CDN SMB Report: Budgets are stable, but not their IT challenges

Published: June 29th, 2012

For Canadian solution providers targeting the small and medium-sized business (SMB) market, reports of stable IT budgets and general health within that market should seem promising. But as the trend toward mobile technology and the cloud continues, SMBs are still looking to do more with less.

“Our view is that the market’s doing well,” said James Alexander, senior vice-president with London, Ont.-based Info-Tech Research Group. “We see an increase in spending in the SMB marketplace, although perhaps not in the traditional infrastructure areas.”

According to IDC Canada research, IT spending by companies with fewer than 499 employees will reach nearly $10.5 billion in 2012. In 2013, that will increase to $10.9 billion, representing year over year growth of nearly five per cent.

Overall, the SMB market accounts for about 27 per cent of all IT business spending in Canada, according to IDC. As of April 2012, IDC also found that a greater proportion of medium-sized businesses, or those with between 100 and 499 employees, were planning to spend more in the next year compared to smaller or larger businesses.

GROWTH AREAS

Partners looking to target areas of SMB spending growth over the next two years should focus on printers and MFPs, notebooks, hosting infrastructure services, switches, and structured data management software, according to IDC. On a global level, SMBs are still spending on internal hardware. According to Spiceworks Inc.’s global State of the SMB report for the first half of 2012, desktop and laptop computers are still the top two areas of budget allocation for new purchases or upgrades, with an average of 40 per cent of the IT budget being put toward refreshing or investing in hardware.

“They’re buying IT that helps streamline operations and reduce costs,” said Michelle Warren, principal at MW Research and Consulting. Spending on tablets and PCs will continue, as well as on maintenance contracts. SMBs will still invest in hardware as long as it can help streamline business, she said.

However, the trend toward mobile technology, as well as hosted and cloud services, is also continuing from previous years, creating opportunity for managed services, according to Tony Olvet, group vice-president of research at IDC Canada. “We see the desktop PC market tapering quickly and growth in SaaS at the expense of on-premise licensing,” he said.

Mobile collaboration technologies are also moving to the forefront as areas of investment for SMBs, according to Alexander. “Those are the kind of big, high impact things that they’re spending a significant amount of their budget on.”

In the first half of 2012, virtualization and cloud adoption rose among SMBs globally, according to Spiceworks. Virtualization has grown 18 per cent in the last year among SMBs, and 64 per cent of those businesses are now using the technology.

For channel partners, areas of opportunity in the SMB market include managed services, including security and managed mobility, infrastructure planning, including network and data centre build, and mobilizing enterprise applications, Olvet added.

Security presents immediate opportunities for VARs, according to Info-Tech’s Alexander. With the proliferation of mobile devices and the consumerization of IT, security is becoming a bigger priority for customers and ranks as the most important area of IT spending, according to Info-Tech’s research. Desktop virtualization is also an area picking up among SMBs. While the technology isn’t brand new, the consumerization of IT and more mobile devices are accelerating the need and desire for it. As the need for better integration of various applications arises, more desktops will be virtualized, Alexander said.

THE MANAGED SERVICES OPPORTUNITY

However, while in the last six months IT budgets have grown, most SMBs will keep their IT staff the same size, according to Spiceworks.“It’s not so much about investing in IT, it’s about investing in platforms and solutions that will support the way you have to do business,” Alexander said. While Canadians are about 12 months behind the U.S. in terms of cloud adoption, SMBs are beginning to invest less in internal infrastructure and more in services-based delivery of applications and infrastructure.

“What I’m finding is they’re investing more in automation and less in people,” said Ted Garner, CEO of Brampton, Ont.-based solution provider IT Weapons Inc. Cloud and managed services is one way SMBs can avoid the headache of IT. “They’re really looking to do more with less.”

By now, many SMBs have some understanding of the cloud from major companies such as Google and Microsoft, Garner said. However, messaging from those companies can be confusing and many smaller companies will still gravitate toward local solution providers that can articulate what cloud computing can do for their business, and how.“People like to deal with people,” he added.


The vendor community is also investing more in their SMB strategies and providing incentives for solution providers to target smaller businesses. The SMB market is a “promised land” for vendors, Alexander said, so it’s not surprising to see more tech giants creating SMB-centric products and channel specializations.

“The thing about SMBs is, there’s a lot of them and they may be small, but their problems aren’t small,” Alexander said. Large vendors need partners to target those opportunities. McAfee’s SMB specialization, for example, has seen strong uptake among its channel partners.

VARs, however, often don’t see SMBs as lucrative, since those deals can be a lot of work for not as much reward. Having added incentive to target those businesses is a good move, Alexander said.

HELPING INTERNAL IT SHOW THEIR VALUE

Despite stability in IT spending in the SMB market, devising a strategy of how to spend the money can still be a challenge for clients. Long-term planning is one area where partners can play an important role. “It’s really fascinating that a large number of SMB environments don’t have a proper budget,” said Andy Papadopoulos, managing partner at Toronto’s Navantis Inc., a Microsoft partner. “What they struggle with is a lack of a plan.”“They know where they are today and they know where utopia is, but they don’t know how to get there,” he said. “They start to realize that they can’t all be point in time solutions.”

In the SMB, users now have far more input and control into what IT needs to spend on, Papadopoulos said. Now, even in the hiring process, potential employees ask what technology is in place to make them as productive as possible.

“In the SMB space today, I’ve also noticed that more and more people are doing two jobs instead of one job,” he said. With tight budgets, SMBs need the technology in place to help employees be as productive as possible while at work or on the road, otherwise the work just won’t get done.

With more user opinion influencing IT spending, partners need to work with IT teams to deliver continuing value to the users. “They need to be sure they’re selecting projects that are at least giving something back to the end users,” he said. “Otherwise the purse strings won’t open up for the next project they want to do.”

Part of that can include training of internal IT teams so they can continue new projects later. “IT is something that needs to be there, it’s not seen as something that helps the business,” among SMBs. “The challenge is working with those folks to get them to work more with the business.”

Other departments may also contribute to IT budgets, he pointed out. If a marketing team wants to build a Web tool for collaboration, for example, they’ll find the money for IT to carry it through.Providing a cost-per-user figure can also be helpful, he said. That way, they can plan budgets accordingly when new staff are hired.

“They cannot afford to make mistakes with their budgets,” Papadopoulos said. “What we’re able to do with them is help them position their value.”