Inside the SMB Mind


VARBusiness research shows what makes them tick and what they need from you


You're not going to rebuild confidence in technology spending overnight,but you will be able to open some customers' pocketbooks, some of the time.

How do you do that? First, convince them the demand for your wares is large and growing. One key to landing new customers is to focus your marketing efforts on those prospects most likely to buy,those who have seen the bottom of this downdraft market and are positioned to benefit from a tech-upgrade cycle. Many of those are small to midsize businesses.

There are signs the small to midsize business sector is on the mend. According to VARBusiness' 2002 exclusive research on 400 small to midsize end-user organizations, the good news is that, despite changes in the broader economy, half of the SMBs polled say they will not change their technology-spending intentions during the next 12 months. Approximately two in five (39 percent) actually expect to increase their IT investments,by 30 percent on average. Further, more than half (56 percent) are increasingly relying on technology as a way to differentiate their businesses. As companies seek technology solutions to reduce expenses, more than one in four respondents have already accelerated small tech projects (28 percent) or projects with a defined six-month ROI (27 percent). There are also hints the technology hype of years past may be returning. According to VARBusiness' research, a vast majority of SMBs (82 percent) currently view technology as a productivity booster, and more than two-thirds (68 percent) agree their company's future "completely" relies on it.

However, there's bad news, too: One in 10 executives expects to decrease their technology budget during the next 12 months,by 27 percent on average,according to our research. The slowed economy has forced a majority of SMBs (57 percent) to place tech projects on hold, and most (84 percent) are leveraging prior tech investments until financial conditions improve. Moreover, small companies (those with up to 99 employees) are significantly more likely than their midsize counterparts (those with 100 to 999 employees) to cancel projects with no ROI,43 percent vs. 32 percent, respectively. SMBs are also less apt to migrate their desktops to Microsoft's XP operating system than end users at-large (71 percent compared with 85 percent, respectively), according to our research.

Technology Priorities

Last year, PC shipments fell for only the second time in history, due in part to corporations' postponing replacement purchases. This year, as PC prices continue to come down, the depressed market is expected to slowly rebound, according to industry forecasters at Gartner and IDC. That complements the latest VARBusiness research: Replacing aging or broken equipment is the No. 1 trigger for making a technology purchase today, according to 80 percent of the survey respondents. What's more, during the past 12 months, the top spending priority for SMBs was computer hardware (62 percent),including PCs and servers, followed by security and VPN platforms (58 percent), and Internet or Web-related hardware, software or services (57 percent).

A majority of SMB customers (52 percent) rank connecting employees to the Internet as their top technology priority this year, followed by automating customer interactions (39 percent) and adopting wireless capabilities (26 percent). The technology sectors likely to enjoy the most growth in 2002, according to our respondents, are security and VPN platforms (56 percent); Internet or Web-related hardware, software or services (52 percent); and computer hardware, including PCs and servers (51 percent). Additionally, spending in 2002 has grown rapidly for IT backup and recovery. In fact, disaster-recovery applications currently rank among the top 10 products running on the Internet, cited by one in four respondents (24 percent). A majority of the SMBs we polled (54 percent) have a business continuity plan in place today, as well.

Outsourcing Plans

Understanding that IT providers can help to accelerate cost reductions and cope with the increasing demand for businesses to improve the speed and quality of IT services, nearly two in five SMBs (38 percent) will likely make a technology expenditure via a VAR, IT supplier or distributor in the next 12 months.

Customers entering partnerships often focus on getting more than just cost savings; agreements with business providers often enable access to the latest information, best practices, market intelligence and industry expertise. Demonstrating a good working knowledge of the customers' business or industry (62 percent) is indeed the top benefit solutions providers can offer to help gain approval for IT expenditures, according to our research. Results also indicate that when SMBs select an outside IT provider, their No. 1 criteria is the provider's technical expertise (43 percent), followed by cost (22 percent) and the provider's strategic business expertise (9 percent). SMBs are likely to obtain information about their potential providers from an array of sources. More than four in five cite the Internet (85 percent), word-of-mouth (82 percent) and trade-publication articles (81 percent).

Take some time to learn what your SMB customers really want,and how their needs might be changing. The pages that follow will help by giving you the tools you'll need to identify customer needs, define strategies, obtain solutions and determine value. So read on; the benefits could be huge. Moreover, doing so could help you stay in business.