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SMB customer IT spend: Barriers and how to overcome them

Channel companies may need to overcome technical and financial obstacles among their SMB customers to encourage them to acquire and adopt new technology.

John Burgess knows a thing or two about how to win over clients in the small to midsize business market.

When approaching a potential customer, Burgess explains, the first thing he does is evaluate the company's IT environment before rushing in with a marketing message. "In the early stages of engaging a potential SMB customer we look for a minimum size in terms of the number of endpoints or some basic level of infrastructure, usually expressed in the number of servers," said Burgess, who is president at Mainstream Technologies Inc., a managed service provider in Little Rock, Ark.

Once the small business warms to Burgess' message and discussions begin, Burgess said the ability to move the conversation from considering the technology to convincing the potential customer to use Mainstream's solutions depends on the size and scope of the customer's business, and its vision for future growth. According to Burgess, there is a continuum due to the two orders of magnitude range between the smallest 'S' and the largest 'M'

"At the small end, the customer is usually fairly ad hoc and reactionary in how they manage and spend technology. The conversations there start with educating the customer about the superior value of consistent, proactive spend and effort contrasted with the reactive, probably inadequate mode within which they have been operating," Burgess said. "As you move up the continuum, the customers are more familiar and established with effective technology management and the conversations become more about quality of service, relevant expertise in the customer's stack and our ability to fill defined roles or identified gaps."

John Burgess, president, Mainstream TechnologiesJohn Burgess

Channel companies such as Mainstream, which generates 75% of its revenue from SMB customers, face many opportunities as well as obstacles in a market where SMB executives are often reluctant to buy more technology. The message from such customers is sometimes mixed. Two-thirds of the SMB executives in a recent CompTIA survey view technology as a primary factor in pursuing their business objectives, but 40% of the executives acknowledge their investment level in technology is lower than it should be. The CompTIA report, published in March, relied on interviews with 600 SMB executives.

Tim Herbert, vice president, research and market intelligence, CompTIATim Herbert

One challenge the CompTIA report cited is the SMBs' inability to map their business roadmaps to technology solutions. The report notes that when SMBs were asked about technology priorities in relation to their business objectives, SMBs rank improving customer experience as their top priority, which would involve activities such as implementing upgrades to websites or adding e-commerce or mobile commerce capabilities. Yet when asked to prioritize their technology wish list, SMBs said they gravitate toward emerging technologies and innovation.

"What came out in the research is that most SMBs acknowledge that they don't do a very good job with vision and strategy, meaning they recognize the importance of technology, they recognize that they are not where they want to be and they need that assistance in helping them to piece it together," said Tim Herbert, CompTIA's senior vice president of research and market intelligence.

Barriers to tech adoption

For many an SMB customer, the desire to buy new technology is determined by limited funds and the business pain points that affect their operations.

Anurag Agrawal, CEO and analyst, TechaisleAnurag Agrawal

"All technology investment is closely linked to the business pressures that SMBs are facing, whether it's improving productivity, customer satisfaction, or acquiring new customers, or managing the uncertainty of dealing with competitive pressure," said Anurag Agrawal, CEO and analyst at Techaisle LLC, a global SMB IT market research firm.

 Agrawal said IT solution providers should keep in mind that an SMB customer can be at any point along the IT adoption spectrum. The possibilities range from micro enterprises that tiptoe into adopting IT to medium-sized SMBs that adopt the latest and most cutting-edge technology. Agrawal noted that irrespective of where SMBs are on that journey, many IT providers have difficulty developing a long-term roadmap for SMB customers because many of them do not have the expertise in cutting-edge technology.

The SMB is not buying technology because it is something nice to have, but because technology helps to solve their business objectives.
Anurag AgrawalCEO and analyst, Techaisle

"Many channel partners themselves are not up to date on the latest technology and they are not able to marry the business pain point with the solution that they may have to offer and that starts to delay the technology adoption," Agrawal said. "How many partners can stand up and say I have expertise in the internet of things, or mobility, or artificial intelligence?"

Another key challenge for channel partners is the ability to calculate the return on investment (ROI) that comes from providing technology offerings. The CompTIA report noted that only 16% of SMB respondents rate the ROI they achieved with the help of technology as excellent while 40% said the results are just okay or disappointing.

"There are certainly many challenges in assessing ROI and, for certain types of technology solutions, you may not even be able to accurately calculate ROI over a short period of time. It may take many years to truly understand total cost of ownership verses what you are getting on the back end," Herbert said.

Charles Weaver, CEO, MSPAllianceCharles Weaver

Charles Weaver, CEO of the MSPAlliance, said the SMB view of an MSP's costs is misguided.

"When they say cost, cost means I don't value the service that you are trying to sell me, I don't believe I need it," Weaver said. "Wait until that SMB has a catastrophic event. That's the best educator on the true meaning of cost."

Strategies for encouraging SMB customer spending

Indeed, broaching the subject of security is one way to open the door to an IT engagement, Mainstream Technologies' Burgess said. 

"Increasing public awareness around cybercrime and information security provides a natural conversation starter," he said, adding that a security conversation allows IT solution providers to point to a set of services and products they provide.  

Weaver said SMBs are living in a new world where even the smallest business is a target for data theft.

"A decade ago, SMBs would have concluded that nobody wants their data -- that's no longer the case," Weaver said. "Today, if there is something sensitive on their IT infrastructure, then someone with ransomware, blackmail or intellectual property theft on their mind will take advantage of that opportunity."

Another strategy Burgess recommends for convincing SMBs to commit to adopting new technology is developing a three- to five-year IT infrastructure plan that divides IT projects into phases, while giving customers a clearer vision of what their IT business will look like in the future. 

Burgess also cited software as a service as a model that provides ways for SMBs to obtain new technologies. He noted cloud computing helps an SMB customer attain incremental operating expense spend as opposed to big capital expenditure outlays.

Whatever strategies IT solution providers use to increase their business among SMB customers, channel companies will need to take some fundamental steps. Those include taking the time to understand their customer's vertical, evaluating the customer's business problem and converting those findings into an offering that best fits the customer's environment, according to Agrawal.

"The SMB is not buying technology because it is something nice to have, but because technology helps to solve their business objectives," Agrawal said. "If the SMB wants to attract and retain customers they'll need technology to support a great marketing agent, a sales agent, they'll need analytics capabilities and a fantastic website. All of these translate into discreet but interconnected IT solutions that the SMB will invest in, but their IT partner has to figure out how they are going to take that and convert it into an opportunity so that they can generate revenue for themselves."

Next Steps

Find out how DRaaS is expanding into the SMB space

Learn how SMBs have become more dependent on channel partners

Read about how partners help SMBs manage cloud vendors

This was last published in April 2017

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