SMBs spend more, enterprises buy more managed services
The two reports, “The State of Enterprise Networks and Telecommunications: 2009” and “The State of SMB Networks and Telecommunications: 2009” were based on interviews with enterprise and SMB IT executives in North America and Europe.
“We are seeing that the market for network and telecom services is growing and growing pretty well,” said Ellen Daley, the Forrester analyst who authored the studies. “The main reason is they don’t want heavy capex. At the same time, firms are telling us that the rate of technology change is coming so fast that they are not confident they can keep their skill set up. A down economy puts the emphasis on opex versus capex, but the second reason is increasingly the more complex technology, which makes it hard for the IT staff to keep its skills up to speed, especially with IT staff getting laid off.”
While 47% of large enterprises are buying managed services, another 4% are preparing to buy, and 11% are considering such a purchase. But the SMB numbers on managed services tell a different story: Only 37% have deployed, 4% will deploy and 11% are considering.
“This is the big irony or paradox,” Daley said. “Every telco will tell you the SMB doesn’t have a strong IT staff and will want managed services, but there is no data that supports that. They have higher interest in managed services, but their adoption rate is much less.”
One possible reason, Daley said, is because enterprises are more sophisticated in their ability to assess where to best allocate capex and opex dollars and can determine the value of managed services and the return on that investment. Service providers that want to sell managed services to SMBs need to do a better job of explaining that ROI in a way that is relevant to that particular business, Daley said.
“Decision-making in the SMB space is much more personal – it can come down to whether the family takes a vacation this summer or signs a contract for a new managed service,” Daley said. “If they have a hard time understanding how to build the business case, they are more likely to just buy a server and start running applications and hope the person managing their LAN can also manage the WAN.”
SMBs also tend to be more attracted to service bundles, Daley said. “If you can link data-center services with access, so that you are providing a network-based backup and storage, for example, but it is billed along with access, that tends to make sense to a small business,” she said.
The SMB market is taking on more importance for service providers because these are the businesses spending money, the Forrester Research showed. While 58% of large enterprises said they will spend less on IT and telecom – mostly because they expect their own revenues to be off – 57% of SMBs interviewed in the study said they expect revenue to go up, and 51% said they would spend the same amount or more on telecom and IT.
“This is reflective of where the recovery is coming, and we see this broadly,” Daley said. “We have seen large enterprises cut IT spending and resist any new initiatives because they think they are bloated in IT and technology. On the SMB side, it’s not completely rosy, but they are more nimble. Mid-market SMBs haven’t been as hurt by the economy – except in some specific sectors like construction, because of the housing market – and they have been focused on technology to gain higher linkages with customer and productivity elements. They have investment dollars; they are smaller dollars than an enterprise might need, but they are spending.”