"Tier 1 SMBs account for the smallest percentage of the overall SMB universe," says Sau Lam, New York-based Research Analyst at AMI-Partners. "But, in general, they outspend Tier 3 and 4 SMBs on IT. In the enterprise software arena, this gap is even more pronounced." For example, the study shows that Tier 1 and 2 SBs account for almost three-quarters of SB spending on CRM and ERP solutions, while Tier 1 and 2 MBs account for more than three-quarters of the CRM and ERP investments in the MB market. "Enterprise solutions vendors must understand the different needs and sophistication levels of these segments, and must craft go-to-market strategies with products, marketing, channels and pricing aligned to the needs of each segment," says Ms. Lam.
AMI-Partners' proprietary segmentation model categorizes and analyzes SBs and MBs in four distinct tiers, based on IT behavior, adoption, needs and attitudes for customer targeting, product positioning and focused offerings. By viewing SMB IT adoption through this lens, vendors can gain new insights into the buying propensity of each tier for different types of IT solutions and services. The four tiers include:
-- Tier 1 (Enterprise Adopters) - View IT solutions similarly to large enterprise counterparts. IT is an integrated part of their company strategy and they use IT solutions to drive growth. They account for the smallest proportion of the SMB universe, but they drive the lion's share of IT spending.
-- Tier 2 (Early Adopters) - Embrace new IT solutions to optimize productivity, but lack resources needed to deploy full-scale solutions. They tend to opt for less costly options or point solutions. They account for less than one fifth of the total SMBs.
-- Tier 3 (Value Adopters) - Implement IT solutions after others have done so, with a relentless focus on costs. They need to be educated on the business benefits of IT solutions, and are a pragmatic, economically driven target for IT vendors. They account for slightly more than a quarter of the total SMB universe.
-- Tier 4 (Needs Help Adopters) - Employ IT solutions only at the threat of losing customers or suppliers. As laggards, they view IT as a support tool for business functions, rather than a growth driver. They comprise almost half of the total SMB universe.
Highlights from the report include:
-- In the SB space, Tier 1 SBs make up just over 6% of the universe, but spend, on average, ten times more on IT, and twice as much on CRM (or ERP) solutions, as Tier 4 counterparts.
-- On average, Tier 1 MBs spend about four times more than Tier 4 MBs; Tiers 1 and 2 MBs account for more than three-quarters of CRM and ERP spending.
-- 41% of Tier 1 SBs, and 33% of Tier 2 SBs expect to increase Software as a Service (SaaS) spending. Tier 2 MBs are most likely (46%) to expect to spend more on SaaS. Over 1/3 of Tier 1, 3, and 4 expect to increase SaaS spending.
-- Tier 1 and 2 SBs are more likely to buy software directly from packaged software vendors, while Tier 3 and 4 SBs are more likely to do so from regional or national retail chains.
-- All four MB tiers buy software from a variety of channels. Tier 1 MBs buy directly from packaged software vendors, Tier 2 MBs like to deal with value-added resellers (VARs), Tier 3 MBs buy from Internet/mail order resellers, and Tier 4 MBs prefer regional/national retain chains.
While Tier 1 and 2 SMBs have bigger IT budgets and are more likely to invest in technology solutions, vendors shouldn't overlook Tier 3 and 4 SMBs, who are prime targets for solutions that are easy to use, manage and implement, and designed for smaller budgets. Understanding the similarities and differences among these four segments of the SMB market will help vendors better tailor their solutions to meet the requirements and needs of a fragmented SMB marketplace.
About the Report
Based on AMI's 2006-2007 U.S. Small and Medium Business end-user surveys, the "2006-2007 U.S. SMB Business Applications and Solutions Segmentation Report," authored by Sau Lam, Industry Analyst, and Laurie McCabe, VP, SMB Insights and Solutions, details these and other major trends and spending forecasts across accounting, CRM and ERP/SCM business solution areas, as well as for related areas, including Internet solutions, and IT and business process outsourcing services. The report also examines key related data, such as SMB demographics and attitudes, and trends in channels and purchasing behaviors. Findings are presented granularly, with data broken out by AMI-Partners' 4 SMB Tiers (Tier 1 - Enterprise Adopters, Tier 2 - Early Adopters, Tier 3 - Value Adopters and Tier 4 - Needs Help Adopters). The report highlights the similarities/differences among the four tiers and what their requirements and needs are when it comes to IT adoptions, spending and attitudes.
For more information about this study, AMI-Partners, or our global SMB research, please call 212-944-5100, e-mail firstname.lastname@example.org, or visit the AMI Web site at www.ami-partners.com.
About Access Markets International (AMI) Partners, Inc.
AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence -- with a strong focus on global small and medium businesses (SMBs), and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and "go-to-market" solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.
AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies over the last ten years. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 25 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.
Access Markets International (AMI) Partners, Inc.
Sau Lam, 212-944-5100 ext. 531
In US (New York):
Nancy Carty, 212-944-5100 ext. 581
In EU (London):
Claudia Jachtmann, (44) 208 987 2756
In Asia Pacific (Singapore):