The market for small business IT services is large, extremely varied and challenging to address.
Those are among the takeaways from CompTIA’s research in the small and medium-sized business (SMB) market, which reveals patterns in small business IT investment and business priorities. CompTIA also spent some time on market segmentation. Tim Herbert, senior vice president of research and market intelligence at CompTIA, described the sector as “incredibly expansive,” ranging from one- and two-person shops to 500-employee companies. He discussed CompTIA’s take on small business this week at the organization’s annual member meeting in Chicago.
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Breaking down the market
CompTIA breaks down the SMB market into three subcategories, the largest of which is “budget conscious” companies that represent 78% of the estimated nine million U.S. small businesses. Herbert said much of what that segment spends on IT boils down to break/fix services and other items such as web design.
At the other end of the SMB spectrum are companies CompTIA refers to as “competitive targets,” firms that employ 100 to 500 employees. Those companies represent 2% of the SMB market. Channel partners looking to sell small business IT services in this segment will find companies with a tech budget to spend and a “pretty sophisticated internal IT capacity,” Herbert noted.
CompTIA identified the “sweet spot” of the SMB market to be companies with 10 to 99 employees. Those companies represent a 20% slice of the overall market. But it’s a big slice in terms of sheer numbers: 1.8 million businesses fit the sweet spot description.
Presumably, the sweet spot companies have money to spend on IT, but smaller or non-existent IT departments – factors that make this group more dependent on external providers of small business IT services.
So what exactly are small businesses buying? A CompTIA online survey of 600 U.S. SMB executives and professionals identifies desktop and laptop computers, productivity and office applications, and networking equipment as the top three areas.
As for wallet share, resellers and technology partners are capturing 22% of the SMB spend, with local retailers (22%), online-focused retailers (25%) and direct-sales vendors (30%) soaking up the rest of the spending.
Business priorities inform IT spending. And when it comes to an SMB’s top business priorities, many channel partners will see themselves in CompTIA’s research findings. The top three business priorities for SMBs in the year ahead are renewing/maintaining key customer accounts, identifying new customers/new markets, and implementing new systems or work processes to enhance efficiencies, according to CompTIA.
A mirror image of channel priorities
That’s practically a mirror image of a channel partner’s to-do list: They need to keep customers happy and in the fold, while seeking out emerging market opportunities, and deploying automation to lower the cost of service delivery.
The ability to identify with customer concerns could help channel partners deal with the IT obstacles small businesses must confront. CompTIA’s research indicated that many firms want to boost technology investment but 40% of SMBs admit their “investment level is lower than it should be.” CompTIA also pointed out that SMBs want to engage in digital transformation, but “lack the necessary vision and strategy” to do so.
Against that backdrop, channel companies have an opportunity to provide technology strategy advice in a virtual CIO capacity. And if partners can demonstrate how intelligent use of IT made them more efficient, or how a security and compliance regimen reduced their risk exposure, they stand a better chance of moving the needle on small business IT services spending.