ChannelTrends: Small Business Rebound Strengthens IT Growth

The stock market and consumer confidence indexes continue to show signs of anxiety, with some economists suggesting it may take a couple more years before we get back on track. While that prediction may be too pessimistic, conservative spending habits will likely continue to be the norm for most businesses.



Despite the doom and gloom, one key business sector is on the rise; SMB. That segment is also a major consumer of VAR solutions and services, so this should be welcome news for the IT channel which could benefit from increased support needs for new hires. Channel Insider underscored one indicator of SMB growth this week with an online post concerning the hiring intentions of the segment, including details of a recently completed small business survey. According to the article, while May overall employment figures did not meet expectations, 57% of SMB intend to add new employees in 2011. That data comes from the Manta SMB Nation Survey, with the majority of responding companies having less than 10 employees.

 

SMB is Channel Friendly

Small business continues to thrive for a number of reasons. As unemployment remains high, a number of individuals with entrepreneurial spirit and ideas to support them decide to strike out on their own. There are risks in any endeavor—including taking a new job and threat of future lay-offs—so why not start a business and work for yourself if you have the ideas and ability to do it. These new operations may not represent a huge revenue opportunity for solution providers, but those with a properly leveraged managed service and cloud computing practice may find them to be cost-effective clients.

Another reason small businesses fare better than corporations is their ability to adapt to economic and competitive challenges much quicker. The decision making process at an enterprise company typically takes a lot longer than at a sole proprietorship; think of it as trying to turn and ocean liner compared to a canoe. With most SMB organizations lacking an IT department (or resource) of their own, it presents a great opportunity for solution providers to be the change agent for business operations. Rather than just selling and supporting a new workstation for every additional employee your clients hire, show them how virtualization and other innovative technologies will help them get the work done cost-effectively. For example, could a UC (unified communications) system integrated with a CRM (customer relationship management) solution enable them to work more efficiently, at a lower cost than adding another employee?

 

Small Business Spending is Also on the Rise

Another health sign from the SMB segment is an indicated 4% increase in their IT spending during 2010, according to IDC. Small business has typically outpaced technology spending compared to larger companies, but the economic slowdown we experienced over the past couple years has closed that gap before the latest survey. The IDC report also notes “SMBs are responding to today's new economic realities in distinct ways and, in many cases, adapting differently than large enterprise.” The reality is that the small businesses that survived the downturn may be smarter and leaner than those that didn’t endure, with a management team more interested in their operational efficiencies than the value of their stock. Solution providers that are accustomed to selling to SMB clients understand that point and have learned to capitalize on it.

With most SMB hiring not occurring in the IT department, these organizations require more solution options and support than ever before; a “perfect storm for MSPs and cloud providers. Most of these organizations can also shift technologies faster, with a minimal staff to convert and train on the latest offerings. Suggesting an SMB client upgrade to a cloud-based CRM or backup and recovery solution is typically an easier discussion that with an enterprise customer locked into significant infrastructure costs. My point is not that small businesses are flush with cash (most are not!), but with fewer decision makers in the process, a VAR or MSP has more influence over their clients’ IT investment decisions than they do at larger organizations. If you provide a good business technology proposition, there is a higher likelihood of a sale—and a healthier long term business relationship for all involved.

The Drivers in SMB are Numerous

What does a successful SMB VAR have in the product/service portfolio of offerings? Mobility, virtualization, and cloud computing seem to be the most popular specialties these days. With the rise of tablets, smart phones, and related applications (or apps) for business use, smaller organizations need an expert advisor to deploy and leverage them properly. As pointed out by Elaine Hom in her ChannelPro article this week, “focusing on how your customers will actually use the tablets and for what purposes will help you package the tablets with other services and value-adds. Being aware of the latest and greatest mobile business applications will be incredibly useful in this scenario.”



With virtualization and cloud solutions in place, your SMB clients can not only save money through reduced infrastructure and energy costs, but it enables their employees to access their systems from anywhere at any time. Is your ability to provide those services a differentiator for your customers?



Brian Sherman is founder of Tech Success Communications, specializing in editorial content and consulting for the IT channel. His previous roles include chief editor at Business Solutions magazine and industry alliances director with Autotask. Contact Brian at [email protected].