The SMB hype cycle

'Here we go again'

globalisation

Every few years, we hear a surge in the talk about "the SMB opportunity" and what IT vendors can do to exploit it. Yet smaller organisations have been using IT for a long time now, and there is a well established community of suppliers that has been servicing their needs for many years.

So what's behind all this recent attention?

Largely it is to do with traditionally enterprise-focused IT vendors periodically waking up and thinking "there's a whole new untapped market out there that we should be paying more attention to". Of course, by "untapped" they generally mean "by them", rather than in the absolute sense.

Meanwhile, the rest of us look on, thinking "here we go again", knowing that it will all blow over as most of the pretenders discover that working the small and medium-sized business (SMB) space is too much of a long-term play to fit with the cut and thrust of immediate quarterly revenue targets and aggressive market creation initiatives. The stalwarts are then left to get on with it as usual and the cycle starts over again a few years later.

To understand what's behind this, it is worth taking time to consider some motives and practicalities.

Let's start with the IT vendors themselves, i.e. software authors and equipment manufacturers. The core business of these players is to make money from their R&D investment in new and enhanced technologies. Unless they drive new offerings out into the market frequently enough, they go out of business. Even so-called "cash cow" products offer limited protection from this market reality, as they must be refreshed from time to time to avoid slipping into the land of legacy.

In the enterprise market, provided we are not in a downturn, the constant need to drive out new technology offerings is manageable. With the potential opportunity to provide solutions for large numbers of users within corporate accounts, suppliers can afford to train up specialist teams then spend time in the sales cycle educating, evangelising and hand holding.

From the buyer perspective, things tend to work pretty well too. It is normal for larger organisations with big IT departments and an extensive range of skills to allocate resource to exploring new technologies. This allows them to make an early assessment of the value and risk of significant proposed upgrades to existing systems, as well as to check out opportunities relating to novel solutions that are just emerging. Lab tests, benchmarks, proof of concept studies and experimental pilots are the vehicles used to achieve this.

The problem is that none of this works very well in the SMB space. IT investment activity among smaller companies is almost completely driven by the "need/solution" mindset - i.e. the customer is generally looking for safe, hassle-free and cost-effective offerings that address immediate problems and opportunities. There are exceptions, but typically smaller businesses don't have the time, resources, breadth of skills or inclination to get involved in the same speculative or exploratory activities as their larger cousins.

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