The rise of the SMB Phoenix

• Service providers should position and bundle their offerings to cater to the unique business concerns and goals of SMBs
• A new breed of SMBs founded by people with enterprise experience is an important demographic to consider

THE one thing you can count on is the fact that no two small and medium-sized businesses (SMBs) are alike, said Tim Harmon, principal analyst at Forrester Research, during his keynote presentation at the Parallels Summit 2013 in Las Vegas.
 
Harmon noted that there is “no such thing as a single SMB market per se,” with 250 million of them around the world operating in a diverse range of industries, all with differing growth patterns and IT needs.
 
“That’s the reason why it’s a difficult segment to not just tackle but also categorize, be it by size, vertical, geography, demographics or personas,” he added.
 
Despite the diversity, when crafting solution bundles to tackle the needs of SMBs, Harmon pointed to a recent worldwide SMB survey conducted by Forrester Research.
 
The top three business concerns expressed by SMBs surveyed were the need to improve product and service capabilities (81%); increasing expectations from customers (69%); and increasing pressure from competition (69%).
 
Top technology priorities for SMBs were increasing their use of business intelligence (59%) along with significantly upgrading their disaster recovery and business continuity capabilities (59%).
 
Harmon (pic) also highlighted significant business opportunities for hosters and service providers in the area of software as a service (SaaS), identified as a dominant choice among SMBs.
 
“SMBs lack the resources to do custom development on top of IaaS or PaaS (infrastructure or platform as a service) type resources. However, SMBs do frequently attach infrastructure as a service to their SaaS purchases, which opens up opportunities in terms of packaging and offering services,” he said.
 
A rethink of how service providers position their services, with less emphasis on cost savings, is also worthwhile, Harmon said, as one of the main drivers for SMBs to move to the cloud is that it allows them to focus more resources on their main business priorities.
 
“SMBs put great store in their ability to deliver a great product and experience to their customers, and providers should start talking about how they can help these businesses achieve that,” he said.
 
A new breed of SMBs
 
In his presentation, Harmon also identified a new breed of SMBs, which he termed “SMB Phoenixes.”
 
These are businesses founded in the wake of the recessionary period back in 2008 by people who had lost their jobs at large enterprises, and decided to go start their own business.
 
“This is an important demographic for service providers as founders of these companies come from enterprise backgrounds and are bringing that experience into their own businesses,” he said.
 
These SMBs operate more like larger enterprises and are characterized by a more aggressive approach in technology adoption, informed by past experiences and the witnessed advantages in such environments.
 
According to Harmon, this breed of SMBs are three times more likely to double in employee size and two times more likely to grow in revenue generation in the next two years compared with traditional SMBs.
 
These SMBs also invest in a broader technology solution portfolio – from content management systems, collaboration software, security and media – and on average spend 20% to 25% more on technology as a whole.
 
In addition, these outfits were more dependent on internal staff or founders in making technology decisions, whereas in the past and with more traditional SMBs, there was a bigger reliance on third-party vendor input in such decisions.
 
Harmon ended his presentation with a breakdown of twelve pointers for service providers in addressing the SMB market:
 
The 12 Laws for Cracking the SMB Market
 
The Product Laws
1) Design products for simpler assimilation (delivery, adoption, administration)
2) Deliver mobile form factor apps (mobile trumps SaaS)
3) Surround products with pre-packaged services

The Marketing Laws
4) Build an SMB-specific brand
5) Appeal to SMBs appetite to serve their customers
6) Tie in to SMB’s Word-of-Mouth networks
7) Publish SMB-specific customer case studies
8) Invest in Radio & Print
9) Educate, educate, educate

The Business Model Laws
10) Develop an all-encompassing channel map
11) Craft a freemium pricing model
12) Build a managed services business
 
Gabey Goh reports from the Parallels Summit 2013 taking place in Las Vegas, Nevada from Feb 4 to 7, at the company’s invitation.

More from the Parallels Summit 2013:
 
Plenty of growth for all in SMB cloud: Parallels

Parallels innovations to ease SMB cloud transition

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