I SIGNAL Top 10 SMB Trends

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1 I SIGNAL 1st Quarter 2016 Welcome to I-Signal, a publication through which AMI -Partners provides a periodic, graphic review of the strategic issues, trends and directions impacting IT, communications and related industries. Signal: \sig-n l\ n (Webster s) -- 1: something that excites to action; 2: something that conveys notice or warning; 3: an object used to transmit or convey information Top 10 SMB Trends 2016 will bring some new, as well as a strengthening of existing trends to the SMB space. Continuous digitization of multiple aspects of business, intensified competition, discerning customers, and increasing need for high quality talent is disrupting the way SMBs do business. SMB that are leading in this environment are innovative, nimble players with well defined visions and value propositions that are leveraging technology across all business processes. Digital marketing and advertising, sophisticated IT security, collaboration, and business continuity are high on the list of solutions SMBs are seeking out as they seek to transform their businesses. Engaging and selling to these SMBs requires technology vendors to also up their game. Whether selling through channel partners or direct, developing and sustaining a meaningful relationship has become a key success driver. Beyond delivering intuitive and delightful products and user experiences, IT vendors need to be leveraging integrated multichannel engagement strategies to forge long-term relationships. Social media, content marketing, mobile marketing, SEO, sales funnel management and personalized high-touch strategies need to be concurrently deployed to sustain a high level of brand relevance and preference among SMBs. In this issue, we highlight key individual trends and behaviors that will shape 2016 and beyond. Stay tuned for more signals in the future and send us back a few. Best regards, Andy Bose -1

2 AMI-Partners R&D Investments: AMI-Partners: Extensive Global Footprint Global Primary Research (Surveys) Coverage Map Touches All Major Countries Actionable Global SMB Market Intelligence, GTM Strategy & Implementation Models 20 Year History WW Deep End User Tracking WW Channel Partner Tracking Mindset, Buying Behavior, Decision Criteria, RTM, ICT Adoption/Usage/Plans, Cloud Migration, Bundles, Brands Solutions, Skill Sets, Customer Base, Business Models, Vendor Programs, Capacity Planning, Benchmarking Tools, KPIs, ROI Engines, Cloud Transformation Global IT/Telecom Market Sizing Model 110+ ICT Categories 50+ countries;/sub-regional/city level 19 Verticals, 8 employee segments RTM Overlay Actionable Market Segmentation Model & Predictive Database Analytics GTM - Campaigns/Lead Gen/Partner Recruitment; Competitive Benchmarking; Best of Breed; KPI Strong Global Presence Across Americas, Europe, APAC AMI Tracking Surveys Cover Countries Driving over 90% of WW SMB IT/Telecom Spending (SB = 1-99 Employees, MB = Employees, LB = 1,000+ Employees) AMI-Partners AMI-Partners ( I-Signal Feedback I-Signal is an interactive publication. We invite you to help us focus our future coverage of global technology markets. Tell us what issues are important to you. We welcome your comments by at: Ask-AMI@ami-partners.com. I-Signal Contents Welcome to I-Signal Small and Medium Business Trends...3 AMI-Partners Services Portfolio & Expertise...8 I-Signal Staff Andy Bose Marketing Americas/ EMEA Staff Editors Americas/EMEA Production John Rezac Mark Smolenski Jason Atkins Joseph Bertran Rohan Bose Andrew Kirk Publisher Eileen Zimbler Marketing APAC Contributing Editors Deepinder Sahni Yuki Uehara Jyoti Singh Neha Goenka Jackilyn Almazan Staff Editors APAC Devapriyo Chakravarty Raman Chauhan Rati Ghose Abhilash Pillai Subrata Sarkar Partha Sengupta Sonam Prasad Copyright 2016 by Access Markets International (AMI) Partners, Inc. All rights reserved. No part of this newsletter may be reproduced without permission from the Publisher. I-Signal is published quarterly by Access Markets International (AMI) Partners, Inc., 546 Fifth Avenue, New York, NY 10036, Tel: , Fax: , URL: -2

3 1. Post-Cloud 1.0: Cloud 2.0 Will Continue To Disrupt the Way SMBs Conduct Business Evolution from Cloud 1.0 to Cloud 2.0 The shift from Cloud 1.0 to Cloud 2.0 has changed how SMBs operate their businesses. It has driven productivity within SMB organizations by enabling end users to access business applications from anywhere on the device of their choosing, facilitating flexibility and scalability through platform agnosticism and by also facilitating deployment of integrated, as opposed to siloed, cloud applications. Application integration will continue to open vendors up to the idea of bundling/cross-selling their solutions with other vendors to drive revenue and retention. AMI projects that the global cloud services market will reach almost $490B at a CAGR of 15% through This growth will be driven by next-level Cloud 2.0 solutions such as: 2020 Expected Spending: IaaS Server ($30B 30% CAGR) IaaS Security ($14B 29% CAGR) Social Media Marketing ($30B 24% CAGR) SaaS Applications ($60B 21% CAGR) Remotely Managed IT Services ($84B 15% CAGR) 2. Small & Mid-Sized Business Cloud Adopters are Increasingly Rethinking Their Decision Although shifts to the cloud among WW SMBs are dramatic and accelerating, a recent AMI study reveals that a growing number of SMBs are becoming disenchanted with their cloud service providers (CSPs) and some are even re-adopting on-premise solutions. With 18% of SMBs reporting they cancelled one or more of their cloud contracts in the last 12 months to install an on-premise solution (up from 6% two years ago) and only 47% of SMBs indicating satisfaction with their providers (down from 69%), CSPs need to be vigilant about churn among their SMB customers. This shift signals a maturing of the cloud customer base and their new found confidence to let go of providers that do not meet their needs. AMI does not believe this is disillusionment with cloud services the market is too far along for that rather, buyers are choosing to shop around for better experiences, features and prices. WW SMB Cloud Services Cancellations Cloud Service Provider Satisfaction The upshot is that CSPs need to proactively measure and manage churn. Key is understanding why customers choose to leave and what are the leading indicators of churn. Beyond measuring their internal app level usage data for clues, CSPs need to get a sense of the user experience/ satisfaction that their customers are deriving across a number of dimensions ease of usage, completeness of features, pricing, service/support provided, among others. Over time it will only get easier for customers to take their data to another CSP. Their loyalty needs to be cemented before that happens

4 3. Improved User Experiences, driven by Software Defined Networking (SDN) and Network Function Virtualization (NFV) will help to improve SMBs satisfaction with Cloud Service Providers SDN & NFV Drives SMLB Cloud Services Uplift SDN & NFV are the key enabling technologies at the heart of delivering transformative user experiences that enhance customer loyalty, driving increased spend and transforming SMB customers into advocates. A recent AMI study shows that the overall cloud services market expands by 15% over and above earlier projections as a result of SDN & NFV-driven cloud services. Nearly two thirds of SMBs reported they would add more users and more than three-quarters indicated they would proactively advocate for their cloud service providers as a result of the transformational user experiences SDN & NFV enabled cloud services provide. Service providers that deploy SDN & NFV early will be well positioned to capture market expansion as businesses switch providers, add users, add services, and exchange stories about positive outcomes. 4. SMB spending on Mobile advertising surpassed Desktop advertising in 2015 Worldwide SMB Digital Marketing Spending More than half of the $67 B SMB digital marketing and advertising dollars spent in 2015 were used for mobile marketing. This includes search engine marketing (SEM), social media marketing and display advertising. This shift in advertising spend reflects major changes in SMB customers media consumption behavior, which is increasingly mobile. As mobile advertising spend is driving growth for the digital advertising category, SMBs are also increasingly using marketing automation software (e.g. Hubspot, InfusionSoft) to automate and measure marketing tasks and workflows across multiple digital channels. There are over 200 solutions on the market and more than 142,000 SMBs are using marketing automation software. The Global Marketing Automation Software market is expected to grow from $810 million in 2015 to $1.8 billion in 2019, at a CAGR of 10%

5 5. Partners Focusing On and Winning in Digital Channels In the past, channel partners would rely heavily upon traditional marketing methods such as direct mail campaigns and writing articles in trade publications. Partners would use their field sales teams or telesales to convert leads from marketing activities into opportunities. Today, however, partners feel they are most effective when leveraging digital sales and marketing techniques such as selling via their website or via a cloud broker/online marketplace. As a result, partners are attempting to drive traffic to their websites by leveraging digital marketing tactics such as SEO, banner ads, and social media campaigns. Partners Eschewing Traditional Sales & Mar- keting Motions in Favour of Digital Techniques These tactics are intended to increase partners web presence and enable e-commerce capabilities which are reducing sales cycles and simplifying billing processes. Vendors are rapidly adding digital marketing training and certifications to enable digital transformation among partners. Additionally, increasingly savvy SMB customers are leveraging digital platforms (e.g., social media, blogs, videos) to inform decision making and brand selection. Partners who are able to capture SMB mindshare by positioning themselves as influencers on these platforms will succeed. 6. SMBs drive $5+ Billion Disaster Recovery as-a-service/ Online Backup market through 2020 SMB Hosted Disaster Recovery and Online Back-up Spending Outlook Recent AMI Partners tracking studies indicate, SMBs are expected to spend upwards of almost $2 billion on disaster recovery as a service (DRaaS) and online backup services in With SMBs becoming increasingly data dependent impacted by the Internet of Things (IoT) and business analytics (BA) DRaaS and online backup acquire a new sense of urgency. The DRaaS and online backup market will cross the $5 billion mark by 2020 SMBs in North America will drive nearly 23% of this growth

6 7. Digital Transformation Comes to SMBs SMBs are awakening to the realization they will need to undergo digital transformation in a much more meaningful way beyond social media and web analytics. Digital Marketing Usage Among Small and Mid-Market Market Firms With brick-mortar sales stalling while e-commerce continues to surge, digital marketing & advertising are essential for SMBs to compete and stay relevant. Shaping buyer journeys, influencing prospects & customers, and driving brand preference requires additional investments and expertise in blending digital with offline marketing/sales practices and optimizing both for best results. AMI s 2015 tracking of the WW SMB market, found the trends illustrated in the charts on the right Beyond current use of tools and third party agencies, we believe the winners in this space will be those that bring, to some degree, integrated marketing expertise in-house. Or those that are able to reorient and retrain their traditional marketing staff to layer on digital expertise as well. Clearly, not all SMBs can afford to work with digital agencies on business transformation. AMI s tracking shows digitization taking root and all signs indicate it will grow stronger over time. North America presently leads in adoption at this early stage. This transformation will play out long term globally and will change the way SMBs function in the years to come. 8. Security remains a top issue for SMBs as attacks increase in frequency and cost For WW SMBs the Effects of Cyber Attacks are Costly and Lasting AMI s recent global survey indicates 62% of SMBs reported experiencing data and/or security breaches in This represents a significant increase from 2014 when only half of SMBs experienced the same. On average, the cost to address data/security breaches nearly doubled over the past year from $4.2k to just over $8k per incident. The most frequently cited impact of security breaches continues to be system downtime and reduced employee productivity, followed closely by damage to the organization s reputation and permanent loss of business critical data. The Security solutions market is projected to grow at a CAGR of 11% to reach $67 Billion by 2020 from $40 Billion in This growth is primarily driven by SMBs looking to cloud security solutions as well as to on-premise Unified Threat Management appliances to protect their businesses and their data

7 9. Apple facing competition in tablet market as SMBs increasingly looking to Windows devices AMI projects that Windows device share within the tablet market will continue to grow as SMB users look to devices with value propositions that translate better to their business needs. Majority of Windows Tablet Share Growth Expected to Come at Expense of Android and Marginally ios As Windows 10 tablets support PC versions of apps, rather than the oft pared-down mobile versions seen on Android and ios devices, SMBs are planning to invest in the Windows 10 tablet ecosystem. For example, while a creative shop can use the full desktop version of Photoshop on their Windows 10 tablet, they would only be able to use the mobile versions on their Android or ios tablets. Additionally, the convergence of mobile and desktop on the latest generations of tablets represents a challenge for ios developers and a potential boon to Windows tablet manufacturers. Mid-size software developers are not yet convinced that it is feasible for them to create mobile versions of their OS X (desktop) software as the revenue and support models of the Apple Store do not always align with their monetization and support strategies. This could adversely impact adoption of ios tablets such as ipad Pro. 10. Social Media gains greater influence in SMB purchase process Personal recommendations via social media have become one of the key go to informational sources for SMBs looking to make purchase decisions. The rise of this informational source (whether Twitter, Facebook, Instagram, or LinkedIn) is driven by individuals liking or following known brands and stories, and adding them to their personal information feeds. Social Media as an IT Purchase Decision Making Tool Brands that are able to present their imagery in interesting and engaging ways are garnering a large base of followers, which in turn begins to impact brand recognition, mentions, Q&A, and eventually drives sales though indirectly. AMI s SMB tracking shows 52% of SMBs use social media as an input in their purchase process. IT and communications players need to be thinking about the various SMB buyer personas and how to engage them with compelling social content, given their needs, mindset, anxieties, and aspirations

8 I SIGNAL A publication of AMI-Partners AMI-Partners Services Portfolio & Expertise AMI-Partners provides actionable market intelligence and GTM consulting to IT, communications and business services companies, with a strong focus on global small, medium and enterprise business market sectors. We develop analytics-driven GTM strategies including channel partner/rtm programs to help our clients succeed throughout the world. For more information about AMI-Partners and our global services, call , isignal@ami-partners.com, or visit New York, London, Singapore, Tokyo, Bangalore, Kolkata, Mumbai -8