Top 10 SMB Technology Predictions for 2012 from the SMB Group

Last week  we published a report card on our last year’s top 10 market predictions for 2011.

Here are the SMB Group’s Top 10 SMB Technology Predictions for 2012! A more detailed description of each follows below.

  1. Economic Anxiety Lowers SMB Revenue Expectations and Tightens Tech Wallets
  2. The SMB Progressive Class Gains Ground
  3. The SMB Social Media Divide Grows
  4. Cloud Becomes the New Normal
  5. Mobile Application Use Extends Beyond Email to Business Applications
  6. Increased SMB Business Intelligence (BI) and Analytics Investments Are Sparked by the Social-Mobile-Cloud Triumvirate
  7. Managed Services Meet Mobile
  8. The Accidental Entrepreneur Spikes Demand for No-Employee Small Business Solutions
  9. Increased Adoption of Collaboration and Communication Services in Integrated Suites
  10. The IT Channel Continues to Shape-Shift

2012 Top 10 SMB Technology Market Predictions in Detail

  1. Economic Anxiety Lowers SMB Revenue Expectations and Tightens Tech Wallets. After the Great Recession officially ended in 2009, the U.S. economy resumed moderate economic growth in 2010—and the SMB outlook for 2011 became fairly bullish. But new economic worries and uncertainties are dampening some SMB outlook. Our 2011 SMB Routes to Market Studyindicated that SMBs are less confident about their revenue prospects for 2012: 56% of small and 63% of medium businesses are forecasting revenue growth for 2012, compared to the 77% of both small and medium businesses that forecasted growth for 2011. And many SMBs are tightening their tech wallets: More are forecasting flat or decreased IT spending for 2012 compared to 2011. To loosen the purse strings, tech vendors must deliver a rock-solid case for how their solutions help address top SMB challenges—which are to attract new customers, grow revenues and maintain profitability. In addition to broadening subscription-based cloud solution options (which offload big upfront investments), more vendors will offer flexible, alternative financing to help ease the financial burden—and gain a leg up on competitors.
  2. The SMB Progressive Class Gains Ground.That said, we also see a distinct category of SMBs that we are terming “Progressive SMBs.” Despite economic uncertainties, Progressive SMBs plan to increase IT spending. These SMBs see technology as a vital tool for business transformation, a mechanism to create market advantage and a way to level the playing field against bigger companies. Although price is still a key factor for Progressive SMBs, they are more likely to rate other factors—such as easier to customize for my business, strong reputation and brand, and ability to provide local service and support—higher than other SMBs when making technology decisions, according to our 2011 SMB Routes to Market Study. Progressive SMBs invest more in technology and see the results in terms of higher revenue expectations. For instance, 73% of medium businesses that are investing more in technology anticipate revenue increases in 2012, compared to just 17% among those decreasing IT spending. Technology vendors need to develop different marketing campaigns and more sophisticated solutions for Progressive SMBs than for their counterparts to win in this very important segment.
  3. The SMB Social Media Divide Grows. SMB use of social media is rising. According to our 2011 Impact of Social Business in Small and Medium Business Study, about 50% of SMBs already use social media, and another 25% plan to do so within the next 12 months. The study revealed that about half of SMBs take a strategic and structured approach with social media. These “strategically social” companies use social media for more activities, use more channels and are more satisfied with the business results than the other half of SMBs that are still throwing spaghetti on the Facebook wall. These more informal, ad hoc users say that they don’t have enough time to use social media effectively; they can’t decide what social media strategies and tools will work best; it’s too difficult to integrate social media with sales, marketing, service and other business processes; and they are unable to measure value from social media. As new social media tools—from crowd-sourced pricing to video commerce—take shape, SMB social media “haves” will gain business ground on the “have-nots” in an exponential manner. As the have-nots lose ground, they will clamor for better social media guidance and easier-to-use, better integrated and more affordable social media management solutions.
  4. Cloud Becomes the New Normal. Is the cloud perfect? No. Is it right for every solution and every business? No. But that said, the rate and pace of technological change are in overdrive, and the need for businesses to harness new technology-based solutions—social, mobile, analytics, etc.—to maintain a business edge is rising. Our 2011 SMB Routes to Market Studyresults reveal that demand for cloud-based solutions is accelerating in almost all solution areas. For instance, in the past 24 months, only 7% of small businesses purchased or upgraded cloud accounting/ERP solutions, compared with 13% that plan to purchase them in the next 12 months. Areas that show the biggest potential for cloud gains in 2012 are marketing automation, business intelligence/analytics, and desktop virtualization solutions and services. Most SMBs simply don’t have the staff, expertise or capital budgets needed for do-it-yourself IT—and they can’t afford the time it takes to get business payback from a solution that they need to vet, buy, install and deploy in-house. This makes the arguments for cloud computing—reduced capital costs, speed to deploy, and real-time collaboration and visibility—compelling. Demand for anytime, anywhere, any-device mobile access to applications will also accelerate cloud adoption, as many SMBs will want to offload management of mobile applications to a cloud solutions provider too. Enterprise players such as Oracle (with RightNow) and SAP (with SuccessFactors) have already begun their cloud shopping sprees. Look for traditional SMB vendors (Intuit, Microsoft, Sage, etc.) to join in the fun.
  5. Mobile Application Use Extends Beyond Email to Business Applications. In a custom study we completed this summer, SMBs indicated that they plan to significantly increase spending on mobile devices and services in the next 12 months, with the highest jump in the 5-to-49–employee size band. The study revealed that with mobile use of collaboration apps (email, calendar, etc.) now mainstream, SMBs are mobilizing business applications. Some of the strongest categories for SMB current and planned mobile app use are mobile payments (52%), time management (59%), field service (59%), and customer information management (69%). This rapid uptake will also include more vertical apps that are a perfect fit for industry-specific needs, especially given the choice of both smart phone and tablet (read: iPad) form factors. Unfortunately, our crystal ball is cloudy when it comes to predicting if another vendor will be able to give Apple a run for its money in the business-use tablet market.
  6. Increased SMB Business Intelligence (BI) and Analytics Investments Are Sparked by the Social-Mobile-Cloud Triumvirate.According to our 2011 SMB Routes to Market Study, 16% of small and 29% of medium businesses purchased/upgraded a BI solution within the past 24 months, and 16% and 28%, respectively, plan to do so in the next 12 months. The social-mobile-cloud triumvirate will fuel new and increased SMB investments in this area as businesses try to plow through the growing data avalanche to get to the insights they need to grow their businesses. As SMBs try to get a better handle on customers’ and prospects’ opinions and influence networks, interest in sentiment analysis and social graphing solutions will grow. New mobile access capabilities and applications from BI vendors designed to provide SMBs with just the information they need, when and where they need it, will spur interest as well. Finally, our study indicated that roughly a third of SMBs use or plan to use cloud-based BI and analytics solutions. An expanding array of cloud options in this area will make it easier and more affordable for more SMBs to deploy these solutions.
  7. Managed Services Meet Mobile.Despite momentum toward the cloud, it will continue to be a hybrid world for a very long time. Many SMBs will continue to use existing on-premises apps and choose on-premises deployment as security, regulatory or other needs dictate. So most SMBs will continue to grapple with IT infrastructure management—even as new mobile device management and governance challenges grow. SMB adoption of mobile phones and tablets is now on par with that of traditional landline phones, according to our 2011 SMB Collaboration and Communication Study. With employees more likely to lose a smart phone than a laptop, security issues abound and will only increase. The “bring your own device” (BYOD) phenomenon creates additional concerns, not least of which is to create a firewall between personal and business data. These SMB challenges provide ample opportunity for wireless carriers, networking vendors, MSPs and others that can provide integrated and automated managed services. These are likely to include services that encompass management of cloud-based infrastructure and all end-point devices, from desktop PCs, tablets and smart phones to purpose-built mobile devices; network services to reduce downtime and help optimize the network that mobile access relies on; and support for cloud-based dual-persona solutions on personal mobile devices.
  8. The Accidental Entrepreneur Spikes Demand for No-Employee Small Business Solutions.As unemployment has increased, so has the number of freelancers, contractors, independent consultants and others choosing to go it alone. According to the U.S. Census Bureau, small businesses without a payroll make up more than 70% of America’s 27 million companies, with annual sales of $887 billion. Many entrepreneurs never intended to take this path, but stay solo because they prefer it to going back to the corporate payroll. Others stick it out due to limited employment options. Either way, more accidental entrepreneurs view what they’re doing as a long-term business venture instead of a short-term stopgap. As a result, they see themselves more as business owners than as freelancers or contractors. But many have no intention or desire to hire employees. This will spike demand for—and growth of—applications and services that help them to achieve their business goals without adding employees. Traditional small business powerhouses (Intuit, Sage, etc.), pioneers in the SOHO space (FreshBooks, Shoebox, Zoho, etc.), new start-ups and others will increasingly cater to their needs with solutions that make it easier for them to fly solo—whether from a home office or on the go.
  9. Increased Adoption of Collaboration and Communication Services in Integrated Suites. As evidenced in our 2011 SMB Collaboration and Communication Study, the SMB pendulum is swinging from point solutions for voice, communications, social media and collaboration solutions to integrated suites. Medium businesses are leading the charge, with 28% currently using an integrated collaboration suite, and 35% planning to do so in the next 12 months. Small businesses are slower to make this leap, but a transition is under way here too. By moving from disparate point solutions to an integrated offering, SMBs can avoid the hassles of learning to use multiple user interfaces, going to different sites to login and remembering different passwords—in short, things that waste time and frustrate users. They also can lower costs and improve their ability to collaborate effectively. A growing roster of low-cost (or free), easy-to-use integrated collaboration suites (Google Apps, Microsoft Office 365, IBM LotusLive and HyperOffice, to name a few) are adding fuel to the convergence fire—although vendors will still need to address the obstacle of user resistance to learning something new.
  10. The IT Channel Continues to Shape-Shift. The trend triumvirate—cloud, social and mobile—is also reshaping the IT channel. These trends are moving the goal posts and changing the ways in which channel partners add value. Cloud computing reduces the need for hardware, software and infrastructure deployment skills, and ups the ante for educational guidance, business process transformation and integration skills. Re-imagined channel partner programs from vendors such as Intacct and IBM’s Software Group have blossomed as they shift partner rewards to focus more on value-add and renewals. Meanwhile, non-traditional IT partners, such as creative and marketing agencies, have stepped in to fill a gap by providing social media and digital marketing services for solutions such as Radian6 and HubSpot. In the mobile domain, partners will need to bring more value to help SMBs develop and implement mobile strategies, and offer solutions to manage mobile devices and applications and provide better network performance, reliability and redundancy. As with any significant inflection point, the cloud-social-mobile trend necessitates that older partner models continue to move aside as new, more relevant ones take shape.

For more information, please visit the SMB Groupweb site at, contact us at (508)410-3562 or send an e-mail to

SMB Group Top Ten 2011 SMB Technology Predictions

Here are the SMB Group’s Top 10 SMB Technology Predictions for 2011! A more detailed description of each follows below.

1. Mobile Commerce Lifts Off

2. SMBs Demand that Vendors Bring Order to Social Media Chaos

3. App Stores Become a Key Information Source and Channel for SMBs

4. The Shift to Cloud Computing and Software-as-a-Service (SaaS) Becomes Irreversible

5. A New Cloud Channel Model Forms

6. The Transition to the Insight Economy Gets a Bit Easier

7. Tablets Add Fuel to the Mobile Applications Explosion

8. Better, Faster Integration Becomes a Key Business Solution Differentiator

9. Hybrid Computing Requirements Accelerate Virtualization Adoption

10. Continued Convergence of Unified Communication and Collaboration Suites

2011 Top 10 SMB Technology Market Predictions in Detail

1.     Mobile Commerce Lifts Off: Today, mobile commerce is in its infancy, but with the Internet in our pocket or purse, it’s only a matter of time before it takes off.  As big retailers and companies invest to make mobile commerce easier, more convenient and more secure, the pressure mounts for SMBs to develop mobile commerce capabilities to stay competitive. The SMB Group’s 2010 Mobile Solutions Study reveals strong SMB plans for mobile web sites, payments, product and service tracking, document sharing and sales/support/service in the upcoming year.   However, key drivers for mobile commerce and adoption plans vary by industry, phase of business and other factors. Vendors will need to tailor messaging and solutions to resonate with these different requirements. As SMBs become more dependent on mobile commerce, they will also look for ways to integrate mobile commerce with ERP/accounting and CRM systems to save time and increase efficiency.

2.     SMBs Demand that Vendors Bring Order to Social Media Chaos. SMBs are jumping on the social media bandwagon to help attract new customers and improve customer relationships. But managing marketing, branding and reputation across and between social media (e.g. Facebook, Twitter, blogs, etc.) and other digital marketing venues (email marketing, search engine marketing, etc.) as well as more traditional CRM solutions can be a nightmare—and surfaces as a top technology challenge in our 2010 Routes to Market Study. In 2011, SMBs will demand converged solutions that streamline inbound and outbound interactions across different channels, and help  measure their effectiveness. Vendors are stepping up efforts to help meet this challenge. For instance, BatchBlue “Social CRM” integrates contacts sales and social media feeds for small businesses; HubSpot’s inbound marketing helps companies create, optimize and promote content to “get found,” convert and close more business, and link to relevant conversations across the Web in a unified dashboard; Sage CRM Solutions integrates social media with opportunities and contacts to help sales, marketing and support people prioritize and focus sales activities and marketing campaigns more effectively; and makes Chatter available for free to all Salesforce users to integrate profiles, groups, online document sharing, task management, contacts, web forms, status updates, newsfeeds with CRM.

3. App Stores Become a Key Information Source and Channel for SMBs. In our 2010 Routes to Market Study, respondents rated “figuring out how different solutions can help the business” as their second most vexing technology challenge. SMBs most often turn to search engines, vendor emails and websites to help sort through this confusion, and keep up with information about technology solutions.  SMB app stores—aka marketplaces—go beyond search engine listings to provide user-generated ratings and guidance to help SMBs determine best-fit solutions. They offer single-sign on access to apps and integration capabilities. Google Apps Marketplace, Intuit’s Workplace,, Constant Contact Marketplace and Zoho Marketplace are just a few examples of SMB-focused app stores that have launched recently. In 2011, they will become a more important source and channel for SMBs—our survey results show that more than half of all SMBs use or plan to use app stores. Vendors that run their own app stores will need to stay ahead of competitors not only by offering the best selection of applications, but by providing superior information, community, guidance, integration and ecommerce experiences.

4.     The Shift to Cloud Computing and Software-as-a-Service (SaaS) Becomes Irreversible. SaaS and cloud computing vendors have been pitching the mantra of easier, faster and more affordable solutions for SMBs since the late 1990s when pioneers such as NetLedger (now NetSuite) and Employease (now part of ADP) launched. But the great recession has accomplished what marketing alone could not. From 2009 to 2010, SMB awareness, interest, consideration and adoption of SaaS and cloud solutions has spiked. Our 2010 Routes-to-Market Study reveals that more than 25% of small and 12% of medium businesses now use collaboration, customer management, online marketing and business analytics as cloud-based services. Economic necessity has driven more SMBs to the cloud, and once in, they are seeing mostly positive results–not only in terms of cost savings and time to solution, but in being able to re-deploy scarce (if any!) IT resources from application support and management to more strategic activities. As important, they are getting significant business value from real-time visibility and collaborative capabilities that are intrinsic to cloud computing–and provide a compelling case to expand their use.

5.     A New Cloud Channel Model Forms. Cloud vendors deliver many of the things that IT channel has traditionally provided–software and hardware sourcing, installation, management, etc. As a result, cloud computing doesn’t neatly align with the traditional IT channel provider role, and many VARs and SIs have been wary of cloud computing. But as customer demand catches up with early hype, and the lure of annuity revenues and higher value services grows, more channel partners are inclined to get on board—even if they’re not yet sure how to straddle two very different business models. At the same time, more cloud solution vendors are acknowledging that partners will be critical to fuel future SMB market growth. After all, while the cloud removes technical barriers to adoption, SMBs often need the one-on-one guidance to derive maximum business value from solutions. In 2011, a new channel model will begin to take shape, incorporating greater collaboration and joint goal setting between cloud vendors and partners; a selective partnering framework that gives fewer partners more opportunity to make money; more transparent and simplified partner programs; and increased incentives for customer satisfaction, cross-selling and renewals. Vendors to watch here include Intacct and Acumatica.

6.     The Transition to the Insight Economy Gets a Bit Easier. Experts tell us that 1.2 zettabytes of digital information will have been created in 2010. A zettabyte is 1,000,000,000,000,000,000,000 bytes (that’s 21 zeroes!) Whew! Online video, social networking sites such as Facebook, digital photos and cell phone data all contribute to the data pile-up. No wonder that SMBs in our 2010 Routes to Market study said their #1 technology challenge is “getting better business insights from the data we already have,” and that 40% of medium businesses plan to spend more in this area in 2011. Luckily, SMBs have more options than just a few years for digestible BI solutions. Vendors such as  Adaptive Planning, IBM/Cognos (and now Clarity), SAP Business Objects, Rosslyn Analytics and Xactly offer function-specific and/or modular solutions that zero in on a specific task such as performance management, spend analysis or pipeline management. And several on demand/SaaS BI solutions (check out Birst, Cloud9 Analytics, PivotLink, Zoho Reports)  are designed to be easy and inexpensive enough for many small businesses to use and get those important “aha moments” from.

7.     Tablets Add Fuel to the Mobile Applications Explosion. Smartphone apps have already caused a seismic shift in the IT industry—and in how SMBs use and interact with technology and the world. Increasingly, SMBs have mobile workforces that need real-time information and access to applications no matter where they are. The iPad’s swift rise and a slew of new tablets from vendors such as Dell, HP, RIM, Samsung has led to a quick ramp up in tablet adoption. Our Mobile Solutions Study reveals that 10 % of small businesses and 22% of medium businesses have at least some employees using tablets to help them get more done on the go. However, while SMB adoption of calendar, contacts, email and web access is almost ubiquitous, the mobile business solutions market is still largely untapped. But, SMB plans to invest in mobile marketing and advertising, customer service management, social media solutions are on the rise. Innovative, versatile tablet designs and capabilities will further accelerate the availability, quality and adoption of mobile solutions among SMBs. However, fast-paced traction of newer devices, such as Android-based tablets underscore that SMB device preference is highly volatile—so look out for the next new thing that can shift the landscape

8.     Better, Faster Integration Becomes a Key Business Solution Differentiator. Integrating business solutions with each other and with other applications shouldn’t cost more than the business solutions themselves. This is especially the case for SMBs, who usually don’t have the money or appetite for complex or time-consuming integrations. This reality has driven IBM to acquire Cast Iron earlier this year, Dell’s recent purchase of Boomi,  and Pervasive’s strong growth. Because simple, clean integration options save SMBs time and money, they will increasingly become a vital factor in SMBs ‘short list selections. The good news is that options in this area are growing, and include: comprehensive integrated business suites, such as NetSuite; solutions that come with embedded integrators for typical integration scenarios; app stores that streamline integration among participating solutions; and on demand integration marketplaces, such as Pervasive’s DataCloud marketplace.

9.     Hybrid Computing Requirements Accelerate Virtualization Adoption. Even as SMBs embrace cloud computing, they will continue to use packaged applications that are working just fine. In addition, some businesses will purchase new on premise solutions because they best meet their needs, or due to privacy, security or regulatory considerations. For the foreseeable future, most SMBs will need to combine on-premise and cloud solutions in a hybrid computing approach. As virtual server desktop and storage options grow, more midsize businesses will consider cloud enabled high availability and disaster recovery solutions, which until now, have been desirable, but largely unaffordable for SMBs. They will also look to managed services providers for remote management of their on-premise IT infrastructure, and for help in implementing and managing virtualization and cloud-based business continuity/disaster recovery solutions. Look for VMware to lead the way, with others, such as Citrix and Microsoft playing catch up. A growing mobile workforce combined with next-generation virtual desktop solutions, such as IBM Virtual Desktop for Smart Business, will also spark greater interest in the virtual desktop area. However, vendors will need to continue to invest to educate SMBs about the cost savings, management, and provisioning benefits to further SMB understanding and adoption.

10.  Continued Convergence of Unified Communication and Collaboration Suites. In 2010, the collaboration battle swung into full gear, with many vendors introducing integrated solutions that pull together suites to help make it easier for to find and share information, extend and enhance shared knowledge, and connect with people more easily than with email and disjointed point solutions. Because collaboration is the only business activity that every employee engages in every day, large vendors such as IBM, Cisco, Google and Microsoft, as well as a slew of smaller ones from HyperOffice to Zoho will continue to ratchet up efforts and add more capabilities to expand their market footprints. Vendors are also filling in gaps in their unified collaboration and communications portfolios, such as Cisco did with its Tandberg acquisition; Google has done with Google Voice, to add VoIP and softphone capabilities; and as HyperOffice and IBM LotusLive have done with Skype. And of course, all are integrating social networking capabilities as well. As the kinks get worked out and the integrations become smoother, these converged services can help SMBs to declutter their in boxes, improve productivity and save money.

What is Total Cost of Ownership, and Why Should You Care?

(Originally published in Small Business Computing, January 29, 2010)

Technology insiders tend to throw around technical terms and business jargon, assuming people outside the industry understand what it all means. By its nature, technology vocabulary is often confusing and complicated, and insiders often add to the confusion by over-complicating things. To help add a sense of clarity to the confusion, each month, Laurie McCabe, a partner at the SMB Group an dat Hurwitz & Associates, will pick a technology term, explain what it means in plain English, and then discuss why it may be important to you. This month, Laurie takes a look at IT Total Cost of Ownership (TCO).

What is Total Cost of Ownership?

In the IT world, total cost of ownership (TCO) is used to calculate the total cost of purchasing (or in the case of cloud computing, subscribing to) and operating a technology product or service over its useful life. TCO provides a construct to evaluate technology costs that may not be reflected or be apparent in the upfront pricing. For example, if you’re buying a new server, the server (including operating systems, database software and storage) usually accounts for roughly 15 to 25 percent of the overall, long-term costs to install, maintain, upgrade and support the server over time.

Why Should You Care?

Although many companies factor TCO into the purchasing equation, they often underestimate the hidden costs of a new technology solution, which can result in negative consequences. For example, if don’t have the resources you need to adequately maintain a solution, you may skip upgrades and patches required to keep the solution running securely and at peak performance. Or, if you misjudge the time and expense needed to train employees on a new product or service, they may never use it productively.

While TCO helps you to determine hidden costs of a new technology solution, return on investment (ROI) analysis helps to illuminate benefits that may not be readily apparent, such as improved employee productivity or increased customer satisfaction. ROI assessments can be more subjective in nature than TCO, because these indirect benefits are usually harder to measure than direct costs.

When two solutions provide roughly equivalent benefits over the solution lifecycle, but have different types of costs associated with acquisition, maintenance and operation, a TCO comparison gives you a framework to better evaluate competing solutions to a problem, and avoid getting stuck with hidden costs and unwanted surprises.

For instance, a cloud or software-as-a-service (SaaS) customer management solution may provide business benefits very similar to what an in-house customer management solution would provide. However, TCO over a given time period may vary greatly. That’s because the very different business and delivery models and the cost and pricing structures for cloud computing and on-premise solution significantly affect TCO.

For example, on-site solutions usually require significant upfront capital expenditures for hardware, software and application software, along with IT resources to install and configure these components. As a result, first-year costs for on-site solutions are often much higher than those associated with SaaS or cloud computing solutions, and total costs to maintain and manage on-site infrastructure and solutions continue to be a factor over time. On the flip side, TCO analysis may actually favor on-site solutions as the number of users rises and the total time period factored into the calculation increases.

What to Consider

Think about your business and how long you expect to be using a particular solution. In the case of a core business solution, such as accounting or financial, many companies look at a TCO a period of four or five years (generally thought of as the useful life of hardware and software without the need for major replacements).

In less core or strategic areas — which will vary from business to business — you may want to look at TCO over a shorter time period. Regardless, TCO calculations usually include several categories and components, such as:

• Planning and selection: How long will it take to evaluate the solution, the vendor and service level agreements (if applicable)? Consider whether you can try the product for free and/or if you need to invest money or resources to set up a test environment.

• IT infrastructure requirements: For on-site solutions, do you need to buy hardware and software upfront to run the solution? What associated expenses will you have for space, power and cooling? Consider if you will you need to add, shift or outsource IT personnel to manage and maintain the infrastructure, and how much this will cost. For a SaaS or cloud solution, do you need to upgrade or add networking capabilities or bandwidth?

• Application subscription or license costs: What is the per user charge for the license (on-site) solution, or the per user subscription fee (cloud or SaaS solution)? Are ongoing maintenance costs for patches, bug-fixes, upgrades, etc. included in this price or billed separately?

• Application design, configuration and implementation: What resources (internal and/or external) will it take to design and configure the solution so it fits your business needs? Factor in relevant data migration, integration and customization costs, and any system testing necessary.

• Administration and maintenance: For an on-site solution, what is required to transition daily system administration to your internal staff? How much time, resources and money will you need to invest to manage, upgrade, trouble-shoot, patch, etc. over the solution lifecycle?

• Training costs: What IT administrative training and/or end-user costs are involved to get everyone on board and productive in using the solution.

While TCO is very important for most companies, you should also consider other factors — including contract terms, service level agreements, data security requirements and customization and integration needs — just to name a few. Many companies under-invest when it comes to thoroughly evaluating IT solution requirements and options.

By doing a more careful assessment upfront — either with an internal team, or by hiring an independent consulting organization — you will save your company time, money and aggravation down the road.

Did this help you understand total cost of ownership more clearly? Let me know, and send me any additional questions you have on this topic. Also, please send your suggestions for other technology terms and areas that you’d like explained in upcoming columns.

Impressions from Sage Insights 2009

Last week, I attended Insights, Sage North America’s annual partner event. I’ve attended this event for several years now, watching the company’s attempts to create a cohesive brand and strategy across its many small and medium business (SMB)  solutions. At last year’s Insights, Sage had just hired Sue Swenson as North America CEO, so I was very curious to see what progress the company  has made in what has been an exceptionally tough economic year.

First, Some Background

Through a long history of acquisitions, Sage North America has assembled a collection of more than 40 small and medium business (SMB) applications that span financials, ERP, CRM, HR and other business functions. Although many of its brands–including Abra, Peachtree, MAS, ACT! And SalesLogix–have a long history, and large, loyal following, Sage hasn’t capitalized on the cross-selling and upselling opportunities between and among them.

Attracting new customers has also been a tough challenge for Sage. To outsiders, Sage’s large portfolio is confusing, and many of its older solutions haven’t been refreshed with new technologies. Sage has also faced mounting competition in the SMB business solutions space, from traditional SMB rivals such as Intuit and Microsoft Dynamics; enterprise players Oracle and SAP as they push downstream; and a growing array of cloud and open source vendors, such as, NetSuite, Intacct and SugarCRM.

Sage North America has tried to build a more cohesive strategy and reset its market image several times in the past. But for the most part, these efforts have fallen short because each product group continued to devise their solution and go-to-market schemes independently of one another.

My Impressions

It looks like Sue and her team  have done a lot of soul searching, which has resulted in the “back-to-basics” approach she outlined in her keynote address. Noting that the past year has been “transformational”, she elaborated on some of the tough choices Sage has already faced, including staff reductions. But she, along with Motasim Najeeb, Sage’s new CTO and other senior executives also outlined how they intend to move Sage forward. These center on a few key over-arching goals, including:

  • Unifying the Sage portfolio under the Sage master brand. Sage’s is investing in a new corporate campaign designed to make the brand more visually appealing, contemporary and friendly, and to ensure that the Sage brand has a strong presence in each product. This is the first time I’ve seen this much coordination and ongoing discipline over a sustained period of time, and according to Sage, it’s working.
  • Improving customer experience. Sage has two critical, yet often conflicting goals: keeping it’s large installed base happy, and attracting “net-new” customers to the Sage fold. The top priorities for installed base customers are for Sage continually improve quality, ease of use and operation, and fill product gaps in an incremental, non-disruptive way. But to attract new customers, Sage needs updated products, built on newer technologies. Sage provided a roadmap that spells out its plans to modernize Sage solutions without destabilizing the IB. For instance, Sage MAS 90 will add SQL support to compete for new license revenue, but continue to support installed base customers on ISAM, unifying the two via business framework reengineering and an abstraction layer. Sage is also working to ease customer integration and migration pain points with an “integration contract” that will integrate of any of its CRM solutions with its ERP solutions. Balancing all of these concerns may be Sage’s toughest challenge, both technically and financially.
  • Place bets on innovation. Sage is placing its bets on cloud computing, mobility and social media. In the cloud area, Sage has introduced a Web-based community (SageSpark) and services designed for the millions of small business that don’t use accounting software. The vendor has also rolled out turnkey appliances for MAS90 and SalesLogix, in partnership with Applianz, and is making its CRM solutions available via Amazon’s EC2 cloud. On the mobility front, Sage sees many users adopting mobile devices as their primary computing platform, and is integrating context aware and location based services into its CRM line-up.
  • More disciplined appraisal of customer experience. Sage is investing in better metrics and analytics to measure its performance, identify gaps and discover opportunities. It is closely scrutinizing support and upgrade rates, win/loss rates, investing more in its usability labs, and engaging in more one-on-one customer and prospect conversations. Sage is also using Net Promoter to measure customer satisfaction with its partners, and helping partners benchmark and better emulate best practices with a new Net Promoter portal.
  • Refuel partners. Although I don’t know the exact numbers, partner attendance at Insights seemed to be down about 20% or so from 2008. But the partners that were there seemed serious and very interested in how they could more effectively market and sell Sage solutions, and Sage is beefing up partner enablement programs and tools for many of its solutions.

I also sensed a shift in the Sage culture. Employees and executives appeared to be on the same page, positioning and discussing their solutions within the context of a bigger Sage picture. Not easy in a company where acquisition and brand independence are part of the DNA. In general, I got the feeling that Sage becoming more honest in its own self-appraisal, and less focused on products or positioning that were once treated as sacred cows.

How Will Sage Fare?

Let’s face it, a lot of things are more challenging this year than in recent ones—but maybe that’s a good thing. In difficult times, companies have to make the tough calls, set priorities and get focused. Sage North America still has a lot of work to do in all of these areas, but has charted a viable course to renew growth. Only time will tell if it will successfully navigate it.

Meet MrTed

Those of you that follow me on Twitter and read some of the reports I’ve written over the years know I’m very interested free software-as-service (SaaS) offerings, and how companies that take this approach plan to monetize their free services.

Last week, I had a briefing with Jerome Ternynck, the CEO of MrTed, which has been providing MrTed TalentLink solutions for enterprise applicant tracking system (ATS) since 1999. In October 2008, MrTed launched a new, free ATS called SmartRecruiters (still in beta) for small and medium business (SMB) recruiters and hiring managers. SmartRecruiters streamlines the hiring process with an integrated, collaborative solution to help recruiters and hiring managers create postings, broadcast openings, enable candidates to apply online, view, screen and organize applicants, scheduled interview, provide feedback and make job offers.

And, when Ternynck says free, he means it. There are no catches for the SmartRecruiters ATS—no user fees, contracts, hosting or installation fees, upgrade fees, and no limits on the number of users, storage or time. And, SmartRecruiters connects to popular job search sites such as Yahoo! HotJobs, SimplyHired, and Career Builder.

MrTed’s initial target for SmartRecruiters is the 220,000 U.S. businesses with 50 to 2,500 employees. This market has been underserved by traditional, enterprise-oriented ATS vendors, whose solutions have typically been too costly and complicated for the average SMB to use. However, MrTed doesn’t exclude others from using SmartRecruiters–there are no technical or other of limitations to prevent companies of any size from accessing and using the solution. With little marketing fanfare, 600 businesses have registered for SmartRecruiters since the company launched the beta.

Launching a recruitment solution during an economic meltdown seems somewhat counter-intuitive, but when you think about, even if overall hiring is down, the number of applicants for any given position is most likely up. So companies that are hiring must exert just as much or greater effort and expense to hire the best people. As the economy recovers, and more SMBs start hiring again, Ternynck believes that its SmartRecruiters business model will disrupt the ATS market in the same way that Google has done in many areas.

But unlike Google, which relies on advertising revenues to support many of its services, Ternynck plans to monetize SmartRecruiters with integrated fee-based services, such as job posting, background screening, compensation analysis, relocation and assessment. In effect, SmartRecruiters wants to become a resale distribution channel for the providers of these services, helping them cut sales costs and increase SMB market penetration. According to Ternynck, SmartRecruiters will need to convert just under 20% of SmartRecruiters users to one or more of these fee-based services to become profitable over time.

Can MrTed do this, and do it profitably? Ternynck believes that it can. Some of the key factors in its formula include:

·      Using MrTed’s healthy profitable high-end business to subsidize SmartRecruiters for a few years. MrTed’s TalentLink solution has 200 enterprise users, and has been profitable for 20 quarters. Ternynck doesn’t see cannibalization will be an issue; he believes that enterprise customers are used to paying for technology, consulting and support and will continue to spend for higher levels of service and attention.

·      A low cost technology platform. SmartRecruiters is built on single code-base multi-tenant open architecture. Ternynck estimates that technology costs will account for about 10-15% of the total cost of delivering the solution to customers.

·      Viral marketing model. Sales and marketing will be SmartRecruiters’ largest expense, but Ternynck believes that viral marketing—on it own and with its partners—along with a self-service access and delivery model will keep these expenses low as well.

·      Community features. The SmartRecruiters community will rate providers, and supply input about functionality they want and additional services they’d like offered.

·      Under-penetrated market. According to MrTed, less than 10% of its target market uses an ATS system today—it doesn’t need to unseat an incumbent.

Of course, SmartRecruiters must exponentially grow its user community to gain the scale it needs to monetize its free service—at a time when many SMBs just aren’t hiring. But MrTed seems to have enough patience and resources to get through this period. As the economy ticks back up, and companies transition from a cost-cutting mindset to growth, the talent war will heat up again. If SmartRecruiters can broadly educate SMBs about the benefits of ATS, and get the right partners on board, I think that it will be in a good position to make the headway it needs to monetize its free service in this as yet under-penetrated market. 

Let me know what you think about free SaaS services monetized with ancillary services in the following poll!

Demandbase—Can it Turn Your Web Traffic Into Treasure?

Like most analysts, my schedule is usually chockfull of briefings from vendors. Some of these are boring, some are interesting, and once in a blue moon, a vendor comes along with a solution that everyone should know about.

Demandbase ( is one of these solutions. I initially came across the vendor late last fall, when I was judging for the Destination CRM Awards, and Demandbase was one of the nominees. I wanted to learn more, but between the Christmas holidays and my job change, I didn’t get to schedule a briefing with them until a couple of weeks ago.

Here’s why Demandbase is so interesting—particularly now, in this bruising economy. Companies spend a lot of time and money to drive prospects to their Web sites in the hopes of converting them to paying customers. With email campaigns and a dizzying array of social media (not to mention direct mail and other traditional marketing tactics), there are more tools than ever to get visitors to your site.

But most companies—especially in the B2B space—have a tough time harvesting the quality, “best-fit” leads from the irrelevant traffic. How can you tell if your campaigns hitting—or missing–the mark when it comes to reaching and attracting the right visitors to your site?

Demandbase zeros in on this problem by giving B2B companies much more visibility into who is visiting their Web site, and delivering qualified, scored lead services. Demandbase starts by aggregating and scrubbing lists from major database providers such as Hoovers, LexisNexis, Dun & Bradstreet and ZoomInfo. This provides the underlying business contact data for its lead qualification and scoring services, which are integrated with each other.

These services help you weed out the irrelevant leads and target the quality leads. Demandbase offers free, pay-as-you-go, and subscription based services. Demandbase Stream is the freebie service, and even this offers great value. You download a widget from the Demandbase site, and link it to your Web site with some JavaScript in a couple of clicks. Once you set it up, it displays ticker-style information about who’s visiting your site, what search terms they used, and what pages they looked at. It deciphers web traffic URLs, and filters out the ISPs and other irrelevant data. You can also create a Watch List to alert you when existing customers, prospects, partners and competitors are on your site. Demandbase Stream even works with blogs. (However, some blogs, such as, don’t allow you to add JavaScript to your page, so you have to use the company’s image-based tracking system instead. Its not quite as detailed, but I’ve installed it and am finding that even this more limited information is useful).

Demandbase fee-based services work with Demandbase Stream. For instance, when you see a qualified lead in Demandbase Stream, you can use granular search capabilities to locate specific people in targeted geographic areas, and purchase business contact information from Demandbase Direct. With Demandbase Standard, you create a target customer profile, and buy leads that fit your profile one at a time, or by the thousand, directly from it’s aggregated database. Demandbase can send them via email or to your CRM system. Price per lead depends on the score, and is typically about $2 per record. Demandbase is currently offering $20 worth of free contacts so you can take Demandbase Standard for a free test drive.

The company launched Demandbase Professional last week, which is a subscription service that starts at $325 per month. Demandbase Professional provides all of the services above, and additional features that integrate inbound marketing programs like online advertising, search marketing, social network marketing, etc. that drive traffic to your site with your outbound direct marketing programs.

Demandbase closed an $8 million round of funding last summer, and says that it is growing 30% quarter over quarter. This trajectory should continue, since Demandbase addresses a challenge that is ever present, but particularly compelling when times are tough. So compelling that I think the right question is, can your B2B business afford not to try it? 

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