How SMBs are buying and benefitting from cloud business apps
According to some estimates, there are more than 15,000 SaaS companies around the world competing for the attention of business decision makers. And once any attention has been gained, the targeted business can choose to purchase a SaaS solution directly from the software vendor, or they can be redirected to the vendor’s indirect channel. They can purchase the software as part of a bundle from their ISP or telecom provider, or they could engage a trusted technology advisor, such as a value-added reseller or managed service provider.
A new report put out by AppSmart, as a follow-up to a similar 2017 report, sheds some light on how and from where small and mid-sized business are finding, buying, using and best benefitting from cloud-based business applications. And with all things being equal, it turns out things are not equal in terms of results and return on investment.
As far as the top reasons an SMB chooses to work with their primary source of software, knowledge, customer service and support and an easy buying process take the top three spots on the list, shows findings from the survey, which was conducted by Wakefield Research on behalf of AppSmart. Trust that the provider/vendor understands the SMB’s needs, as well as the expectation for lower costs come in a close fourth and fifth.
Which of the factors are most important to you in selecting a technology advisor?
|Pricing and overall savings||44%|
|Easy-to-access customer service||43%|
|Knowledge of my industry||43%|
|Knowledge of business our size||35%|
|Offers useful self-service tools||33%|
|Recommended by colleagues or friends||29%|
|Local to my community||27%|
|None of these are important||3%|
Source: Wakefield Research; AppSmart
“For any providers attempting to convince SMBs that they can’t trust competing SaaS sellers, the findings show this tactic seldom works,” said AppSmart researchers. SMBs put “lack of trust in other providers” last in the list of reasons for choosing a SaaS partner.
Similarly, providers cannot assume that SMBs will continue to buy from them because of the inherent barriers or “headaches” to switching providers. Only 25 percent of responding SMBs said that they don’t want to disrupt their business by switching providers, leaving 75 percent that would turn to a provider offering better knowledge or higher levels of customer support. This is especially true considering that when SMBs select their primary providers/vendors for software based on the level of knowledge of technology and customer service and support, they are more likely to say that they’re getting good ROI from their business technology, showed the AppSmart findings.
Looking at the scorecard as it stands now, about half of SMBs (51 percent) purchase their SaaS business software from vendors directly, growing slightly from the 49 percent that said they went straight to the vendors in 2017. However, technology advisors gained ground since the last survey, as well, with 28 percent of SMBs now turning to them for software versus 21 percent in 2017. ISPs/telcos slipped from 27 percent in 2017 to 20 percent in 2021.
Software vendors likewise are doing the best job of communicating to customers and prospects about new products and services. Marketing communications from vendors effectively ties at the top with communications from industry organizations and IT professional organizations in terms of where SMBs hear about new SaaS solutions. The remaining top five sources feature another tie between IT trade publications and websites and colleagues in similar organizations, at 36 percent each. Technology advisors rank seventh (32 percent) out of nine sources while ISPs/telecom providers rank eighth (28 percent).
How do you generally hear about a SaaS solution?
|Professional organizations in our industry||38%|
|Marketing communications from software vendors||37%|
|Professional organizations for those working in IT||37%|
|Trade publications or websites for IT professionals||36%|
|Colleagues at similar organizations||36%|
|Trade publications or websites for our industry||33%|
|Our technology advisory service||32%|
|Our telecom or internet provider||28%|
|I haven’t learned about new SaaS solutions through any of these sources||7%|
Source: Wakefield Research; AppSmart
Breaking down SMBs by size, the figures show that larger SMBs (101-250 employees) are much more likely to turn to a technology advisor, such as a VAR, MSP or other channel partner, for information on new SaaS solutions, at 44 percent compared to only 23 percent of small SMBs (1 to 10 employees) and 35 percent of medium SMBs (11-100 employees) who said the same.
For SMBs that get their SaaS information from technology advisors, they are about equally likely to agree as disagree that they are getting good ROI (32 percent versus 29 percent), “which shows that messages emphasizing the value of solutions aren’t getting through to SMB targets,” said AppSmart researchers.
The same applies to SMBs getting their information from ISPs/telecom companies, where they are split between agreeing (28 percent) and disagreeing (27 percent) that they see good ROI. Some small SMBs (15 percent) aren’t being reached by any of these sources. These SMBs are also significantly less likely toagree (only 5 percent) that they’re getting good ROI for their technology investments.
Once an SMB prospect learns about a new solution, the factors most important to selecting an advisor or provider are pricing and overall cost savings (44 percent), easy-to-access customer service (43 percent), industry knowledge (43 percent), “knowledge of business our size” (35 percent), the existence of useful self-service tools (33 percent) and recommendations from a colleague or friend (29 percent).
Location ranked last, “perhaps reflecting the shift to remote/hybrid work models and digital adoption,” said AppSmart.
The type of provider an SMB ultimately chooses has a direct impact on the type of return the business gets from its investment, the AppSmart and Wakefield figures suggest. After all, the vast majority of SMBs (84 percent) experience at least some difficulty in using new SaaS solutions. Most notable are difficulties surrounding maintenance and troubleshooting, adopting or migrating to the service, and training staff tied with selecting the service. Nearly a quarter of those surveyed (24 percent) indicated that purchasing the service is usually difficult.
Which of these aspects of using a new SaaS solution, if any, are usually difficult for your company?
|Maintenance and troubleshooting||34%|
|Adopting or migrating to the service||33%|
|Training staff on using the new service||32%|
|Selecting the service||32%|
|Purchasing the service||24%|
|None of these are difficult for us||16%|
Source: Wakefield Research; AppSmart
Even so, more than half (56 percent) of SMBs strongly agree that they’re getting good ROI from the investments they make in business technology. But SMBs that use technology advisors are more likely to agree that they get good ROI from their business technology investments compared to those that don’t use technology advisors. Using outside professional assistance for adoption and migration also increases the likelihood of achieving good ROI, with 96 percent of those that do agreeing or strongly agreeing that they see good ROI for their investment in business technology.
Perhaps this is not surprising. “Unlike large enterprises, SMBs often lack the IT staff, skills and experience, time and budget to deploy technology within their business and drive user adoption of the new technology,” said the AppSmart report. “Without guidance and assistance from external partners such as technology advisors, it can be difficult for SMBs to maximize the value they get from new software to achieve a good return on investment.”
Indeed, small SMBs are less likely (47 percent) to strongly agree that they achieved good ROI from their business technology investments, while medium (62 percent) and large (61 percent) companies are more likely to strongly agree. Incidentally, those that aren’t using any SaaS applications are more likely to disagree (29 percent) that they get good ROI, with only 5 percent agreeing that they get good ROI from their technology investments.
The survey also found that SMBs experiencing certain pain points are more likely to disagree that they see a satisfactory ROI from there technology investment. The difficulties that are most likely to negatively affect perceptions of a return include issues with ongoing management, maintenance and troubleshooting, migration and the solution selection process. In turn, two-thirds of SMBs use professional assistance for adoption or migration of new software, and those that do use professional assistance are more likely to agree that they see good ROI from their business technology.
SMBs also report to “spending too much time” dealing with multiple SaaS suppliers. Nearly three-quarters (70 percent) of SMBs believe that their company spends more time than they should interacting with SaaS vendors and processing invoices because they use multiple SaaS suppliers. In 2017, 66 percent said they wanted to consolidate their cloud services purchases to have only one vendor to deal with. One of the drivers for this was having everything on one bill for easier invoice management.
SaaS vendors and solution providers also shouldn’t be surprised if they encounter reluctance among SMB buyers to quickly pull the trigger on a new solution. During the uncertainty of the pandemic, SMBs were forced to rapidly make changes and deployment decisions without undergoing normal levels of due diligence. And according to the Wakefield Research survey, 52 percent of SMBs said they made SaaS investments in response to the pandemic that ended up not being a good fit for their businesses.
It sounds like more SMBs could use the help of technology advisors and partners that understands not only the technology their selling but the needs of the businesses they are selling to.