Unravelling the SMB SaaS opportunity
Dale Vile says he has identified the sweet spots for resellers
SMBs and cloud are a match made in heaven. That's the theory, at least, based on the idea that smaller businesses have less in the way of cash and skilled resources for IT, while the cloud reduces up-front costs and the operations burden.
A report by us takes a closer look at how cloud, SaaS in particular, is translating to real activity in the SMB space.
This is based on a Europe-wide study of some 500 organisations with 10-250 employees, in a variety of industry sectors.
When we started analysing the research data, we noticed many SMBs are not making the most of IT, whereas for large enterprises this is often business as usual.
While smaller businesses usually do an OK job of covering back office and core business system requirements, most are overlooking or failing to act on opportunities associated with what we might call 'business performance enhancing' technology.
Gaps are evident in areas such as web-facing customer applications, CRM, collaboration, mobile or flexible working and business intelligence. This stuff enhances business effectiveness and differentiation as well as efficiency.
What has this got to do with SaaS? One out of five participants in our study that have adopted SaaS focus intensely on these performance-enhancing offerings.
Other areas where SMBs are often weak include operational management, data protection and security, and we see SaaS activity in these too.
It's obvious to us that SaaS is primarily being used by SMBs to raise their game. They are deploying business-enhancing and risk management technologies that used to be regarded as too complex, costly or plain overkill to implement on the premises.
A couple of important 'so what?' points follow for resellers.
First, a lot of the rhetoric about SaaS being primarily about saving money is missing the point.
It's not that cost – particularly up-front capital investment – is not important, it's that SMBs are generally not migrating existing systems to SaaS, with the possible exception of email.
Therefore a conversation about direct savings is often irrelevant. The real cost-related selling point of SaaS is that it reduces the funds required for new, previously cost-prohibitive items.
The second point is really looking at the same principle from the reseller's perspective. If SMBs are taking SaaS on board to implement offerings they would not buy from you in traditional hardware and software form, then there is an incremental business opportunity there.
Incorporate the right mix of SaaS options into your portfolio, and new sales opportunities will appear.
OK, that's easy to say and harder to put into practice, and we would not want to underestimate the investment and effort required for a reseller to expand into SaaS.
However, our data suggests it's worth considering the opportunity rather than getting hung up on fears about lack of demand or cannibalisation of your existing business.
SaaS users at the moment are still in the minority in the SMB space, with most of the activity in the 100-250 employee range, and the SaaS awareness and acceptance level is actually even lower.
A little more education is often required in the sales cycle. However, if you put the proposition clearly, you should be pushing against an open door more often than not.
If you do get into formulating SaaS propositions, messaging and pitches for use in the marketing and sales cycle, our research provides some pointers based on the views of early adopters.
There's a lot more in the study that could help with targeting, planning, messaging and objection handling (for example, on the old chestnut of security) so, if you are looking at developing your SaaS activities, we encourage you to download the report.
Dale Vile is an analyst at Freeform Dynamics