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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

http://www.idc.com


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.

http://www.idc.com



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%

http://www.idc.com



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

http://www.idc.com



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).

http://www.idc.com



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.

http://www.idc.com




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%

http://www.idc.com




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


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?

http://www.idc.com




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.

http://www.idc.com




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.

http://www.idc.com




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.

http://www.idc.com



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.


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.

http://www.idc.com




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.

http://www.idc.com




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


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.

http://www.idc.com



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


37.1%44.3%

17.1%

51.2%

31.7%

17.1%

Preferred way to package service offerings to small businesses

http://www.idc.com



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


37.1% 37.1%

51.2% 51.2%

Preferred approach to service management/support for small businesses

http://www.idc.com



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


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).

http://www.idc.com



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

http://www.idc.com

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

https://www.linksys.com/us/cloud-manager

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