Techaisle Blog

HP has split into two – HP Inc. and Hewlett Packard Enterprise (HPE). Almost all SMB relevant products and solutions (except PCs and printers) now reside within the HPE organization. The global small and midmarket businesses, SMB (1-999 employee size) market has been the growth engine for the IT industry at large. The reason is quite simply that SMBs account for over 80 percent of businesses in any country – developed or developing. As per Techaisle, SMBs are forecast to spend US$597 billion on IT in 2015. Their IT requirements range from servers, networking and storage to cloud, mobility, analytics, managed services and collaboration solutions. Today, most SMBs are looking towards IT suppliers that offer appealing value propositions in either of three IT delivery models – traditional infrastructure built on-site from hardware and software components; hosted solutions and/or applications most often purchased on a “pay as you go” model; and, cloud infrastructure delivered on-demand.

HPE – the new incarnation of HP and its focus on SMBs with Flex solutions

Since the launch of its “Just Right IT” portfolio (September 2010) for SMBs, HPE has been striving to better serve its SMB customers by consciously lowering cost of solutions, improving agility in deployment and enabling faster time to value in managing IT assets. Just Right IT includes products, services and solutions specifically engineered for SMBs. The portfolio offers management, data protection, communications and connectivity solutions that are designed and priced "just right" to deliver affordability and value to SMBs. These solutions revolve around HPE’s core offerings of servers, storage and networking which comprises of:

• Servers: ProLiant MicroServer, ProLiant 10 Series Servers, ProLiant 100 Series Servers, ProLiant 300 Series Servers
• Networking: 1950 Switch Series, R100 Wireless VPN Router Series, Cloud Managed Networking, and 2920 Switch Series
• Storage: Solutions for the virtualization, SQL Server, Exchange, File sharing and Backup

In November 2015, soon after the split, HPE announced a new portfolio of ProLiant Generation 9 (Gen9) Servers (ProLiant DL20 Gen9 and ProLiantML30 Gen9) that are specifically engineered for SMBs to help reduce cost and complexity to run the new style of IT, web, collaboration, and business workloads. HPE is hoping that the new server portfolio advances its vision for compute and the future of data center technology.

HPE also announced its Flex solutions which bundles various services around its server, storage and networking products including support services, financial services, ISV software, distribution services, and management. It is specifically targeted at three different segments of SMB market at the low end of which are the SMBs who are “starting out” and at the high-end are the SMBs who are “expanding their business”. This does align well with what Techaisle analysts find in Techaisle’s SMB & Midmarket IT Sophistication Segmentation as shown below.

SAP, Europe’s largest software vendor is ramping up its solutions and marketing strategy to boost its SMB market share. Although SAP claims that 80% of its customers are SMBs (largely due to Business One and the Concur/SuccessFactors acquisitions) it is viewed as a company selling large & complex enterprise applications. Some of us who have been in the IT industry long enough remember heated debates in many business board rooms - “Fire the CEO, CFO or SAP?” - nobody dared to fire SAP. To change that perception SAP has been shaping its SMB lens for a while. In a discussion, almost on cue and pre-empting any question on the topic, EJ Jackson, EVP & GM, SAP Anywhere, said, “SAP Anywhere is a solution focused solely on the SMB space. I know whenever one hears the term SME and the words SAP; many shrug their shoulders or sigh a little because historically SAP has thought of companies with two or three thousand employees as a small company. In the case of SAP Anywhere we are actually looking at companies under 1,000 employees, truly in the 500 and under range where SAP Anywhere is focused at this point in time”.

SAP Anywhere – purpose-built for SMBs

SAP recently launched its SAP Anywhere solution for SMBs. It is a purpose-built unified front office application that combines sales, inventory management, order processing, commerce, marketing programs, mobile point-of-sale, customer support & engagement capabilities in one complete solution enabling multi-channel commerce with a multi-channel marketing platform. It is intended to be a mobile first/digital first solution with a high degree of focus on ensuring that it is low touch, quickly deployable (can be deployed within 40 hours) and easily extensible.

Toby Davidson, VP of SAP's SMB Solutions Group, reinforces the point that SAP Anywhere is purpose-built for SMBs, “…it has been built from the ground up specifically for the SMB market segment. We're not taking a large enterprise application and scaling it down to serve functionalities to the small business. That often doesn't work. What we have done is we have built the application from the ground up specifically for the small and medium business, the sub-500 space in mind for the functionality that's being delivered.”

Let us step back for a minute to understand when SAP’s clear and present focus on SMB began. In July 2014, SAP launched SMB Solutions Group, a division focused entirely on the needs of its SMB customers. The aim of this structuring was to address the technology demands of smaller companies, expand SAP’s own business opportunities as it built momentum into the SMB space. Since then the group has been re-formulating SAP’s SMB strategy and building simplified, integrated business applications powered by SAP HANA delivered via the cloud - squarely aimed at solving SMB business challenges.

Prior to SAP Anywhere, SAP’s SMB offerings included:

• SAP Business One: offering sales and customer relationships, financials and operations through dynamic ERP software
• SAP Business ByDesign: runs entire SMB business in the cloud through a single solution (designed for upper SMBs)
• SAP Business All-in-One: to automate core processes for fast-growing SMBs with industry-specific ERP solutions’ requirements
• Others solutions include SAP Crystal Solutions, SAP Lumira, and SAP Edge Solutions

SAP SMB strategy – loyal customers make it worthwhile

SAP’s strategy for selling applications to the SMB market segment has at best been ambiguous in recent years. Though its products are well designed, the problem has been with their positioning in the market. Its flagship SMB solution, SAP Business One had limited success with SMBs. However, Techaisle’s many discussions with SMBs and midmarket firms in different countries reveals that there are many die-hard SAP Business One users. As one CIO of a 175 person pharmaceutical company in India said, “SAP Business One enables a single integrated visibility to the senior management for effectively running the business operations. Moreover, it consolidates business operations of multiple subsidiaries and offices across country-wide network. SAP has also improved its quality of solution - now we can manage everyday inventory, enable faster sales and purchase processes, perform analysis for business growth, and provide better customer relationship and support”.

Techaisle’s SMB & Midmarket Collaboration adoption survey research shows that collaboration is already entrenched within many midmarket businesses. While the creation of a central information repository was the most important business driver for collaboration solutions adoption to the “first wave” of midmarket users, it is not so for the new buyers. Leadership’s desire to move forward with collaboration initiatives was the second most important driver for first wave of adopters, the need to meet leadership expectations is widespread within future adopters as well but this issue has been surpassed by the need to enable faster innovation within the new adopter group.

Key business drivers for collaboration are changing within SMBs and midmarket businesses. Specifically, within midmarket businesses, future collaboration adoption efforts will be driven by demands for decision agility, speed of innovation, customer intimacy and faster time to market.

Early midmarket collaboration solution users tell Techaisle that they were frequently investing in these solutions because a lack of teamwork was impacting productivity. New adopters are saying that they are having difficulty coordinating meetings (as a consequence of increased employee mobility, dispersed team members, ad hoc scheduling), and that they need to address slow decision-making within their organizations. In the Techaisle survey midmarket businesses also rated “need for faster innovation” as the third most prevalent driver for collaboration solutions.

The figure below shows the changes in adoption drivers from early adopters to the new wave of adopters for whom collaboration is one of the top IT priorities for business success.

The first wave of users focused on asynchronous file-sharing cloud services. Looked at as a whole, there are several distinct generations of collaboration solution drivers within midmarket businesses. The first wave, reflected in the early users within the midmarket business segment was reacting to a requirement to create a central repository of information, to leadership mandates and to the need to coordinate geographically-dispersed teams. The next generation of midmarket business collaboration solution adopters will emphasize collaborative responses to specific pain points – slow decision making, difficulty in coordinating meetings, faster innovation – more than their predecessors.

A deeper review of the midmarket data in the Techaisle study provides additional context for the discussion of collaboration solution benefit metrics. Speed of customer/prospect response is very firmly positioned as a key determinant of solution success, and the importance of meeting deliverable timelines and decision accuracy are also underscored. Data also shows that businesses with 100-249 employees view a reduction in the cost of collaboration as a key success metrics.

The type of collaboration solution adoption data shows that the next stage in the collaboration platform/framework is the ability to enable richer online interaction by allowing simultaneous sharing and editing of files from PCs and mobile devices, to enable multiple simultaneous communication modes, mobile video collaboration and to integrate social networks thereby extending collaboration initiatives from file sharing to more interactive solutions.

Mobility is a key driver and a key support requirement for collaboration. There is a sound basis for believing that mobility has extended demand for collaboration solutions and collaboration investment priorities emphasize inclusion of mobile devices. It is expected that mobile video will drive the highest proportion of new technology needs. Data also shows that enabling teamwork and dealing with new mobility/geographic challenges will be a key investment driver and that individual employees will have a greater voice in shaping solution demand. For the IT staff deploying support for multiple simultaneous communications modes (text, chat, voice, and video) will be a key technology requirement.

Techaisle believes that this reflects a couple of broad trends: the initial centricity of file sharing to a more interactive communications in collaboration strategies, a recognition that there are now many different ways to connect midmarket employees beyond email and a move away from collaboration solutions as a stand-alone platform (like email) and towards collaboration solutions as a framework for integrating multiple capabilities.

Techaisle’s SMB & midmarket virtualization adoption research shows that some adoption drivers that were less important in 2013 have assumed increased prominence today, some have dropped off while top two have remain constant and consistent. The figure below shows that some of the top issues, including a need to reduce operating costs, to establish effective backup and recovery strategies, and to provide better security for corporate data and infrastructure, were important to SMB buyers two years ago and are still important today.

Two of the 2013 issues have disappeared altogether because they no longer had the same degree of urgency: “move towards cloud computing” is not a driver when the market has already embraced this move, and “reduce energy costs” is less important when power-constrained operations can move processing to the cloud.

“Deliver services on demand” was the ninth-ranked driver of virtualization adoption just two years ago, but today, when “on demand” has become the default mode of delivery, it is the fourth-highest rated adoption driver. Regulatory compliance is another issue that is more important today (ranked fifth) than it was in 2013 (when it was ranked 11th of 13 issues). Scalability, which was added to the 2015 survey in response to increased market interest, debuts as the sixth most compelling reason for server virtualization adoption, while anywhere/any device application access, which is also new to the 2015 survey, is cited as an important adoption issue. On the other side of the balance, the comparison of 2013 and 2015 research indicates that SMB firms are now putting less emphasis on server virtualization as a means of reducing IT support costs and improving utilization of existing hardware. It appears that the issues that are increasing in importance speak to the ability of server virtualization to support key business objectives, while those framed entirely as means of enabling specific types of IT cost control are declining in relative importance.

Interestingly, the IT channel – which is the primary source of IT supply and advisory services to mid-market businesses – has a more advanced take on server virtualization adoption drivers than the customer community that it supports. Above figure compares the channel’s perception of why SMBs are embracing server virtualization with the actual user motivations. We see that the channel is more focused on support for advanced business objectives – delivery of on-demand services, scalability, and anywhere/any device application access – than is the user community itself. This suggests that channel members (two-thirds of which reports that they sell/support server virtualization) are attuned to evolving needs, which speaks well of the channel’s ability to continue to promote server virtualization within the SMB market.

Despite the buzz around cloud, most SMB workloads are still hosted and managed on site, and SMBs have a clear need to reduce costs and improve efficiency of back-end infrastructure and to establish better control over mobile resources. Virtualization helps accomplish both of these goals, and converged infrastructure provides a platform that sophisticated SMB users are already finding compelling. Techaisle believes that virtualization and converged infrastructure are poised for strong growth in the SMB market because they address specific high-priority IT and business issues. It’s important to remember, though, that different virtualization technologies are aligned with different requirements. Server virtualization addresses corporate need for controlling cost and uncertainty, while VDI and DaaS provide control options for mobility solutions. Although they stand to benefit from user comfort engendered by server virtualization, VDI and DaaS should not be seen simply as “next steps in virtualization” – they play a different role in business and IT strategy, and as a result, will respond to their own logic.

Use of server virtualization is reasonably widespread in the small business market, and nearly universal within midmarket enterprises. Suppliers targeting high-potential server virtualization accounts in the 1-99 employee segment are urged to use Techaisle’s IT sophistication segmentation to identify “Advanced IT” organizations, which are far more likely to be using server virtualization than their “Pre-IT” or “Basic IT” peers. Suppliers are also urged to cultivate relationships with firms that host servers for SMBs, as the growth of virtualization in hosted environments is far higher than growth in on-premise use of virtualized servers.