen and professional developers. For citizen developers, it reduces complex functions to one-click or drag-and-drop actions. For experienced developers, Zoho has added controls to build customized applications and services from the ground up. Like everything Zoho, the platform has been 15 years in development, rendering the learning from organizations of all sizes to better user experience and scalability. For specific vertical industries for whom governance is a vital issue, the platform is SOC2 Type II and GDPR compliant. It also provides authentication, encrypted data storage, and full lifecycle management. Zoho's low code platform, Zoho Creator Platform, currently has 13,000+ paying customers, which is up by approximately 30% during the pandemic year. A testament to how the platform empowered businesses to pivot with agility to respond to employee and customer needs.

Although Zoho is known for its focus on the small business segment, which continues to grow, it also gains traction within the enterprise segment. Zoho's largest customer is IIFL, with 28,000 employees using 45 of the 50 apps. Zoho is a genuine one-of-a-kind visionary firm. It is the complete CRM platform and has the most comprehensive toolsets for hybrid, co-modal work. Its flagship, Zoho One, has over 50 products designed for multiple business needs across productivity, finance, marketing, HR solutions, etc. I am glad I made the call to Zoho analyst relations. Zoho will continue to be within Techaisle's vendor research radar for a long time. It should be on the evaluation map for SMBs, mid-market firms, and enterprise customers.

US SMB IT spend is forecast to grow by 7.6% in 2021 over 2020. In July 2020, we had written that resiliency, agility, and adaptability would accelerate recovery for SMBs. Techaisle's survey of 1720 US SMBs confirms the prognosis for the US market. Data shows that 45% of US SMBs will be in the high growth segment, with IT budget increases ranging between 7.5% to 15%. However, 12% of SMBs will experience budget decreases of more than 5%. The majority of the declining IT growth segment will be in the 1-49 employee sizes. Regardless, the small businesses will grow their IT spend. There is an apparent dichotomy appearing in how technology is likely to be acquired by SMBs. Nearly two-thirds of micro-businesses prefer acquisitions structured around leases, whereas one-fourth of midmarket firms plan to move to "as-a-service" approaches.

IT services spending will grow by 8.6%, driven by managed services, data/platform integration, cloud orchestration, and business process automation. As cloud applications increase, the demand for hybrid IT is becoming a pressing requirement for SMBs.

2021 will be the year of the midmarket segment, with IT spending forecast to grow by 8%. Data illustrates a fascinating picture showing IT budget increasing in direct proportion with size, from 100-249 to 500-999 employee firms. The upper midmarket (1000-4999 employee size segment) will have an average budget increase of 6.1%, slightly lower than the 500-999 size business.