SMB 2.0: using technology strategically, not tactically

There are two types of small businesses in Canada – those that spend on IT in a reactionary way to meet operational needs, and those that plan out strategically what business solutions they’ll accomplish with IT, according to IDC Canada.

The latter group of businesses can be described as “SMB 2.0,” says Paul Edwards, director of SMB and channels research at IDC. The analyst firm polled 305 businesses in July and August, asking about plans for IT spending and attitudes towards cloud computing. Respondents were senior managers that were involved with information systems roles.

“There’s a positive change in the small business market where many are taking on attitudes that we normally see in larger companies,” Edwards says. “The focus on addressing a business need will result in a higher spend on IT services and software.”

  • Definition: IDC says cloud computing refers to consumer and business products, services and solutions delivered and consumed in real-time over the Internet.

Canadian small businesses (less than 100 employees) spend 63 per cent of their IT budgets on hardware, IDC’s report shows. Another 21 per cent is spent on IT services and 16 per cent on software.

That is nearly the opposite of how larger firms (with more than 500 employees) spend their IT budgets. They spend 61 per cent on IT services, 18 per cent on hardware, and 21 per cent on software.

“Technology has a more embedded, strategic place in their business,” he says. But this is changing for the group of small firms he classified as SMB 2.0.

Voices.com might fit into that category. The London, Ont.-based firm allows clients who need voice talent to search through a large database in order to find the right fit. Using the Web site, clients can find talent, hire them, send the voice work to be read, and receive the finished product. To get all this done, Voices.com uses cloud computing services.

The site uses Amazon’s Simple Storage Service (S3) platform to host its database that contains about 20 terrabytes of audio files. It also links those audio files to 150,000 customer records in a separate, hosted database with Rackspace, explains David Ciccarelli at Voices.com. Switching to a cloud-hosted database resulted in big cost savings.

“We used to limit the number of audio files people could upload to our site with a subscription model, but it got to the point that it was cost-prohibitive,” Ciccarelli says. “It was a limiting factor on our business’ ability to grow.”

Voices.com also uses Salesforce.com, a cloud-based service, as its customer relationship management solution. It plans to replace instant messaging at the company with Salesforce.com’s Chatter, a social networking platform for business.

The qualities associated with SMB 2.0 firms by IDC are proactive IT spending plans, seek solutions-based services or software, and have an executive-level perspective on adopting IT. These are SMBs shifting away from a tactical view of IT buying to a strategic one, Edwards says.

“Cloud computing is really bringing down the barriers,” he says. “It represents an opportunity as SMBs seize it to reach beyond their size limitations.”

When asked what business needs they were looking to address with IT purchases, 32 per cent of small businesses said customer service. Another 21 per cent named project management, and 21 per cent also mentioned sales automation.

“Canadian businesses will help drive the cloud market,” Edwards says. “More specifically than this, they want to convert technology to impact existing business imperatives.”

But Edwards doesn’t see cloud computing as a panacea. There are some concerns stopping SMBs from adopting cloud services, and privacy and security are chief among them.

For Voices.com, customer support is the sore point in its cloud experience thus far with Amazon.

“I don’t know the support options for Amazon, and wouldn’t even know where to turn to get it,” Ciccarelli says. “I don’t see any toll-free number or any live chat options.”

Amazon does offer Web support and phone support options to premium customers. Less premium customers must rely on a collection of forums and FAQs on the Web site.

If cloud vendors hope to overcome challenges to adoption, they must do a better job at educating the market, Edwards says. There is a lack of expertise around cloud computing at businesses.

“The onus is on the vendor to prove these key points in order to drive adoption,” he says. “Vendors should lead with the factors that businesses value in a cloud provider.”

The IDC survey respondents were divided evenly across business segments – one-third small businesses, one-third medium-sized businesses (100 to 499 employees) and one-third large businesses.

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