by John M. Covaleski

Quebec City - After an extended drought in information technology spending, small and midsized businesses are poised to spend more, but their decision-making style is far different than in the past, according to industry analysts Gartner Inc.

“It’s a big pie and there’s lots of room to be successful, but there’s also a lot of rope to hang yourself with,” Gartner research director and SMB specialist Robert P. Anderson said in a presentation to resellers at Accpac International’s annual partnership conference here.

Big may be an understatement. Gartner estimates that the 101 million SMBs worldwide represent some $350 billion in potential spending on information technology products and services. Its research further shows an end to the drought, as 45 percent of SMBs plan to increase their IT spend through the rest of this year, while just 25 percent plan decreases.

By 2005, SMBs will account for 50 percent of all IT buying, Anderson said, in further assessing his company’s research. Gartner defines small businesses as ones with up to $150 million in annual revenues and up to 100 employees, while it defines midsized businesses as ranging from 100 to 1,000 employees and having revenues of at least $100 million.

Heading a long list of changes in SMBs’ IT buying preferences is an increased desire for technology that solves specific problems. “We’ve moved from the Ôbig bang’ approach to demand for topical solutions,” Anderson told a very interested audience of about 50 resellers.

“SMBS are saying, ÔI just want what I need to solve the problem at hand, such as a warehouse management issue, and if you do good on that, I’ll bring you back for more,” he explained.

Gartner’s Top 10 list of “What Resonates Among SMBs:”

1. Provide a solution to a business problem.

2. Emphasize vertical-specific and SMB-specific features.

3. Avoid the use of jargon and slang.

4. Highlight ease of integration.

5. Demonstrate commitment to post-purchase support.

6. Provide proof of tangible bottom-line benefits.

7. Highlight features that optimize existing architecture.

8. Provide peer testimonials about value and successes.

9. Get advocacy from industry leaders or associations.

10. Demonstrate empathy for their desire to maintain control.

On the subject of “highlighting features that optimize,” Anderson offered this example: “Don’t sell Dot Net [Microsoft Corp.’s platform for XML-based Internet services and business processes], sell the customer on how it will help their business.”

IT areas where Gartner said that SMB spending has increased this year versus last include vertical applications, enterprise systems, security, and data/process integration. Drops in spending are occurring with desktop tools and operating systems.

The business issues driving SMBs’ IT buying are distinctly different from a decade ago, when most SMBs were still grappling with accounting software that had four to six modules. One of the biggest new forces is SMBs’ need for technology that enables them to collaborate with their suppliers and customers and with trading communities.

“SMBs need applications to extend them to their partners and customers,” Anderson said. “It’s no longer a matter of my company versus your company; it’s my supply chain versus your supply chain.”

According to Gartner research, “By 2005, SMBs that haven’t developed formal processes for collaborating with their top partners, suppliers and customers will fail 50 percent more than those that do.”

“The need to work together will become more evident, and when it does, that’s when we step in,” Anderson elaborated.

SMBs also have an increased need for tools that enable them to use the Internet to transact business in distant locations. “Before, an SMB’s competition was just across town, but now, if the SMB is on West Coast the competition can be on the East Coast or in Japan,” Anderson said. “The rules have not just changed for the big guys; they’re also different for the little guys.”

Electronic business areas commanding the greatest SMB spending interest, ranked highest to lowest, are:

● Business intelligence/analytics, and performance measurement.

● Integrated enterprise and customer relationship management.

● Enterprise portals that involve workflow.

● Vertical industry functionality and processes.

● Component architecture and middleware.

● Human resources/employee self-service.

● Integrated enterprise and supply chain management.

● Electronic invoicing and payment.

● Electronic procurement.

Anderson said that there is some SMB demand for Internet-hosted applications, but noted, “It’s not for core solutions (such as financials) but for extended applications like business intelligence or customer relationship management.”

Anderson hailed Accpac as an SMB vendor in tune with today’s demand, noting that its end-to-end product development strategy includes collaboration applications, such as supply-chain management, CRM and Internet-based EDI, as well as several other technologies that Gartner has defined as critical to SMBs.

The movement into the SMB space by high-end software vendors such as PeopleSoft, SAP an Oracle Corp. - a trend that began about four years ago - is continuing, Anderson noted. But, reiterating a sentiment that’s also been felt for years, he said that the high-end vendors, accustomed to direct selling, have not figured out how to work with SMBs, who prefer getting IT from local resellers.

“Everyone wants trusted advisers who have relationships with SMBs,” Anderson added, adding that software resellers and accountants are considered SMBs’ most trusted advisors.

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