Yankee Group Says SMBs Want Better Integration

Published: April 27, 2006

by Timothy Prickett Morgan

The small and medium business (SMB) sector of the IT economy is neglected in many ways, and one of them is in detailed research about exactly what SMBs are up to and what kinds of IT products they are looking for. Because no one really likes a low-margin, high-volume business, the big IT consultancies and analyst organizations of the world tend to focus on what large organizations want, need, or should do, and when they talk about the SMB market, they are often really talking about medium businesses, which are quite large compared to real SMBs.

But, the SMB market is where a lot of new jobs are created and is where IT spending is growing much faster than spending at large organizations, so some consultancies are starting to put a little work into trying to figure out who the SMB customer--the real SMB customer, with a few dozen to a few hundred employees--is and what they are looking for in IT products. Yankee Group is one such consulting firm.

According to Yankee Group analyst Steve Hilton, who was quoted recently in the Wall Street Journal citing some research the company had done, about 38 percent of the IT budget at companies with between 20 and 99 employees went for hardware in 2005, with 18 percent going for infrastructure software such as Web servers, email servers, firewalls, and such. Another 14 percent went to business applications for accounting, sales, customer relationship management, while 13 percent of the budget went to maintenance on hardware and software. Another 9 percent of the IT pie went to security software (mainly antivirus software), and the remaining 8 percent went to IT services.

These percentages come from a survey that Yankee Group did of real SMB shops, and guess what their biggest gripe was? The lack of integration between their various computer systems and the applications they use to run their businesses--something that 53 percent of those polled by Yankee Group said was among their top priorities. Another 47 percent said that integrating their Web sites with back-end applications was a problem, 42 percent said they had insufficient staff, and 34 percent said they had outdated applications. Why don't these companies just bite the bullet and modernize and integrate their IT infrastructures?

Because they don't have any money. That's why.

Which would suggest that a smart vendor with an integrated system of business applications at a very low, low price could just mop up here in the SMB world.