2009 Small Business Trends: No Longer Business as Usual

In 2009, it’s no longer business as usual. The sharp economic decline has led many small companies to slash operating costs and cut staff to the bone. In the wake of small businesses’ initial shock and awe, uncertainty has become the new normal.

With little fat left to trim, small businesses that want to stay in business will turn to technology solutions to help optimize talent and streamline business processes to get back on a growth trajectory.

Some of the technology trends that will take shape as a result are that small businesses will:

1. Catch the social networking wave. Reduced marketing budgets and headcount will tempt more small businesses to social networking to spread the word about their businesses—and tap into customer and market opinion and demand. Look for small businesses to start figuring out how to take advantage of blogs, Twitter, Facebook, LinkedIn, YouTube, etc. for no and low cost viral marketing. These businesses will also tap into the mobility angle, as vendors extend more social networking capabilities to more mobile devices.

2. Demand solutions that do more for less. With economic anxiety growing and budgets shrinking, “Easier, cheaper, better, faster” is the bar that vendors must meet. Transparent pricing and service agreements are a must; and vendors must  prove early on in the sales cycle that their solutions increase revenues, improve profitability and/or reduce risk. Those with blurry value propositions will not survive.

3. Find fresh technology alternatives more appealing. Barack Obama’s election signaled one thing loud and clear—people are ready for change. Small businesses are too. Their minds will be much more open to a new generation of solutions to help differentiate in the market, reach more customers, and pursue new business models and opportunities.

4. Favor software-as-service (SaaS) over packaged software that they have to buy, install and manage. The SaaS model is now about 10 years old. To date, adoption has been steady but gradual. Dramatic reductions in capital budgets and headcount mean that companies will be much more likely to consider SaaS alternatives seriously than ever before. The fact that all the big guys—Microsoft, IBM and Google—now have on demand offerings will also accelerate adoption.

5. Increasingly turn to non-Microsoft desktops and servers. Despite the price premium, those small businesses that are tired of dealing with Windows problems, will turn to Apple in greater numbers. At the same time, netbooks will pick up share in small businesses when workers are using the Internet most of the time and don’t need a lot of desktop horsepower. Likewise, value-priced plug and play server and software appliances (usually built on open source software), which bundle up a complete solution and require no IT management, will start eroding Windows server sales. Look for security, storage and collaboration appliances, along with pre-packaged solutions that zero in on specific vertical industry needs.

6. Innovate beyond what we can anticipate. Continuing economic uncertainty is a recipe for the unexpected. Hundreds of thousands of people are being laid off every month. After a few months of sending their resumes into the black hole of Internet job sites, many will decide to strike out on their own and do something new. Business innovation among both startups and established small businesses will be on the rise, and so will the opportunities for technology vendors that can create solutions to enable this innovation.

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My Top Takeaways from Lotusphere 2009

As always. IBM’s Lotusphere has been chock full of announcements about new products, upgrades and partnerships. At Lotusphere, “resonance” was the overarching theme, framing the benefits of having multiple applications work in harmony to amplify the benefits of individual solutions, and create better business outcomes (or something like that, I’m paraphrasing here!).

One level down from that, I see a few top takeaways that cut across individual announcements and point to where IBM Lotus (which I’ll abbreviate to Lotus for the rest of this blog) is heading. Here are the takeaways that bubbled to the top for me.

1.    Expect Lotus to take a bolder marketing stance. In the past, Lotus has been reluctant to go head to head with obvious rivals, particularly Microsoft. But in the opening keynote, Lotus executives came out swinging, declaring intentions to “drive the decline of the Office Suite”, “shatter Windows” and “change desktop economics” with Symphony, the free Lotus desktop suite. Likewise, Lotus is positioning Foundations, which bundles e-mail, file sharing, document management and backup in a turnkey server appliance, aggressively against Microsoft Small Business Server (SBS). While I don’t expect Lotus to get as edgy as Apple has done with its Mac versus PC ads, I think we will see a feistier IBM Lotus persona going forward.

2.    Substantial, long-term strategy and investment to broaden the Lotus market. Large enterprises have always been a Lotus stronghold. But, running Lotus on premise can chew up a lot of IT resources, putting it out of reach for most small and medium businesses (SMBs), and branch offices in larger firms.  After some past unsuccessful attempts to field solutions for these businesses, it looks like Lotus finally has a handle on creating easier, simpler and more affordable solutions. The vendor is taking a hybrid approach, with a mix of customer premise and cloud solutions. LotusLive (www.LotusLive.com, formerly codenamed Bluehouse) moves Lotus firmly in the cloud, offering  an easy software-as-a-service (SaaS) on ramp  for social networking and collaboration (with Web email coming soon via IBM’s planned acquisition of OutBlaze, www.outblaze.com). LotusLive  integrates solutions from cloud computing partners, and enables “click to cloud” integration with customer premise applications. Lotus Foundations comes at the market from the opposite direction, providing customers a plug and play on premise collaboration and email solution. While Lotus still has a lot of work to do to clearly position and market these solutions (along with several other appliance and cloud offerings within IBM’s broader portfolio) it’s on the right track to finally tap into this huge market opportunity.

3.    New momentum and vitality in the Lotus partner ecosystem. Partners have always been key to bringing complete solutions and added value to Lotus customers. But, while Lotus has enjoyed solid relationships with longtime partners, it’s often missed the mark in attracting fresh faces.  At Lotusphere, the vendor unveiled new and newly strengthened relationships that breath new life into the ecosystem. Not surprisingly, LotusLive and Foundations are fertile ground for many of these. Skype, LinkedIn and salesforce.com are working with LotusLive to create integrated collaborative capabilities. For instance, Skype will integrate voice and video to enable customers to directly connect to Skype contacts from LotusLive.  Meanwhile, Lotus Foundations is adding 80 new partners per quarter to its volume SMB channel, and working with ISVs to build turnkey industry solutions. For example, SRC Solutions (www.src-solutions.com) is building streamlined records and document management solutions for schools, healthcare, public sector and other verticals on top of Foundations. Lotus is also deepening relationships with more traditional partners, such as SAP, as well. The two announced joint development of Alloy, which will link collaborative and core business process applications more tightly for users. And Smart Market, a one-stop solutions shop for customers, gives partners a new vehicle to reach, sell and support customers.

4.    Going Mobile. Lotus and RIM announced new enhancements for the Lotus BlackBerry, adding new client capabilities for Sametime and Connections, and editing functionality for Symphony. The two also announced BlackBerry platform support for and Domino Designer for X Pages, so that developers can develop and deploy once for both Domino and Blackberry. While Lotus took some knocks for not moving quickly enough on other mobile devices—most notably the iPhone—it will almost certainly duplicate its BlackBerry initiatives with other mobile device leaders.

5.    Changing the conversation about collaboration and social software. Lotus will be doing this on several levels: extended collaboration, the value the openness brings to the collaboration equation, and the importance of using collaboration to optimize talent. LotusLive provides a great example of how Lotus is focusing on extending collaboration beyond the firewall with easy, secure on demand collaboration. Tying into the overarching resonance theme, the vendor will turn up the volume on the value of openness is maximizing the business value of an integrated portfolio and partnerships. Last but not least, I think that Lotus will turn more of the conversation to the fact that today, many businesses have already cut costs to the bare bone; the new challenge will be to grow the top line by enabling people to be  as productive as possible. Look for Lotus to progressively socialize (no pun intended!) the importance of using collaborative and social solutions to make collaboration more fluid and friction-free across the value chain.

On its 20th anniversary, Lotus is opening a new chapter in its story, offering up some new and convincing alternatives to the status quo, and extending its reach into new markets. By making these strategic investments now, in a turbulent economy, Lotus has time to get the kinks worked out, and get ahead of the game for when things turn around.

It’s a Small World

It’s a Small World

Well, it’s about time—I’m taking my first leap into the blogosphere.
It took a good-natured push from my new colleagues at Hurwitz & Associates, who helped overcome my concern that the last thing the world needs is another blog and reassured me that I’ll add something useful to this big bowl of talk soup.

Let me start with a quick introduction. I’ve been in the IT industry for over 20 year, both at analyst firms (past firms are Summit Strategies and AMI-Partners) and now at my new position as Partner at Hurwitz & Associates (www.hurwitz.com). I’ve also worked in different marketing and channel roles on the IT vendor side.

As an analyst, I’ve always found the small and medium business (SMB) market the most interesting. It also tends to be the most challenging for IT vendors fully grasp and succeed in. I’m frequently approached by vendors that look at the sheer size of SMB space and see dollar signs, but just don’t comprehend how complicated it really is. I also talk to vendors that offer great technology and interesting solutions, but fail to make a clear-cut case for how their solutions help smaller businesses tackle real world challenges. As a result, most IT vendors have just begun to scratch the surface of the SMB market opportunity.

The good news is that over the past couple of years, more vendors have come to realize that they can’t just force-feed watered down enterprise solutions to SMB customers; they must build solutions for SMBs from the ground up. The bad news is that many still don’t understand the diversity and nuances in this market, and fall short when it comes to targeting the right groups with the right messages and solutions. SMBs do not have the resources or time to sift through jargon or opaque information; vendors must get to the point quickly and clearly just to get in the game, and deliver pragmatic, compelling solutions to stay in.

If this weren’t challenging enough, the current economic downturn adds some new twists and turns. Of course, many SMBs will hunker down, targeting IT for deep cost cuts as they try to ride out the recession. However, others will calculate that technology investments will yield better business returns than physical investments. This group wants to find ways to automate labor-intensive processes, cut costs, generate new business, and boost customer satisfaction and repeat business. Many newly minted entrepreneurs will be in this category. Whether fresh from corporate layoffs, or fresh from campus, these startups will look for solutions that help them create a bigger, more professional company persona right out the gate.

In this blog, I’m going to discuss the key trends, characteristics, requirements and nuances and other factors that vendors need to put top of mind in an SMB market quest. I’ll explain what works and what doesn’t and why; and examine vendors that are hitting the mark in SMB, and those that are missing it.

Software-as-a-service (SaaS), Web 2.0 and social networking, collaboration and managed services are sweet spots for me, and I will also start looking at green IT initiatives that relate to SMBs. I’m sure I’ll roam into other areas as well. Whatever the area, I try to take a common sense approach and connect the dots: how well do the message and the offering match up with the expectations and realities of the market?

This blog will be much richer as a discussion than a monologue, so let me know what you think is important. If you’re a vendor, what are your most pressing concerns as you plan, enter or build your presence in the SMB market? If you’re a small or medium business customer, let me know your views about IT and your business, and how you think IT vendors are doing in delivering on their promises. I’m looking forward to hearing from you, and keeping a pulse on the always vibrant SMB market.