News Stay informed about the latest enterprise technology news and product updates.

Focus on the "M" in SMB market

At a quick glance, the flat growth prediction by Techaisle LLC for IT spending in the small and medium-size business (SMB) market in 2016 may seem to contradict the often-heard flaunting of this market segment as rich with opportunity for channel firms. B-r-e-a-t-h-e — it still is. You just have to know where to look.

In a recent blog post, Techaisle CEO and analyst Anurag Agrawal suggested that U.S. SMB IT spending in 2016 would remain flat at $188 billion compared to 2015.

Was he surprised? Yes and No.

According to Agrawal, he expects to see a decline of about 2% in IT spending in small businesses (50 and fewer employees) primarily due to the fact that they simply don’t have more money to invest on IT.

“They’re also saying that they’ve reached a limit on where they can spend money,” he said, noting that this finding overall was a bit surprising to him.

The industry analyst pointed out that this segment of the SMB market is spending money on IT — cloud and managed services for example — but they’re not buying devices such as PCs or tablets and they’re not spending money on consultant services to help them ramp up their IT solutions.

“Buying bigger ticket items such as new PCs or tablets aren’t really what’s on the wish list for these small companies — there’s no compelling reason for them to replace these devices,” said Agrawal. He did, however, note that Windows 10 will accelerate the device refresh cycle, but these small firms aren’t looking to replace ten PCs at a time.

Where these companies are more likely to spend their IT dollars is where it will make the most impact. And, that’s not necessarily on cloud offerings. “Many small firms have already reached their limit on cloud apps — they’re already using CRM, ERP, collaboration, analytics,” said Agrawal.

The partner opportunity here goes beyond provisioning applications and instead finding a way to integrate the data from all of these applications. “It’s not enough for partners to focus only on recurring revenue. They have to figure out how to fit into their customer’s business success,” Agrawal said.

From here the news gets better in the SMB market.

Midsize businesses (50-249 employees) are all about IT spending. This segment of the SMB market will increase IT spending by 6% and investments will continue across all technology segments: It’s not just about cloud or mobility, but also analytics, Internet of Things (IoT), managed services, virtualization and security, according to Techaisle.

“Beyond the small businesses there’s tremendous expansion happening in the midmarket and the real sweet spot is businesses with 100 to 249 employees,” said Agrawal. This midmarket segment views IT as a way to gain competitive advantage, increase productivity, and achieve business goals, he added.

Small businesses spent $137 billion in 2015 and Techaisle projects 2016 spending of about $134 billion. Medium-size businesses spent $51 billion in 2015 and the analyst firm expects spending in 2016 to reach $54 billion. According to the analyst firm, there are about 5 million small businesses in the U.S. and about 100,000 midmarket firms.

While not addressed in the report, larger midmarket firms (500 to 999 employees) are expected to have the highest spending increases, according to Agrawal. “The increase is not because IT is spending more but rather it’s because … the line-of-business executive is spending on cloud and analytics and using services to drive business growth,” he said.

For a few years now, the midmarket has been the battleground for leading IT vendors. Partners who focus on the midmarket not only have an opportunity to grow their business with their midmarket customers, but they also are more likely to get on the radar of their IT vendor partners.

Cloud Computing
Data Management
Business Analytics