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Sponsored by Linksys | Page 1
An IDC InfoBrief, Sponsored by Linksys | May 2019Raymond Boggs, Program Vice President, Small and Medium Business Research
How IT Providers Can Sharpen Practices to Serve Small Business CustomersSuccessful Strategies for IT Providers that Serve Small Business Customers
Sponsored by Linksys | Page 2
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
The changing needs of small businesses for advanced networking services and equipment means new challenges and opportunities for those serving the market.
The dynamic small business opportunity
This IDC InfoBrief, sponsored by Linksys, looks at small businesses (firms with under 300 employees) and the channel partners they use for network resources. Shifting customer preferences are placing new demands on channel partners, but also represent new opportunities for those that can streamline processes, expand offerings, and provide greater value.
This InfoBrief explores what IT products, solutions, and services key groups of SMB customers are looking for, and how service providers and resellers can be better equipped to do so. For the study, IDC conducted a survey of 300 managed service providers and network infrastructure resellers in January 2019.
Sponsored by Linksys | Page 3
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Source: U.S. SMB Survey, 1Q18, n = 820
Small businesses have a number of IT spending priorities, some with long-term implications, all with immediate business performance improvement as a goal. For many SBs, especially as they grow, improving wireless networking or network infrastructure is an important spending priority.
Share of firms citing network performance improvement as IT spending priority
Small businesses are looking to expand network capabilities
<50 employees
22%100–299 employees
57%50–99 employees
44%
Sponsored by Linksys | Page 4
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Source: U.S. SMB Survey, 1Q18, n = 820
Both channels are important, especially as firms grow in size. Number of sources continues to increase, especially as firms grow, with SB customers looking for choice, competitive prices, and support.
And equipment resellers and service providers are frequently cited by SBs as important sources of advanced technology
Share of SBs using service providers and equipment resellers for new technology in past 12 months <50 employees 50–99 employees 100–299 employees
Use service providers (ISP/MSP/CSP) 32.7% 42.4% 59.3% Use equipment resellers (computer reseller, 38.7% 58.7% 75.8% VAR, other hardware source)
TOTAL SOURCES USED 1.9 3.4 3.7
Sponsored by Linksys | Page 5
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
Much like small businesses are expanding their options by using diverse sources of technology, equipment resellers and service providers are expanding into new technology areasQ: Which of these products, solutions, and services does your company offer to your customers? Network equipment MS/ISPBasic broadband connectivity/online internet service 19.3 40.0 (voice or data connectivity) Cloud-based software as a service 30.0 60.7Infrastructure or platform as a service (IaaS, PaaS) 12.7 24.0Other cloud services 16.7 16.7IT services, including training and installation 46.0 53.3Data backup and disaster recovery 30.0 39.3Managed IT services, including maintenance and support 44.7 78.0WiFi as a service 32.7 28.7Routers/switches and wireless access points 100.0 22.0Servers and storage hardware 34.7 22.7Internet of Things sensors and other hardware 24.7 20.0Management automation systems 28.0 29.3Software (standard/packaged) 35.3 25.3Custom software (designed/fine-tuned for customer) 34.7 30.0
Top revenue generator? For equipment providers it’s network equipment (no surprise); for MS/ISPs it’s managed services (cited by two-thirds) and internet services (cited by a third).
Sponsored by Linksys | Page 6
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
An average of about five technology categories are offered by both channel types, and of course there are often additional choices within each category.
Providing access to both services and network equipment allows partners to serve as comprehensive sources for network resources. No wonder 78% of service providers surveyed also provide access to equipment — and 84% of equipment providers provide access to services.
If you aren’t providing the same level of technology access, you’re putting yourself at a competitive disadvantage.
Sponsored by Linksys | Page 7
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
Partners note that their small business customers vary by size and industry
Channel partners serving small businesses don’t just focus on the largest or most mature ones
Very small business (<25 employees)
Small business (25–99 employees)
Larger small business (100–299 employees)
Midsize business (300–999 employees)
Large businesses (1,000+ employees)
n Network equipment n MS/ISP
Q: Approximately what percentage of SB customers falls into each of these categories?
24.2%26.4% 25.9%
13.2%10.2%
23.2%
27.6%
25.0%
14.0%10.2%
Sponsored by Linksys | Page 8
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
SB customers also vary by business life-cycle stage
Share of customers also aligns closely with share of total revenue by company size
Start-up Early growth Mid-life/stable Mature No group in particular/all of the above
n Network equipment n MS/ISP
35.3%
44.7%42.7%
22.7% 6.0%34.7%
46.7%
52.7%
22% 4.7%
Q: Which life stages within SB is your firm targeting or are especially important?
Sponsored by Linksys | Page 9
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
Targeting the right verticals — equipment and service providers often agree on top prospects by industryQ: Which vertical sectors within SB is your firm targeting or are especially important? Network equipment MS/ISPAccounting 24.0 19.3 Technology products, services, and consulting 20.0 22.0 Banking/finance 20.7 19.3 Food services/restaurants 21.3 14.7 Construction 16.0 21.3 Accommodation 12.7 18.7 Education — K-12 14.7 10.7 Communications and media (e.g., publishing, 12.7 12.7 broadcasting, telecommunications) Agriculture 10.7 15.3 Other professional, scientific, and technical services 12.0 10.0
Equipment and service providers target three different verticals on average.
Building industry expertise can make demonstrating value easier and more compelling.
Plus reference selling and targeted promotion can expand opportunities even more.
Sponsored by Linksys | Page 10
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
Channel partners expect above-average revenue growth from a wide range of products and services technology aimed at small businessesShare of channel partners expecting higher-than-average revenue growth for different products Network equipment MS/ISPBasic broadband connectivity/online internet service 41.4 26.7 (voice or data connectivity) Cloud-based software as a service 42.2 34.1Infrastructure or platform as a service (IaaS, PaaS) 42.1 27.8Other cloud services 36.0 28.0IT services, including training and installation 27.5 35.0Data backup and disaster recovery 24.4 32.2Managed IT services, including maintenance and support 38.8 37.6WiFi as a service 36.7 34.9Routers/switches and wireless access points 32.0 27.3Servers and storage hardware 17.3 32.4Internet of Things sensors and other hardware 40.5 10.0Management automation systems 35.7 29.5Software (standard/packaged) 39.6 21.1Custom software (designed/fine-tuned for customer) 34.6 31.1
Leading edge as well as traditional core resources expected to show strong growth.
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IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
And partners plan to add a wide range of products and services in the next 12 monthsQ: Which of these products, solutions, and services does your company plan to start offering in the next 12 months? Network equipment MS/ISPBasic broadband connectivity/online internet service 20.7 8.0 (voice or data connectivity) Cloud-based software as a service 18.7 11.3Infrastructure or platform as a service (IaaS, PaaS) 18.7 18.7Other cloud services 16.7 17.3IT services, including training and installation 15.3 17.3Data backup and disaster recovery 21.3 22.0Managed IT services, including maintenance and support 16.0 8.0WiFi as a service 19.3 23.3Routers/switches and wireless access points 0.0 15.3Servers and storage hardware 20.0 21.3Internet of Things sensors and other hardware 24.7 18.7Management automation systems 20.0 22.0Software (standard/packaged) 9.3 12.0Custom software (designed/fine-tuned for customer) 22.0 12.7None of these 6.7 7.3Not sure 2.7 2.7TOTAL PLANNED TO BE ADDED 2.5 2.4
Keep an eye out for data backup and disaster recovery, as well as servers and storage hardware.
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IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Ease of management and affordability especially important. Do-it-yourself and “do-it-for-me” both appeal to a third of network equipment resellers and 40% of service providers.
Helping manage resources can also provide opportunity for upsell as once-adequate resources are strained.
Unweighted valid n = 150
But diverse product offerings are only one way to appeal to small business prospects
Factors cited as very important — must have — in small business selection of wireless networking solutions Network equipment MS/ISPSeamless integration of new technology with current 32.7 30.7 network environment Effortless implementation of turnkey solutions for upgrade, 32.0 25.3 coordinating hardware and services Ease of management, with self-service tools/consoles so 33.3 40.0 customers can manage their own environment Ease of management, with tools/consoles so channel 35.3 44.7 partners can more easily handle management chores on behalf of customers More affordable solutions 39.3 39.3Better network performance than that offered by 32.0 38.7 consumer-grade solutions, but less expensive than enterprise-grade solutions Availability of coordinated on-premise equipment 33.3 38.7 and network services Expanded wireless coverage and connectivity 34.7 38.0None 2.0 3.3
When it comes to wireless networking, partners cite a variety of factors that influence small business hardware and services preferences.
Sponsored by Linksys | Page 13
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
And partners cite a variety of triggers encouraging investment in new networking equipment or services by small businessesQ: What are the most important triggers that encourage investment in new networking equipment or services? Network equipment MS/ISPAvailability of higher performance services 27.3 30.0Availability of new equipment with improved capabilities 20.0 24.7Recognition that current services are not meeting 20.0 25.3 company needs Recognition of specific technologies as growth drivers 28.0 24.0 for their business Interest in improving management of networking resources 17.3 22.0Business expansion that requires new equipment 26.0 22.0 or capabilities Pressure from customers/visitors for improved wireless 21.3 16.7 connectivity experience onsite Pressure from employees for improved network performance 15.3 18.0Need to move beyond consumer level performance 24.7 17.3
At the heart of things — support for business growth. The strength of new capabilities can enhance business performance.
Sponsored by Linksys | Page 14
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Unweighted valid n = 150
Partners are sharpening their packaging of infrastructure resources for small businesses — and are looking to do more
Currently offer
Currently offer
Currently offer
Currently offer
Currently offer
Plan to offer Plan to offer Plan to offer Plan to offer Plan to offer
Network
infrastructure
service offerings
Bundled network infrastructure
services and equipment into a
subscription model including
regular upgrades
Comprehensive network
infrastructure on-premise
and services in partnership
with large service providers
Network infrastructure
management
consoles/tools
Comprehensive single point of
contact for “IT-as-a-service”
solutions in partnership with
large service providers
n Network equipment n MS/ISP
46.7% 48.7%
40.7%42.7%
32.7%22.5% 20.8% 21.3%
17.4%25.7%
54.7%
46.0%
36.0%
52.7%
21.3%13%.2 14.8%
29.2%26.8%29.7%
Q: Which of these infrastructure products or services do you currently offer to small businesses and which do you plan to offer?
90% of network equipment partners and 83% of MS/ISPs surveyed plan to expand the types of network service offerings to small businesses.
Sponsored by Linksys | Page 15
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
n = “sell network infrastructure service offerings” — 70 network equipment, 82 MS/ISP
Having flexibility in meeting SB needs through a la carte offerings is the preferred partner approach.
Beyond expanding into new products and services, channel partners recognize the opportunity in providing small business customers with bundled packages, support, and management tools
Have a menu of a la carte offerings combined in a single subscription
Have a combination of a la carte offerings and some custom elements in subscription
Have standard packages to simplify purchase and deployment by small businesses
n Network equipment n MS/ISP
37.1%44.3%
17.1%
51.2%
31.7%
17.1%
Preferred way to package service offerings to small businesses
Sponsored by Linksys | Page 16
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
n = “sell network infrastructure service offerings” — 70 network equipment, 82 MS/ISP
But also simplicity and building service management/support into a subscription price is the most popular approach
Service management/support typically built into subscription price
Service management/support typically priced and billed separately
n Network equipment n MS/ISP
37.1% 37.1%
51.2% 51.2%
Preferred approach to service management/support for small businesses
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IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
n = “offer network infrastructure management consoles/tools or plan to” — 117 network equipment, 122 MS/ISP
Management consoles and tools can help small business get the most from their network resources
n Network equipment n MS/ISP
Offer free to customers Charge additional fees Depends on the customer
34.2%
42.7%
23.1%
41.0%39.3%
19.7%
Q: When providing management consoles and tools to small business, which approach do you use or plan to use?
But partners have mixed views on the best way to provide management consoles and tools to small businesses:Offering as part of a package can increase appeal in general and help win the business; but offering as an incremental capability can help grow revenues and margins. The optimal approach can be a bit of both — offer basic tools as part of every engagement but provide upsell to enhanced tools for those wanting more (including remote management that you support).
Sponsored by Linksys | Page 18
IDC InfoBrief | Successful Strategies for IT Providers that Serve Small Business Customers
Network reliability and performance are increasingly important to all small businesses, which vary greatly in the resources devoted to network support.
High value/low touch engagement with small business prospects and the ability grow relationships across all size categories will pay continuing dividends to channel partners.
Small businesses vary in the resources they can devote to managing their networks, but all recognize the importance of network performance in driving productivity and supporting effective customer engagement.
While small businesses will always pressure partners for lower prices, performance and reliability continue to be at the heart of small business acquisition decisions.
Channel partners that can provide comprehensive access to the latest technology will have a competitive advantage in terms of loyalty and share of networking wallet.
Ultimately, partner success will depend on the success of their small business customers, which should be confident in partner commitment to their own success.
Channel partners play a key role in helping manage customer networks or providing resources, including access to comprehensive management tools, that can allow customers to self-manage.
Comprehensive and flexible solutions (especially affordable and easy-to-deploy ones) rather than custom a la carte approaches will help small businesses accelerate their network investment time to value.
Recommendations for infrastructure resellers and cloud service providers focused on SMB customers
Message from the sponsor
To Learn More About Network Infrastructure Services for SMBs and the Linksys Cloud Manager Solution
https://www.linksys.com/us/cloud-manager