Aug 9, 09 - SMB interest in services doubles

eChannelLine Daily News
9-August-2009

SMB interest in services doubles

by Steve Wexler

It appears that the combination of the value proposition for managed services and the economic environment are driving explosive growth in this market, according to new research from AMI-Partners. In an 11-country survey, including the U.S. and Canada, there''s been an almost 100-per cent increase in interest in managed services and software-as-a-service over the last three months. According to the data, nearly 60 per cent of SMBs are now interested in managed services, and nearly 40 per cent in SaaS.
AMI has been tracking the SMB MSP market for several quarters now, and the latest data indicates not only explosive growth in interest, but a substantial change in what SMBs are interested in, said AMI VP Chad Thompson. "What we are seeing in the SMB space right now is anything but ''business as usual. SMBs are re-evaluating the way their businesses run on a number of fronts, including where and how they spend money, how they drive revenues and how IT supports these goals."

As the economy started to collapse, SMBs seemed to be "shell-shocked" and were taking a "shotgun" approach to address two needs, cut costs, and increase revenues. Thompson said they''re now seeing the next phase. The new study found most SMBs feel the economy is starting to stabilize, but "just because SMBs believe it may not be getting worse as fast as it has in the past and may have hit the bottom, we don''t see the SMBs easing up on what they''re doing."

While it''s not consistent across all 11 geographies, what both Canadian and the U.S. SMBs are doing is getting back to the basics. "They want to get more employees to be more productive." They are exploring IT products and services that can directly and immediately help ease pain points like restricted cash flow and limited access to credit. "Solutions like SaaS and managed services offer flexible payment options and usage-based models that are very attractive to SMBs right now, as they struggle to overcome the credit crunch and very tight IT budgets," added Thompson. SMBs are looking at line item budget costs like telecom, office supplies and travel costs and ways to "dial them back."

The survey found two more significant changes. The purchase process has become more formalized and decision making cycles have been significantly extended compared to just three months ago, said Thompson. The decision making process has also changed, with the business owners and presidents taking a greater role. The business decision makers are more involved in why, when and where IT purchases are made. He said BDMs are now involved in the first two stages of the purchase process: identifying the business needs driving the IT purchase; and deciding on the specific brand of the IT product and/or service.

In a fourth quarter 2008 U.S. study, approximately 31% of SMBs stated that their BDMs were involved in "brand selection" while making an IT purchase. The most recent study found that this number jumped to 83%. "Today BDMs are the reason an IT purchase is made. They are solely focused on cutting costs and increasing revenues. If an IT purchase doesn''t speak directly to one of those core needs the purchase will simply not happen," said Thompson.

Another benefit of the change in decision making is that while SMB IT budgets tend to be small, addressing business pain points like travel and printing can free up other monies if direct and immediate savings can be achieved, he added.

However, while the survey shows the stars have aligned for SMBs and managed services, creating a window of opportunity, MSPs need to jump on that opportunity now, said Thompson. The quarterly surveys look back at the previous three months and ahead to the next three months, dividing SMBs into several groups, led by the very small but important ''very likely'' to buy and ''somewhat likely'' to buy.

"The ''very likely'' convert into sales", he said, while the ''somewhat likely'' tend to be "fence sitters" with a very small percentage converting to sales requiring a clear and compelling reason to make the purchase. The fence sitters, need a sense of urgency to drive that pent-up demand, said Thompson.

Another critical consideration is that while he thinks the managed services and SaaS markets are here to stay, this spike won''t last. "We don''t think this opportunity is going to go away. We also think the spike is not going to continue forever, so they need to capitalize on the interest and willingness to explore this now."

This spike in interest and buying intentions varies across product categories, said Thompson. Specific IT categories covered in the survey include desktops, notebooks, servers, printers and software.

Desktop PCs are the poster child for this, with a huge spike in interest in them over notebooks. He expects most ''very likely'' and more than a few ''somewhat likely'' to convert intent to purchase. Other categories are not as fortunate. "When looking at storage and security, even some of the ''very likely'' won''t convert."

AMI''s quarterly SMB tracking study--Q Pulse--is conducted in eleven countries: U.S., Canada, Mexico, Brazil, France, UK, Germany, China, India, Korea, and Australia. The study surveys SMB business decision makers from four perspectives: 1) Mindset, economic impact and the actions that are being taken to manage their businesses; 2) IT purchase plans including spending, brands and planning; 3) Buying behaviors including routes to market and decision making, and 4) Insights for fine-tuning GtM plans including value propositions, messaging, marketing mix and more.