Report Card: 2012 Top 10 SMB Technology Market Predictions

–by Laurie McCabe and Sanjeev Aggarwal, SMB Group

Before developing our 2013 predictions, we wanted to assess how we did on our 2012 Top 10 SMB Technology Predictions. Here’s our take–please let us know what grades you would have given us!

And stay tuned for our Top 10 SMB Technology Predictions for 2013, which we will post in a couple of weeks!

Note: On this grading scale, 5 means that we came closest to hitting the mark, and 1 means we missed it entirely.

Prediction Score  Comments
1.     Economic Anxiety Lowers SMB Revenue Expectations and Tightens Tech Wallets 4 Year-over-year data from our annual SMB Routes to Market Studies indicated that more small and medium businesses (SMBs)* were forecasting flat or decreased IT spending heading into 2012 compared to 2011. Given SMB budget constraints and the plethora of solutions aimed at SMBs, vendors had to work harder to convince budget-constrained SMBs that their solutions would really help address top SMB business challenges to attract new customers, grow revenues and maintain profitability. More SMBs turned to lower-risk, pay-as-you-go cloud options, and several vendors (IBM, Dell and HP, to name a few) introduced new and/or enhanced financing options to help SMBs overcome financial hurdles.
2.     The SMB Progressive Class Gains Ground  5 We identified a distinct category of SMBs that we termed “Progressive SMBs,” who see technology as integral to achieving business goals and to gaining a competitive edge. Progressive SMBs invest more and purchase more sophisticated solutions than their counterparts. Trending analysis from our 2011 to 2012 Routes to Market Studies show that the percentage of SMBs in the Progressive category is growing. Furthermore, Progressive SMBs continue to gain ground over SMBs that skimp on technology in terms of expected business performance.
3.     The SMB Social Media Divide Grows  5 SMB adoption of social media did indeed jump, from 44% to 53% among small businesses (and from 52% to 63% among medium businesses from 2011 to 2012, based on trending analysis in our SMB Social Business Studies. The divide between social media haves and have-nots is also growing: our research reveals that 65% of SMBs that use social business tools anticipate revenue gains, while only 17% of “non-social” SMBs expect revenues to increase.
4.     Cloud Becomes the New Normal 4 SMBs haven’t swapped out all of their on-premises solutions in favor of the cloud–but the puck is clearly moving to the cloud in all application areas. The evolution is continuing at a steady pace, as evidenced by trending analysis in our annual SMB Routes to Market Studies. In some areas, cloud is poised to overtake on-premises solutions. For instance, over 30% of SMBs that purchased or upgraded collaboration, marketing automation, BI and data backup in the past 24 months chose cloud, and over 40% of SMBs planning to purchase solutions in those areas in the next month plan cloud deployments. 
5.     Mobile Application Use Extends Beyond Email to Business Applications 5 SMBs significantly ramped up mobile business application use and plans in 2012, as evidenced by trending analysis from our annual SMB Mobile Solutions Studies. More SMBs are providing mobile business apps to employees in categories ranging from CRM to time management to expense reporting.  In addition, adoption of external-facing (for customers, partners and suppliers) mobile apps and websites also rose considerably.  For instance, SMB use of a mobile-friendly website is up 10% among small businesses and 23% among medium businesses.
6.     Increased SMB Business Intelligence (BI) and Analytics Investments Are Sparked by the Social-Mobile-Cloud Triumvirate  3 The avalanche of data generated by cloud, social and mobile has certainly created the need for better analytics. However, year-over year trending data from our SMB Routes to Market Studies reveals a mixed bag in terms of adoption. Use of BI solutions among medium businesses spiked 24% in the past year, but adoption rose just 2% among small businesses. While vendors appear to be doing a good job of developing and marketing BI solutions tailored to the needs of medium businesses, they have not yet figured out the right formula for smaller ones.
7.     Managed Services Meet Mobile 5 We forecast that the explosion of mobile devices and apps, “bring your own device” (BYOD) phenomenon and the increasing concerns about security would spark increased demand for and more solutions to manage mobile on the back-end. Our annual SMB Mobile Solutions Studies show that SMB adoption of mobile management services—from simple device management to comprehensive mobile management platforms—has accelerated rapidly. For instance, 16% of SMBs have already deployed an outsourced mobile management platform, and 30% plan to do so within a year.
8.     The Accidental Entrepreneur Spikes Demand for No-Employee Small Business Solutions 5 Small businesses without a payroll make up more than 70% of America’s 27 million companies. We hypothesized that the 2008 recession and subsequent layoffs generated a new and often “accidental” breed of entrepreneurs that would spike demand for—and growth of—applications targeted to meet the needs of these businesses. And they have. New and improved cloud-based and mobile apps from traditional small business powerhouses (Sage, Intuit, Microsoft, Google, etc.), SOHO pioneers (Freshbooks, Nimble, Dropbox, Zoho, etc.), and freelance talent sourcing solutions from companies such as Elance and oDesk are making it easier than ever for SOHOs to get their work done.
9.     Increased Adoption of Collaboration and Communication Services in Integrated Suites 4 Trending from our Routes to Market Study Medium businesses shows that overall, use and plans to deploy collaboration solutions is up year-over-year. Low-cost, low-risk, cloud-based collaboration and communications services have made it easier for SMBs to use integrated collaboration tools, while eliminating the inconvenience of using multiple sign-ons and interfaces.The fact that vendors are integrating more into their offerings—such as  Google integrating Google+ hangouts, IBM SmartCloud Engage adding social communities and Citrix adding video capabilities to GoToMeeting—doesn’t hurt either.
10.   The IT Channel Continues to Shape-Shift. 5 Cloud, social and mobile trends continue to reshape how channel partners must deliver value across the board. SMBs are increasingly choosing to purchase directly from software and cloud vendors in most areas. And Managed Service Providers (MSPs) have gained ground as a purchase channel over VARs in several solution areas, including security, BI and collaboration. The need for more specialized business and/or technology expertise has also made some types of channel players more relevant in each specific solution category than others.

*In SMB Group Syndicated Survey studies, we define small businesses as those with 1-99 employees, and medium businesses as having 100-999 employees.

For more information on our most recent SMB Mobile, Social Business and Routes to Market Studies, please visit our website, www.smb-gr.com, or contact Sanjeev Aggarwal, Sanjeev.aggarwal@smb-gr.com, 508-410-3562.

 

Salesforce’s SMB Story: Great Vision, But a Complicated Plot Line

“Why can’t business software be as easy to use as buying a book on Amazon?” At the Dreamforce 2012 SMB keynote, Hilary Koplow-McAdams, President of Salesforce.com’s Commercial Division, told the crowd that this was the question that Marc Benioff, Salesforce CEO, originally set out to answer when he founded the company. When you think about it, this question was particularly prescient in 1999, when Salesforce was in start-up mode and conversations about the “consumerization of IT” were scarce. This perspective also provided a welcome breath of fresh air for small businesses, which were Salesforce’s chief target market at the time, and were in dire need of technology vendors that could keep things simple. Fast forward to 2012 Dreamforce. As I discussed in my first post about the event, Drinking From the Dreamforce Fire Hose: Part 1, The Big Picture, Benioff showcased several large enterprise customers, a slew of new directions and offerings, and a compelling case for enterprises to buy into its version of the social enterprise. Salesforce.com has grown up and evolved into a multi-faceted company with a rich portfolio of technologies and solutions that extend well beyond its CRM roots. But with this kind of growth comes complexity. Even if Salesforce can make products Amazon-easy, can it tell the story so that SMBs “get it?” In addition, as combinations of products and pricing options multiply, will SMBs be able to wade through, figure out their best options, and be able to afford them?

“A” for a Compelling Vision for SMBs

Which leads to this, my second post. How and how clearly is Salesforce making its case to SMBs? For starters, this year’s event featured the first SMB track ever at Dreamforce–certainly a big step in the right direction. In the SMB keynote, Koplow-McAdams discussed how the cloud model helps democratize and level the playing field for smaller companies, and reaffirmed the company’s commitment to them. According to Koplow-McAdams, SMBs are also racking up good returns on their investment: Salesforce studies show that their SMB customers have boosted win rates by 25+%, increased sales productivity by 34% and increased revenues by 30%. While it’s not surprising that Salesforce has been transformative for the SMB customers that shared this stage with Hilary Koplow-McAdams, their stories were as interesting–and maybe a little more fun–as the large enterprise customers featured in Benioff’s keynote. They discussed how, despite limited IT staffs and budgets, they’ve used Salesforce to grow their businesses. For instance:

  • PlayerLayer, which sells performance athletic apparel, had customer data in Excel, and “had all the customer data, but no way to look at it.” It wanted a solution to help “interrogate” the data so that the company could expand into new countries without a big ad budget. Salesforce and Chatter have helped PlayerLayer gain a better understanding of its customers, collaborate on products more efficiently, and “compete with giants in industry.”
  • Yelp, the now well-known search and review site for local businesses, has grown from 2 employees in 1994 to over 1,000 employees today. When Yelp hired its first full-time sales rep for its original San Francisco site, it deployed Salesforce. Geoff Donaker, Yelp COO described how as Yelp branched out into new markets, it was “easy to expand with Salesforce.” Now in 18 countries and 90 cities, Yelp has 800 Salesforce users.
  • Square, the mobile payments vendor, has grown to process $8 billion in payments/year, and 400 employees over the past few years. According to Sarah Friar, Square, CFO, “selling is a team sport” at Square, which uses Salesforce Sales Cloud, Chatter, and Desk.com for support. Square shared a demo of how Desk.com automatically brings tweets, Facebook posts, email and phone conversations into Desk.com to help it provide more responsive customer service.
  • Leviev Diamonds, with 25 employees and 5 showrooms around the globe, was founded in 2006. An offshoot of a successful wholesale diamond business, Leviev wanted to start a retail channel to market very high quality diamonds. As the company CEO, said, “the most important part of the business is schmoozing, which you call CRM.” Leviev decided to use Salesforce because it did what they needed it to do and fit the budget. No Leviev has its entire inventory in Salesforce, and when potential clients open mobile alerts, they are redirected to Salesforce for more information. According to Leviev, “I love Salesforce. It changed everything for us.”
  • Carlo’s Bakery, made famous by the TLC reality show Cake Boss, featuring owner Buddy Valastro, served up the final story. Once Cake Boss started airing, “all hell broke loose.” The problem was, although the bakery starting getting millions of hits a day on their website, it wasn’t able to turn them into sales because Carlo’s Bakery was still a pencil and paper business and according to Valastro, “a lot of people have to interact to make a cake.” In about 8 weeks, the bakery switched from pencil and paper to Salesforce and Radian6 to convert more of its millions of Facebook fans and Twitter followers into customers, and get better visibility into its sales funnel. Carlo’s Bakery can take orders on iPads and mobile phones, and the orders come together in one system, which enables everyone to collaborate. The bakery now does $20 million worth of sales from its Hoboken store, has increased productivity by 60%, and improved customer experience.

Collectively, Salesforce and its customers did a great job of summing up how cloud offerings–and Salesforce in particular–can give SMBs a faster, more user-friendly, and streamlined way to run their businesses. In some cases, these customers moved directly from Excel or from pencil and paper to Salesforce, illuminating both the ease and value of having real-time information access, anywhere from any device. So I’ll give Salesforce an “A” for telling the story.

“C” for an SMB Friendly Social Enterprise Plot Line

But, I’m experiencing some cognitive dissonance when I look at the plot line. Sure, Benioff’s big picture social enterprise vision is compelling for businesses of any size. But as I asked in my 2011 post, Is Salesforce.com Outgrowing SMBs?, can the average small or medium business put the piece parts together? Thankfully, the company does seem to have put a simple naming convention in place (and renamed several acquisitions accordingly), but I’ve lost count of how many solutions Salesforce provides…along with what’s included in what. For instance, Salesforce Touch is included as part of Force.com. But do most SMBs even buy Force.com? And if they don’t, can third-party development partners somehow pass relevant Salesforce Touch capabilities through? Likewise, the question of how much it will cost for SMBs to become a social enterprise ala the Salesforce model is also cloudy. Fortunately, Chatter is included in all Sales Cloud editions. But how many small businesses can jump from Group Edition ($15/user/month) to Professional ($65/user/month) to get some fairly basic marketing functionality such as email marketing, campaigns and analytics snapshots. And what about Salesforce Marketing Cloud, which starts at $5,000 per month? When it comes to software (on premise or in the cloud!) SMBs don’t want mystery. They want solution clarity, and transparent, predictable pricing. At the upper end of SMB, companies may have enough staff, expertise and time to sort through and figure this out–or the budget to hire a consultant to do it for them. But, many smaller businesses won’t have these resources. So I need to give Salesforce a “C“ when it comes to making it easy for SMBs to identify, assess, configure and price the best mix of Salesforce solutions to turn the social enterprise vision into reality. And, while Salesforce will likely rely on its partners to help SMBs navigate these areas, it seems difficult to see how partners can profitably provide the services SMBs need to evaluate, select and deploy the right formula of Salesforce solutions. How will Salesforce.com grow and remain true to its small business roots? Most software vendors have found it very difficult to succeed in both large enterprise and small business worlds. Can Salesforce succeed where others have failed? I’ll be looking forward to Dreamforce 2013 to see if the details are as clear as the vision by then.

Tech Tidbits for SMBs: What’s Behind Xero’s Online Accounting Discount for Non-Profits

Earlier this week, I had the opportunity to speak with Jamie Sutherland, U.S. President of Operations for Xero, which provides an online accounting solution for small businesses. Jamie discussed what makes non-profits tick, Xero’s latest announcement, which is a 25% discount for non-profits, and other Xero news.

Laurie: Jamie, can you start by giving us a little bit of background about what Xero is and what it does?

Jamie: Definitely! Xero is beautiful online accounting software designed specifically for small businesses. At the very outset, when we built the application, we went around to a number of small businesses around the world, and uncovered their workflows and the way they do business. We set out to solve key processes for them in an easy to use fashion. What was born was Xero as an application. Ever since we’ve been expanding rapidly with customers in over 100 countries now, and doubling our customer base and revenue every year. So it’s quite exciting.

Laurie: How do you define small businesses?

Jamie: Our definition is between 0 and 100 employee businesses, with a specific effort around the lower end of that spectrum. Now businesses take many shapes and sizes, and one distinction is around services-based businesses versus those that carry inventory or are involved with manufacturing or wholesale. So we’re more focused on the services-based businesses.

Laurie: So Xero announced this week that it is offering 25% off to all nonprofits?

Jamie: Yes. We know that non-profits are essentially small businesses, and are experiencing the same types of challenges other small businesses have. With the slow rebound of the economy, non-profits also have challenges around fund-raising and managing their finances. We did a panel and discussed this with a number of non-profits. We learned that managing their funds is one of their biggest challenges. So we want to make it easier for them to manage their finances.

But what we also know is that not every non-profit has an accountant or bookkeeper on staff—they typically use a volunteer to staff this position. The volunteer may not be as adept as an accredited accountant or bookkeeper. So we want to make it very, very easy for non-profits to do finances. Again, Xero is built in a very user-friendly fashion, which is helpful for the non-profit sector.

Laurie: So how does the 25% discount for non-profits work?

Jamie: Xero has 3 pricing plans. We have a $19/month, a $29/month, and a $39/month plan. All three plans include unlimited users. So no matter how many people are working in the business or non-profit, this one monthly fee covers everything, there are no additional charges. That’s unlike many of our competitors. That 25% discount is right off the monthly plan price.

Laurie: What are the differences between the three plans?

Jamie: The $19/month plan is our entry-level plan, which allows you to send up to 5 invoices a month and a certain number of bank reconciliations. For $29/month, you get the full feature set of Xero minus the multi-currency capability. The $39/month plan includes multi-currency. The majority of our customers are on the $29/month plan.

Laurie: When we do our SMB surveys, we always include non-profits, because we also see a lot of similarities with small businesses. So I’m just wondering, in what ways did you find that non-profit needs differ from those of commercial small businesses?

Jamie: We did research across the U.S., Australia and New Zealand. We found that non-profits’ needs don’t differ that much from small businesses. They focus on cash flow to make sure that cash coming in can cover expenses. Like small businesses, they have issues with employee turnover, complying with rules and regulations, etc.

But non-profits are unique in that they typically have a volunteer workforce. Whether small or large, this is very different from the typical small business.  The other big difference is that people running non-profits tend to understand finances less than the average small business owner. So something like Xero accounting, which makes it really easy to understand your finances, can help out.

Laurie: Are there some tips or best practices that came out of the panel that you can share?

Jamie: Budgeting is a big thing. There’s a budgeting tool in Xero to budget and forecast. It’s important to any business. You can import and export from Excel, and track what’s going on. So if you have a lot of volunteer turnover for accounting or bookkeeper roles, you can still have consistency around your financial and monthly reporting. With an online solution like Xero, you have real-time access to info anytime, anywhere in the world. This is helpful to anyone doing accounting or bookkeeping.

Laurie: Before we wrap up, I’d be remiss if I didn’t ask if there is anything else on tap for Xero that you can fill me in on?

Jamie: Yes. It’s been a busy 6 weeks or so. We recently announced 100,000 paying customers across the globe. It took us 5 years to get to 50,000 and then we added the next 50,000 in 10 months. So we’re starting to see much more rapid growth and adoption.

We also announced  payroll integration with ADP, the world’s leading provider of HR and outsourced solutions. The payroll integration we developed with them lets you do your payroll online with ADP and seamlessly sync with Xero. This alleviates the need for duplicate entry between the two applications, which is also exciting.

We’ve also put together a partner advisory council in the U.S., the Xero Partner Advisory Council. The council will look at the things we’re doing in the market, the products and our strategy and help us really try to cater to the needs of small businesses and make everybody better off.

Making Small Business a Bigger Business: Intuit’s Acquisition of Demandforce

Intuit announced last week that it was acquiring Demandforce, which provides an integrated suite of Web-based social media and marketing tools for small businesses, for $423.5 million in cash. Demandforce automates many of the internet and social media marketing tasks that small businesses increasingly need to do, giving Intuit a proven front office play: Demandforce already has about 15,000 customers, books about $50 million annually in revenue, and is growing at about 80% annually.

This is Intuit’s second biggest acquisition (Digital Insight, which Intuit acquired in 2006, was the largest). What makes Demandforce so attractive to Intuit? Let’s count the ways!

1. Broaden Intuit’s Front-Office Presence

Intuit has a very strong footprint in small business “back-office” applications, such as accounting, payroll and payments solutions. As important as these solutions are to running a businesses, they do little to address small companies’ top challenges–which according to SMB Group studies, are to  attract new customers and grow revenue.

Intuit has made some acquisitions over the past few years to provide customer-facing application to small businesses. The most notable is Homestead, which helps small businesses build web sites and create an online presence.

Demandforce builds on this acquisition, and can help Intuit capitalize on the broader shift to digital marketing that’s being fueled to a large degree by the adoption of social media and mobile solutions. Now, Intuit can provide it’s five million QuickBooks desktop users, and over 400,000 QuickBooks Online customers with Demandforce, which is designed to help services-based businesses grow revenue, retain clients and strengthen their online reputation. Demandforce has already done the integration with QuickBooks and now they can mine the Intuit installed base for service businesses that would benefit most from Demandforce.

And, at roughly $300 per company per month, Demandforce figures to be one of Intuit’s most profitable offerings over time.

2. Gain Industry Solutions and Go-to-Market Expertise

Demandforce’s customers span the true small business service universe–veterinary, pet services, dental care, automotive repair, medical spas, salons, chiropractors, and fitness centers, to name a few.  (The company recently added a solution tailored for accountants–which should turn into a doubly nice move as about 250,000 accountants use QuickBooks).

Demandforce gives these small businesses affordable, easy to use tools similar to those that large enterprises use–and tailored to their industry-specific needs. It’s model is to select an industry, study it, and identify the top industry solutions in that area, such as Henry Schein for dental. Then Demandforce engineering does the integration work, and looks for partners that sell into the relevant industry. The vendor markets through industry trade shows and conventions, and closes sales through telesales and partner feet on the street.

Many vendors say they’re going to target small business vertical markets. But I’m hard-pressed to think of another vendor that has done this type of holistic, industry-by-industry block and tackling. This has paid off for Demandforce, and should reap even bigger rewards with the added muscle and money of Intuit behind it.

3. Flying Higher Into the Cloud

Intuit has been steadily progressing from being a traditional desktop company to an online cloud services provider. This is also where small businesses are moving, as shown in Figure X. The Demandforce acquisition adds to Intuit’s cloud credentials in the very hot marketing automation area.

Figure 1: Small Business Purchase and Plans for Cloud-based Solutions

4. Serving Up SoLoMo to Main Street Businesses

Three big tech trends are reshaping businesses today: social, mobile and local. Demandforce hits all three of these bases for Intuit. On the social front, It brings together many of the social media tools into a unified service, making social media more manageable for small business to manage their interactions across social networks. In terms of mobile, Demandforce makes it easy for small businesses to engage with their customers using mobile devices. So for instance, your salon can send you a text message to remind you about your next appointment, Finally, there’s the local element. With Demandforce, small businesses can invite and collect user reviews and feedback, building up their local reputation. To date, Demandforce has helped its small business customers gather about 1.5 million reviews, which can also be syndicated out to Google, Yelp and other review sites.

Adding it Up

As I discussed in an earlier post, Intuit: From Products to Services, Applications to Platform, Intuit has already made great strides in transforming from a products to a services company. Demandforce gives Intuit the fuel it needs to more fully tap into small businesses’ hunger for solutions that can help them grow their businesses–and in doing so, accelerate its own transformation.

The Small Business Forecast for Cloud Computing

(Originally published October 5, 2011 in Small Business Computing)

What’s changed about cloud computing since 2009, when I wrote What is Cloud Computing, and Why Should You Care? In terms of the basic definition and benefits of cloud computing, not much. But in terms of market trends and adoption, the landscape has changed considerably.

Status Quo: Cloud Computing Basics

Here’s the definition that I provided in 2009: Cloud computing is a computing model in which you access software, server, storage, development and other computing resources over the Internet, in a self-service manner, as illustrated in Figure 1.

What is cloud computing graphic display
Figure 1: An illustrated depiction of cloud computing.
(Click for larger image)
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The benefits that drive cloud computing adoption remain the same as well; instead of having to buy, install, maintain and manage these resources on your own servers, you access and use them through a Web browser.

Since many small and medium businesses (SMBs) lack the time, money and/or resources required to buy, deploy and manage the increasingly complex array of applications and infrastructure they need to run their businesses, this is a huge plus.

Cloud computing lets you access these resources as a service, without having to worry about the care and feeding of them. You can expand or shrink services as your needs change, and do it all on a pay-as-you-go subscription basis instead of forking over capital to buy hardware and software.

The concerns that people raise about cloud computing haven’t changed much either. They continue to revolve around reliability, security and support questions, such as how do providers protect your data? What happens if a service goes down, and you can’t access the application or your data?

Even highly reputable cloud providers — including Amazon, Google, Intuit and Microsoft — have experienced outages. Customers still need to do their homework and get details from providers on uptime guarantees, data protection, service levels and other policies and practices.

Cloud Computing Adoption Becoming Mainstream

Cloud computing has been around since 1997– albeit under different labels. But cloud adoption was more evolutionary than revolutionary for a long time. In the early going, many of the technologies required to effectively take advantage of cloud computing — such as ubiquitous high-speed Internet access — weren’t ready.

Equally important, people tend to be creatures of habit, and they felt no need to rush away from packaged software to the cloud. Finally, many IT people were reluctant to go to the cloud for fear it might put them out of a job.

But in the last 2 or 3 years, studies from both researchers and vendors indicate that cloud computing is becoming a more mainstream choice, especially in categories such as online marketing, collaboration and contact and customer management, as shown in Figure 2.

What’s Driving the Change?

Several factors that have coalesced to create the right conditions for cloud computing’s increased popularity. To begin with, cloud computing providers have grown up. NetSuite was founded in 1998, and Salesforce.com was founded in 1999.

Small business cloud-computing adoption rates, by application category
Figure 2: Small business adoption of cloud-based software-as-a-service solutions in selected application categories. Source: SMB Group 2010 SMB Routes to Market Study.
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Meanwhile, “old guard” players including IBM, Microsoft and SAP have also created rich portfolios of cloud solutions. Cloud vendors continue to address reliability, security and performance concerns with more redundant services and controls.

Many are also providing more visibility into performance. For instance, Trust.salesforce.com is Salesforce.com’s site for real-time information on system performance and security. Zoho Service Health Status provides a similar service.

Customers have also learned that they like many things about the cloud model. They like the responsibility being on a vendor 24/7 — and that it’s easier to switch to another provider if their expectations aren’t met. They like what I call the “virtuous feedback loop,” which means that when a cloud provider fixes a problem for one customer, it gets fixed for everyone.

Meanwhile, a funny thing happened on the way to the cloud — an explosion of mobile and social technologies. In both cases, the adoption curve has been truly revolutionary.  In contrast to cloud computing, these revolutions didn’t require IT managers or business decision-makers to take off.

Individuals could drive adoption, which in turn required businesses to interact more effectively with these newly empowered customers, employees, constituents, etc. — when, where and how they wanted.

This has had a profound effect on cloud computing. Although it has been on a slower trajectory than social and mobile technologies, cloud is increasingly the critical enabler for both mobile and social solutions. It provides the:

  • Economies of scale and skill that developers need to create, reiterate and reinvent.
  • Continuous customer-feedback loop and data aggregation required to spot trends, identify opportunities and get a leg-up on the competition.
  • Real-time collaborative environment that’s necessary to accelerate new ideas, launch new solutions and solve problems.

Finally, the curve to take advantage of new technologies and new ways of using technology is getting steeper. Most individual companies can’t tap into these opportunities on their own, however. They need IT solutions that will empower the business without draining it — and they are more likely to get this with cloud computing than with traditional on-premises software.

The net-net is that we’ve reached a tipping point. Increasingly, small businesses that want to use technology to move their businesses ahead will need to move to the cloud — or risk falling behind the competition.


Key Themes from SAP TechEd 2011–How Do They Relate to SMBs?

As the name implies, SAP TechEd offers technical education, such as hands-on workshops, deep-dive lectures and sessions with SAP technical experts about all things SAP. That said, TechEd isn’t for everyone, and it’s no wonder that most of the 6,500+ attendees at SAP TechEd 2011, held the week of September 12 in Las Vegas, were SAP partners and technology specialists from the vendor’s large enterprise accounts.

However, despite the technical focus of the event, there were several key themes that have important implications for non-techies and small and medium businesses (or as SAP calls them–small and medium enterprises or SMEs). This makes sense, as SAP’s SME ambitions are core to the company’s growth strategy. Many of the partners I spoke to at the event provide sales, service and third-party development for SAP’s portfolio of SMB-centered applications, including Business One, Business by Design, Business All-in-One and Business Objects Edge. Undoubtedley not by accident, as SMB customers rely on these partners to translate the technology and solution innovations below into practical business results.

  • HANA everywhere. As noted in fellow analyst Cindy Jutras’ post, HANA was by far the lead theme at TechEd–just take a look at the tweet stream at #sapteched. HANA is SAP’s innovative column-based, in-memory database, which enables applications to zip through calculations for millions of records in just fractions of a second. While this is relevant for large companies, why should SMBs care? According to SAP, HANA will be part of every solution that SAP offers. SAP applications, from Business One through the Business Suite, will be “powered by HANA,” providing these applications with a big performance boost. The good news here for SMBs is that while SAP Business Suite customers will pay extra for high-test HANA performance, customers using SAP’s SMB-centric solutions will get at least some of this added horsepower as part of the normal upgrade cycle, at no additional charge. However, at this stage, it’s still fuzzy as to exactly how SAP will embed and deliver HANA in its SMB portfolio, what will be included, and what will be priced separately.
  • SAP Business by Design (ByD) as a platform. ByD will continue to fill the role of a cloud-based ERP suite, but ByD is evolving to become a cloud platform as well. SAP is providing partners and customers with an integrated SDK to build applications on top of the ByD platform, and plans to debut a ByD app store ala Salesforce.com AppExchange, where customers can buy, download and deploy both SAP and partner ByD apps. The ByD cloud platform should make it easier for partners to build their own applications and IP on top of ByD and expand their market opportunity. Partner-developed ByD services will be layered on the ByD foundation to deliver the common elements of ByD.  Providing and enhancing the partner opportunity is essential for SAP to groe its SMB footprint in the cloud space, especially as it plays catch up against early birds such as NetSuite and Salesforce.com. Partner applications and services will be essential to provide the diverse SMB market with the choice and richness in solutions they require.
  • Mobile as the design center for solution development and delivery. Aided and abetted by its Sybase acquisition, SAP is putting the mobile experience front and center for application design and development. This means that SAP’s design point for new applications starts with the mobile device experience. Existing apps will get a mobile makeover–providing users with the mobile interfaces they are increasingly clamoring for and turning to over traditional desktop devices. For instance, SAP Business One presented Version 1.3.1 of it mobile app, which enables users to use Business One on an iPhone or iPad. The app provides things such as alerts and approvals, reports and interactive dashboards, and inventory management, and looks very easy to use and streamlined for the mobile experience that more and more SMBs are using in addition to or as a replacement for traditional desktop interfaces.
  • Making business applications more engaging. Mary Poppins told us long ago that “For every job that must be done there is an element of fun, find the fun and snap, the job’s a game.” Jane McGonigal, SAP TechEd’s guest keynote speaker, presented the modern-day version of this with her talk on “gamification.” In a nutshell, gamification is making a non-game application more engaging by making it game-like. While I talked to several skeptics (or Puritans?) who don’t get the connection between work and games, I’ve always bought into the Mary Poppins philosophy. To me, it’s intuitive that people doing more fun and interesting work are naturally more engaged and productive. SAP put this theory into action at TechEd with Knowledge Quest, which attendees could play and earn points by answering questions, completing interactive challenges, acquiring codes, and taking on head-to-head challenges with other players. Players with the most points were awarded prizes such as iPads, Nintendo 3DS, and headphones. I don’t know how many people played, but the Knowledge Quest booth was pretty packed whenever I went by. Now this is a very big if, but if SAP successfully tackles the gamification challenge (maybe with a game?!) it can gain a big advantage. SMBs using SAP solutions will also come out ahead–via a more productive and engaged workforce–especially as more businesses are started and run by younger entrepreneurs and employees that have been raised in a video-gaming culture.

The bottom line is that while TechEd isn’t for everyone, SAP’s key themes are as relevant to business decision-makers as they are to technology decision-makers and solution builders.

However, SAP is competing against some great marketers–most notably Marc Benioff of Salesforce.com–who bring their own appetite for and vision of business software innovation to the market. In contrast, SAP, for all of its technical strengths, has not been a marketing powerhouse. While SAP has committed to making its technology innovations digestible for SMB customers, can it do the same with it’s marketing and messaging? Creating clear, crisp and compelling marketing for its diverse portfolio of solutions and its new technology directions may prove to be SAP’s toughest innovation challenge.

Reflections on Dreamforce 2011: Now the Cloud Can Ride the Waves

This year, Salesforce.com’s Dreamforce event–with a record-setting 45,000 attendees–got me thinking about the early days before the cloud was the cloud, how far its come, and how perfectly poised it is to ride the waves now driving technology adoption–mobile and social solutions.

Traveling in the Way Back Machine

In a galaxy long ago and far away, I was an analyst at the former Summit Strategies when the first cloud seeds were being planted in 1997. NetLedger (now NetSuite) and Employease (now part of ADP) were among the first to visit and brief us in Boston, followed soon after, of course, by Marc Benioff and Salesforce.com.

These vendors were among the early pioneers of what was first called the internet business service provider (IBSP) model. They built their solutions as multi-tenant software-as-a-service solutions, designing them  business from the ground up to be delivered as a single instance, to thousands of customers, in a subscription-based pricing model.

In the early going, these pioneers survived the confusion wreaked by the traditional software vendors, who put their traditional packaged apps–never designed for a services model–up on servers in the application service provider (ASP) hosting model. Then, they persevered through the onslaught of the software establishment at the time–from Siebel to Microsoft to SAP–who insisted SaaS was just a passing fad. They forged on even as multitudes of IBSP wannabes–from Agillion to Red Gorilla to vJungle–crashed and burned when the Internet bubble burst. They even survived the problems they created for themselves as they kept renaming themselves, from IBSP, online services vendor, software-as-a-service (SaaS) and then to the “cloud” label that would finally stick.

Evolutionary Vs. Revolutionary

From the start, analysts such as myself and counterparts, such as the luminary Phil Wainwright, thought that IBSP/SaaS/cloud was a great alternative to the packaged software model–and that it would catch on much more quickly than it has. But, though cloud computing has grown over the last 13 years or so, it’s growth has been more evolutionary than revolutionary. In the beginning, many of the technologies necessary to enable widespread cloud adoption, such as ubiquitous high-speed Internet access, just weren’t there. As important, IT people were often reluctant to go to the model because they were afraid it might put them out of a job, and decision-makers in some companies didn’t feel a compelling need to change the status quo.

In contrast, adoption of mobile and social technologies has been truly revolutionary. Not only were the right technologies were in the right place, at the right time, but individuals–not IT people or business decision-makers–called the shots. Employees are also consumers, and are spending their own money to BYOD (bring your own device) instead of using a company-issued brick. They started questioning why it was easier to keep track of friends on Facebook than keep track of contacts in CRM.  Armed with iPhones, iPads, Facebook and Twitter, as Benioff so rightly pointed out, individuals are now empowered not only bring about the “Arab spring” that has toppled dictators, but also stir up a “corporate spring” for companies that don’t listen to customers and employees.

Now the Cloud Can Ride the Waves

As a result, the pecking order of the IT universe is being radically altered. Apple is worth more than HP, Google is more powerful than Microsoft, and Facebook has changed the world–and what we expect from software–forever.

Though cloud computing has been on a slower trajectory than social and mobile technologies, cloud is increasingly the critical enabler for both mobile and social solutions. It provides the economies of scale and skill that developers and companies need to create, reiterate, and reinvent. It provides the customer feedback loop and data aggregation necessary to see where the puck is going and get there first. It provides the collaborative environment required to accelerate new ideas and new ways of solving problems. But it is very complicated for individual companies to piece together all the components that they need on their own.

As this perfect storm of social and mobile rapidly forms, how much time do the software vendors such as Microsoft, Oracle, Sage and SAP, have to straddle the fence and ride out the storm? You can bet that I and a lot of other storm chasers will be watching closely as the waves build.

Sage Summit 2011: Tackling the Sage NA Branding Challenge

A couple of weeks ago, I attended Sage Summit 2011, Sage’s first combination partner and customer event. I’ve been attending Sage partner, customer and analyst events for several years, observing and commenting on its ongoing attempts to unify it’s corporate brand across multiple small and medium business (SMB) solutions. Earlier this year, following Sue Swenson’s retirement, Pascal Houillon took over the reins as CEO of Sage North America.  I was interested to find out how Houillon plans to deal with what has seemed like an age-old dilemma at Sage North America: having many strong individual SMB brands (think Peachtree, ACT!, Timberline, etc.), but a relatively weak Sage corporate brand.

The Sage North America Branding Challenge

Over the years, Sage North America has added a myriad of SMB-oriented accounting, ERP, CRM, HR, payments and industry-specific solutions to it’s portfolio. In most cases, these solutions brought large groups of loyal customers with them. Sage has undergone many identity-building initiatives in the past, including co-branding all of it’s individual solutions with the Sage master brand in 2009, developing capabilities to seamlessly integrate Sage CRM, ERP, HR and other applications, and a concerted corporate-wide initiative to make customer experience it’s top priority. But, for the most part, Sage customers have continued to identify more with their individual brands, ala Abra or MAS, instead of the Sage moniker.

This has not only hampered Sage’s traditional cross-selling efforts, but it also threatens Sage’s Connected Services strategy, which provides Sage customers with online, connected services (both from Sage and Sage partners) that integrate with on-premise Sage solutions to provide additional functionality.

Clearly, for Connected Services to achieve it’s goals, Sage needs to make sure that, for instance, Sage Integrated Payments Solutions are the first stop for Peachtree or ACCPAC customers looking for payments solutions that integrate with their accounting software.  In addition, without a strong corporate brand, Sage is at a disadvantage when going up against competitors such as Intuit, Microsoft or SAP.

Tackling the Branding Dilemma Head-On

Houillon wasted no time addressing the elephant in the room. At the opening keynote of the partner session, his first announcement was that Sage NA would embark on a phased approach to drop individual product brand names (again, think ACT!, MAS, Peachtree, etc.) in favor of the Sage brand. So for instance, Sage Peachtree Pro, Complete, Premium and Quantum would become Sage 50 Pro, Complete, Premium and Quantum.

Note the word “phased.” This re-branding won’t happen overnight, but take place over the next 12 to 18 months. Sage has lots of products and in many cases, product overlaps. It will most likely start with entry-level solutions, such as Peachtree and ACT!, and those products that have a well-defined space within the Sage line-up.

As important, along with the re-branding, Sage will ramp up existing efforts to create a more consistent user interface and experience among its products, and make it easier to integrate them. For instance, Sage will be incorporating Sage Advisor (first available in Peachtree), which provides in-product assistance to help guide users through tasks, resolve error messages and find functionality as needed, into more of its products.

Needless to say, all of this re-branding talk caused quite a stir among partners, press and analysts. In many cases, partners have invested a lot of passion in an individual brand–in many cases, partners had been selling the individual brand long before Sage acquired it. They have legitimate concerns about making the brand switch, and the new investments they’ll have to make in marketing collateral, web sites, etc. However, in subsequent sessions, Tom Miller, Sage NA’s channel chief, noted several programs already underway at Sage to help ease partners through the transition.

We (press and analysts) also raised a lot of questions about the risk of eroding brand equity that they’ve built up over the years for the individual brands. Several analysts also worried about the blandness of using a numbering system for product names (as noted in both Denis Pombriant’s and Paul Greenberg’s posts on the topic)–which I’m not crazy about either. And of course, there’s the problem that some products overlap with others–such MAS and ACCPAC.

But, after listening to the Q&As and debates, querying Sage execs one-on-one, and talking to Sage customers (most of whom told me they had no problem with rebranding), I think Houillon has made the right decision.

Short-term Pain, Long Term Gain

No doubt that Houillon’s decision will produce some short-term pain, probably most acutely felt by channel partners. But what’s the alternative? Former CEO Sue Swenson stepped in to stop the bleeding, but major surgery is still necessary for Sage to make a full recovery. In the long run, Sage needs to reset, refocus and re-energize the company for growth–something it hasn’t seen much of recently, for these key reasons:

  1. Although all Sage execs appear on board with the change, I’m sure that there are at least a few that have resisted the corporate call. This is just human nature–either inertia, the fact that an individual brand is doing fine as is, or that some people like to run their own little empire without a lot of corporate oversight. The rebranding and what’s underneath it–common look, feel and experience–should help shake out execs that are idling, and foster a more innovative and collaborative environment.  Ultimately, this should yield more value for customers and partners.
  2. A strong corporate brand is key to the success of Sage Connected Services.  Connected Services enable existing Sage customer to easily tap into add-on online services that give them additional functionality. Sage has about 50 connected services already available and coming soon, spanning HR, payments, payroll, tax, sales and marketing functions. For example, Sage offers a dozen Sage Payments Solutions as connected services to Sage ERP and accounting solutions, and several sales and marketing connected services for Sage CRM solutions, such an e-marketing service, as well as business information services via Hoover’s. But, if customers don’t self-identify as Sage customers, they may not even look at Sage Connected Services when needs arise.
  3. Sage needs a strong corporate brand to help its cloud offerings take off. Sage already offers SageCRM.com, ACCPAC Online, SalesLogix Cloud, Sage Payments Solutions and Sage Intergy on Demand (for healthcare) and Sage Billing Boss as cloud solutions, and several more are on the way. As more companies look to the cloud to deploy new solutions, on demand offerings will increasingly erode the sales of packaged software. Sage needs a strong brand to compete in this space and capture new customers as they turn to the cloud.

Or, as Benjamin Franklin said, “When you’re finished changing, you’re finished.”

What Sage Must Do to Pull It Off

That said, Sage will face many challenges along the way. Here’s my take on what Sage must do to increase the odds that it will be successful:

  1. Facilitate the branding change for partners. The biggest concern I heard partners voice was about the money and time they would need to spend to accomplish re-branding. Sage needs to make it fast, easy and low- or no-cost for partners to re-brand their web sites, marketing collateral, etc. at every step of the re-branding process. Given Sage’s history of providing partners with innovative tools and programs, I’m confident that it will be able to develop and roll out do the same here.
  2. Put more emphasis and resources to make sure that changes beyond product name changes are achieved. Develop and provide Sage employees, partners, customers, press and analysts with a clear vision and solid plan for what the Sage portfolio of the future will look like. Sage has already made good inroads on integration across product lines, and needs to continue investing here. But other areas are fuzzy. For instance, when and how will it bring a common interface to different solutions?  What’s the roadmap to roll out Sage Advisor technology into different solutions? In cases where there is product overlap, how will it rationalize this?
  3. Make the Sage brand stand for something and stand out. Simply using the Sage name to brand all of its products won’t be enough to get new customers in the door. What can the Sage brand represent? IMHO, Sage should piggyback on the Firm of the Future education it’s offering partners. This workshop helps partners analyze their existing business models, understand and navigate change, and build a plan to create a new business model to succeed in a changing world.  Why not take this a step further and help its SMB customers become Firms of the Future? In almost every industry, SMBs are grappling with changes wrought by a global economy, increasing volatility and new technology. Everyone sees the change coming, but few even know where to start to get ahead of the curve and position to capitalize on it.

No one ever said change is easy. But change is inevitable and for Sage, essential if it is to thrive and grow. Sage has taken a big first step is in the right direction, now it just needs to keep moving ahead.

HubSpot: From Breakthrough to Breakout

I’ve been very impressed by HubSpot, which helps small and medium businesses (SMBs) optimize and streamline their inbound marketing programs (see my 2009 interview with HubSpot Marketing VP Mike Volpe) for a while now. Looks like others are impressed too—as evidenced by HubSpot’s announcement that it has raised $32 million in a Series D funding round from Sequoia Capital, Salesforce.com, and Google Ventures. This round brings total investments in HubSpot up to $65 million.

What HubSpot Does and What Makes it Different

HubSpot’s online (aka cloud-based) solutions help SMBs manage their web sites and social media activities so they can increase inbound marketing leads, track those leads and optimize lead conversion to sales. HubSpot pricing ranges from $250/month to $1,500/month. The company has been on a roll, with a current annual run rate of $25 million annually, up from $10 million a year ago, and about 4,000 paying customers.

In addition to these fee-based services, HubSpot offers a slew of great free services to help SMBs optimize their content, including Twitter GraderPress Release Grader, Facebook Grader, and Website Grader (all fairly self-explanatory)—and one of my favorites, Gobbledygook grader, which checks your content for gobbledygook, hype, jargon, other meaningless words. As you’ve probably guessed, HubSpot uses these clever and helpful sites to drive its own inbound marketing engine—with fantastic results.  For instance, Website Grader has over 3 million users.

Although some people put HubSpot in the same category as marketing automation vendors such as Eloqua and Marketo, HubSpot has been the poster child when it comes to building the inbound marketing pipeline. I think that HubSpot invented the term “inbound marketing” (founders Brian Halligan and Dharmesh Shah literally wrote the book on how to get found online, Inbound Marketing: Get Found Using Google, Social Media, and Blogs in 2009).  While competitors have tended to focus on helping companies nurture the leads they already have,  HubSpot has blazed the trail in helping companies make the pipeline bigger.

Quick Take

This latest investment round adds momentum to HubSpot’s already solid growth trajectory. It should give current and prospective HubSpot customers a new infusion of confidence, and help HubSpot accelerate innovation.  HubSpot will undoubtedly use a good chunk of the funding to educate and move more SMBs up the curve and into this new era of marketing. After all, HubSpot’s 4,000 customers who are already “get it” are the very early adopters, and only a fraction of the vast SMB universe.

Some of the other areas I’ll be keeping my eye on include:

  • Possibilities with Salesforce.com and Chatter. HubSpot had been working on opening up it’s APIs already, and it’s not hard to envision using Chatter to integrate sales and marketing in a more collaborative, intuitive way. The bonus here is that HubSpot is a heavy Salesforce.com user, giving it a ready-made test-bed.
  • Serving up HubSpot via the Google Apps Marketplace. HubSpot’s all-in-one solution is great, but it can be a bit daunting for smaller companies to take on all at once. It would be great if HubSpot could package some of the key functions in smaller, bite-size pieces, which would then integrate with each other in Lego-like fashion.  That way, smaller companies could take baby steps but move into a full stride as they grow.
  • International expansion. 95%-plus of HubSpot’s customers are in the U.S. The investment should help HubSpot accelerate global sales and marketing. HubSpot can potentially take advantage of Google and Salesforce international data centers, translation capabilities, etc. as well.

While we’ll have to wait for HubSpot to reveal its plans, one thing is evident. HubSpot has plenty of opportunities to put it’s newly minted investment money and relationships with two technology powerhouses to work to change the rules of the digital marketing game in a very substantial way.

Zoho Books: Big Plans for Small Business Accounting

I was just briefed yesterday by Raju Vegesna on the launch of Zoho Books, Zoho’s new on demand accounting solution for small businesses. With Zoho Books, Zoho fills in a critical application that has been missing in its portfolio of more than 25 cloud-based applications for small businesses.

The first version of Zoho Books will be a standalone accounting solution, but later this year, Zoho will add tight integration with some of it’s other apps, such as Zoho CRM and Zoho Support (see my recent post). According to Raju, Zoho wanted to get the accounting functionality right before focusing on integration and other extras. Some of the key takeaways from my briefing include:

  • Zoho has covered most of the accounting basics. The solution features a dashboard, with tabs from which you can create and send invoices, see profit/loss statements, look at income and expenses, etc. Once you create an invoice, you can email it to customers, and set up a link so customers can make direct payments to you online via PayPal, Google checkout, and Authorize.net. You can set up automatic notifications, reminders and thank-you emails as well, and create recurring invoices. Snail mail is also an option.
  • Zoho Books will help users to manage bank accounts, and view bank and credit card statements. Right now, users need to enter third-party financial information manually via a .csv file, but later this year, Zoho plans to add direct connections to banks to automate the import process.
  • Zoho has also taken steps to reduce the fees that Zoho Books customers pay for PayPal transactions by teaming up with PayPal on the Business Payments on the PayPal X platform. This cuts PayPal transaction fees for Zoho Books users to a flat $0.50 per payment—instead of the standard 2% to 3% of each transaction. Since 70% to 80% of Zoho customers use PayPal as their primary payment method, this is a pretty big selling point for the solution.
  • Zoho Books was designed with non-accountants in mind. The interface uses terms such as “money in” and “money out” instead of accounting jargon. But small businesses that use an accountant to manage their financials can set their accountant up as a Zoho Books user. Accountants can also use the solution to manage multiple small business clients simultaneously, as separate organizations.
  • Zoho is addressing multi-currency needs. At launch, Zoho Books enables users to define multiple currency types. Initially, the user will need to supply the exchange rate manually, but later this year, Zoho intends to automate this through an integration with XE.com currency exchange.
  • The look and feel are very customizable. Users can configure logos, signatures, tax settings, email settings, etc. from the settings module.
  • Integration is basic today, but Zoho has big plans. As I noted, today, you can import data into Zoho Books from spreadsheets, Zoho CRM, Zoho mail, etc. You can also view every module of Zoho Books in Zoho Sheets as a spreadsheet, or export it to Excel. Zoho also has a data migration tool to migrate Intuit QuickBooks data to Zoho Books. Looking ahead, Zoho plans to tightly integrate Zoho Books and Zoho CRM to create a seamless order-to-cash workflow. Zoho also plans to integrate Zoho mail with Zoho Books.
  • Pricing starts at $24/month for 2 users, and $5 per user for additional users. If you sign up for an annual subscription (instead of paying monthly) you get two months free. The solution is launching with a 30-day free trial.

With Zoho Books, Zoho is taking aim at Intuit QuickBooks in the U.S., and similar entry-level accounting solutions in other countries. In its first iteration, Zoho Books maps to QuickBooks Online Essentials, but down the line, as Zoho adds more functionality, it could add a higher-end solution more comparable to QuickBooks Online Plus.

Interestingly, Zoho recently announced Zoho CRM integration with QuickBooks, and according to Raju, Zoho will continue to support this even as it introduces its QuickBooks rival. But coopetition is nothing new for Zoho. And, you don’t need to look any further than its relationship with Google to see that this is an area in which it excels. Although Google and Zoho have several competing applications, Zoho apps are a top seller on Google Apps Marketplace and integrate with Google Apps. Zoho Books, of course, will be in the Google Apps Marketplace from day one.

While many on demand accounting start-ups have set their sights on the QuickBooks market over the past few years, they haven’t really made much headway. Zoho, however, is a different animal and should give Intuit a bit more pause for concern. Not only does Zoho already have millions of free and paid users around the globe for it 25 solutions, Zoho is just one part of Zoho Corporation, which provides enterprise level business, network, and IT infrastructure management applications, and software maintenance and support services to some of the largest companies in the world. This not only gives Zoho a lot of expertise to draw on to add new functionality, but the financial staying power to be a serious contender.

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