Channel needs to walk fine line on innovation to win today’s SMB business

Today’s SMBs want to see evidence of innovation from their trusted advisors, but at the same time, solution providers should avoid falling into a false either-or trap – either you get on the cutting edge and change your business model, or you will be out of business soon.

Seth Robinson CompTIA 300

Seth Robinson, CompTIA’s senior director, technology analysis

A new study by IT trade association CompTIA has found that SMB customers today expect that their technology providers will offer more innovative approaches to managing their business, and are willing to switch IT firms if that is not the case.

The study, ‘Enabling SMBs with Technology,’ is based on an online survey of 500 SMB executives and professionals conducted in the United States in December 2014. While the data is American, Seth Robinson, CompTIA’s senior director, technology analysis, said the same conclusions would apply to Canada.

A key takeaway from the report is that SMB customers want their solution providers to use technology to help them solve business problems.

“The biggest shift we are seeing is SMBs wanting to use technology in a business way to push their business forward, as opposed to the more vanilla operations aspect of technology,” Robinson said. “That’s a trend in all businesses today, not just SMBs, but it’s important that SMBs are showing it as well, even though they are still more concerned with cost issues than larger businesses.”

Robinson said the study identifies several areas where technology firms can leverage current routine activities into more strategic engagements, to move beyond simply selling an individual product or service, by offering greater value add-in which management is much more systematic.

“You need to think about what the next step would be on a product or service as opposed to a completely new product or service you would add,” Robinson said. “For example, if you are doing web design for a client, you need to consider what it would take to translate that into a mobile presence. That would be much more relevant to the customer, as opposed to proposing going to a mobile presence from scratch.”

In the same vein, solution providers who provide basic cloud computing services like data centre hosting should be considering how to adapt this into a multi-cloud architecture that customers today are interested in.

The study found over 70 per cent of SMBs used an outside IT firm at least occasionally over the past 12 months. The typical engagement involved traditional and tactical IT activities like repair, troubleshooting, installation and integration. 46 per cent said that they look to these outside IT firms when they need to gather expertise and new options. Innovation was very important to them in choosing these firms.

“Some SMBs are well aware of what’s out there in terms of innovation, particularly those that are technology companies themselves and who have the time and interest to research this,” Robinson said. “The next tier down would be ones who don’t necessarily know the technology, but who understand there are options out there. They know where they want to go, but don’t know how to make that happen.”

A big issue for the solution providers who work with these smaller companies is that SMB IT budgets are much more limited. Two-thirds of SMBs spend less than $100,000 annually on technology and 29 per cent spend $10,000 or less. However, nearly half said they would be willing to increase their budget if presented with an innovative solution that could enable new business processes, a figure that Robinson thinks is valid.

“We have found in the past, that while statements about hiring plans tend to be overly optimistic, budget numbers like this that aren’t hiring-related do tend to ring true,” he said.

“Still, there aren’t large reserves of cash to be spent by SMBs on technology investment,” Robinson added. “That’s the challenge here – finding the financial model that is going to work to turn their business of innovation into reality.”

Robinson also said that while the data indicate that solution providers do need to propose innovative solutions to customers to keep their trust, and business, they don’t need to completely remake their own business models to do so.

“I believe the industry has been guilty of telling resellers that they either change their business models, or they are In trouble,” he said. “We may have been overstating some things, like the notion that a business is much more valuable if it has recurring revenue. Certainly the best opportunity for growth and expansion today is in managed services, but that doesn’t mean there can’t be a healthy business in break-fix or reselling. Not every reseller needs to become a MSP – a driver of innovation. There is a demand for firms with more basic services. Customers just want them to offer some innovation as well. It’s like an IT department. Their main job is to keep things running, but the business generally wants them to do some new things as well.

“The greatest value today in the channel will be in bringing together services and providing a single point of contact on a solution for an end user,” Robinson stressed. “That’s sort of turned into ‘everyone needs to get there,’ referring to the more advanced business models. But everyone does not need to get there. There’s plenty of room to explore a wide variety of models.”

CompTIA has run similar studies before in the SMB space, but Robinson said most of the specific questions were different this time, so no real apples to apples comparisons to earlier studies were possible.