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SMBs embrace business management

Read up on the Small Business Technology Institute's survey findings on SMB adoption and use of business management applications.

IT channel takeaway: A recent Small Business Technology Institute survey found three key drivers for small businesses to use business management applications. Leverage those drivers when discussing solutions with SMBs.

With Patrick Cook, chief technology officer and a principal investigator for the Market Intelligence practice at the Small Business Technology Institute, a non-profit organization dedicated to helping small businesses better understand and use information technology through complimentary consulting and low-cost training for small businesses, and market intelligence services for technology providers.

Question: What are the top needs of small businesses where business management applications are concerned?

Cook: The Small Business Technology Institute recently surveyed more than 1,000 U.S. small businesses to gauge their attitudes about benefits and uses of integrated business management applications. According to our research, there are three key drivers for small businesses using business management applications. The first priority is to gain operational efficiency by eliminating duplicated data entry and multiple point information gathering. Next is to provide easier access to all information on customers and higher quality information. Finally, small businesses need better process and financial controls.

Overwhelmingly, our survey reveals that small businesses implement integrated business management applications to better serve their customer base by leveraging comprehensive CRM information, and also to take advantage of more sophisticated financial data both for operational and planning purposes. If there is any difference from the needs of larger businesses, it is that tactical advantages of deploying integrated business management applications still predominate with SMBs; strategic uses of the technology are usually secondary considerations when making the purchase.

Question: Why are so few SMBs using integrated business applications such as ERP (7 percent, according to SBTI's study)?

Cook: Our study reinforced several key findings from earlier focus groups: Small business network infrastructures are now sophisticated enough to support client/server business management applications; small business owners recognize the benefits and value to their businesses of using integrated business management applications; and demand is growing rapidly for technology tools to help small businesses acquire, store and analyze data from all their functions.

However, there are several reasons why few small businesses are using integrated business management applications. First, vendors do not provide solutions specifically architected for the needs of small businesses, at the appropriate price points. SBTI's survey shows that current business management applications are perceived to meet the needs of less than 40 percent of respondents. Second, applications that are available are not marketed in the right way; there is too little explanation of the business benefit of adopting such solutions. Last, there is too little information on true ROI or the real cost of ownership of such systems, leading to mistrust of vendors and associated VARs.

Question: Do these challenges differ somewhat from those faced by larger businesses?

Cook: Key challenges of integrating business applications for small businesses include: lack of appropriate products; lack of process for product evaluation and selection; lack of formal project planning experience and methodologies, meaning often the small business is locked into a vendor or VAR methodology; lack of formal budget allocation and associated financial controls; no ability to measure true ROI and justify business case; and lack of internal IT resources, both to assist in process and provide an independent overview on vendor activity. None of these are particular issues for larger businesses, which typically have robust financial procedures in place, formal IT budget allocation, internal IT staff and well-developed project office disciplines.

Editor's note: For more information on SBTI's small business market research, or for a free report on the future of business management applications in the small business market, visit SBTI's Web site. SBTI also publishes a free quarterly magazine with technology tips and advice, available by registering at SBTI's subscribtion page.

This 3 Questions originally appeared in a weekly report from IT Business Edge.

This was last published in September 2006

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