2008 Small Business Technology Trends Survey: A Peer Perspective on IT in Small Business

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1 Enabling Small Business Success 2008 Small Business Technology Trends Survey: A Peer Perspective on IT in Small Business 2008 All Covered Inc.

2 Contents EXECUTIVE SUMMARY... 3 RECOMMENDATIONS... 3 ATTITUDE TOWARDS INFORMATION TECHNOLOGY... 4 BUSINESS FOCUS... 5 KEY DRIVERS FOR INVESTMENT... 6 BUSINESS PRIORITIES... 7 AREAS OF INVESTMENT... 8 TECHNOLOGY INVESTING... 9 COMMUNICATIONS...10 COMMUNICATION SOLUTIONS...11 BUSINESS CONTINUITY...12 AVAILABILITY SOLUTIONS...13 COLLABORATION...14 SALES AND FINANCE...15 REVENUE GROWTH...16 DATA ADMINISTRATION...17 STORAGE SOLUTIONS...18 SECURITY SOLUTIONS...19 APPLICATION IMPLEMENTATION...20 ABOUT ALL COVERED

3 Executive Summary Most businesses today rely heavily on Information Technology (IT) in order to successfully operate. However, in small and emerging businesses, this reliance on IT and the benefits IT generates, vary greatly from company to company. Much of this variance is directly linked to the owner or IT decision maker s attitude towards IT as either friend or foe. In addition to attitudes toward IT, spending is often tied directly to the maturity of the technology infrastructure. This is reflected in the Infrastructure Optimization Model (http://technet.microsoft.com/en-us/infrastructure/default.aspx) which describes how components of technology are leveraged for the needs of business and how technology moves from being a simple tool to a strategic business asset. To better understand the scope of these issues and determine where future technology investments are being aimed, All Covered, the leading technology services provider for small businesses, asked 100 small companies in March 2008 to share their perspectives regarding the state of their IT initiatives. These companies were all small businesses of less than 100 employees that served a wide variety of industries and operated across 17 cities nationwide. In our survey, we found that small businesses are undergoing a significant change in how they perceive the role of information technology. In 2007, almost half of the clients responding to our survey viewed information technology as a need, but not a strategic asset. In 2008, the view from surveyed clients has reversed, with almost three quarters of respondents viewing information technology as a strategic asset, and something that has significant value to the operations of the business. Businesses that internalized the belief that Information Technology is something that you build your business around experienced: Higher percentage of new products and services launched in 2008 Higher spending on office productivity Higher spending on communication and collaboration solutions for clients and employees A typical focus on delivering better service to customers Recommendations Business owners and decision makers are familiar with how tactical solutions will work for their business, but for strategic solutions, they need to better understand how technology links to their overall business objectives. It is important that businesses assess their IT environment to determine how it can be leveraged to meet their unique needs. Those businesses that have successfully utilized technology, even to the point of building their company around it, yielded higher results and a competitive edge over their competition. All Covered recommends retaining expert resources to assist your business with the evaluation of your IT environment: Develop a formal IT budget and spending management plan that is aligned to your strategic business objectives. 3

4 Evaluate your business objectives and match them to your current IT environment. Look for any deficiencies that can impact your business. Evaluate your future business objectives and ensure that you have the technical resources available through the use of a Technology Plan or IT Roadmap. Attitude Towards Information Technology Although all of our clients utilize technology in their small businesses, we wanted to understand their overall attitude and view of information technology from a business perspective. In addition, we wanted to compare this against views from our 2007 survey to determine how they have changed. In our 2008 survey: 26% of businesses viewed information technology as a business necessity, but not a strategic asset. This is down from 46% in % viewed information technology as a source of competitive advantage for their business, up by 5% from the 2007 results. 37% viewed information technology as something that they build their business around, more than double the number of 18% in Of critical importance are the two categories of A source of competitive advantage and Something that you build your business around. In 2007, this sum of these categories was 48%. In 2008 this sum was 71%. This represents a significant shift, as businesses are starting to understand the value that information technology can provide for their business when leveraged appropriately. 4

5 Business Focus In 2008, many of our respondents are launching new products and services, with 42% of businesses stating that they are launching new products or services. Growth is highlighted also by the following responses: 19% are increasing staff levels by more than 10% 19% are opening a new office location 13% are moving their office to a different location 11% are making an acquisition of another company 34% of respondents indicated that they are doing None of the above, indicating that they have no new initiatives beyond planned growth 5

6 Key Drivers for Investment In 2008, productivity tops the chart as the main driver of technology investment, moving up from our 2007 results, which ranked it at #2. Office productivity in 2008 was the highest driver for technology investment, with 72% of respondents indicating that it was the top driver for investment. Keep existing systems running was the choice of 59% of respondents, which in 2007 was the number one choice. Gartner and IDC surveys indicate that system maintenance will typically be one of the top three selections, as businesses should always maintain their hardware and software investments. 58% view Employee Communications as a driver, which ties in closely with Office Productivity. Client communications ranked at 57%, which is reflected in the investments many companies are making in Voice over IP and other phone systems, as well as collaboration portals. 50% responded that the investment goal is to maintain a competitive edge, which is roughly unchanged from our 2007 survey. Meeting the demands of clients was the response of 38%. Improved security at 38% is roughly unchanged from % are impacted by legal or regulatory requirements. 6

7 Business Priorities The top business priorities don t often change, with this year s selection of Delivering Better Service to Customers still at the top with 61% of responses, but what is of interest is how the priorities shifted from last year, and how they relate to investment and business focus. 58% of companies made Improving Worker Productivity a priority, which is also reflected in its #1 ranking in investment. 50% indicated that the Introduction of new products and/or services was a priority, which is reflected in its #1 ranking as a business focus. 48% are cutting costs. 32% are Ensuring Business Continuity, which is up from This leap may be due to the fact that many of the survey respondents had their regions impacted by natural disasters in % are Differentiating their Company through the use of Information Technology. It is interesting to note that this same group also saw technology as a competitive advantage. 28% are Addressing and Complying with Regulatory Compliance Needs, which is tied closely with investment. 7

8 Areas of Investment In 2008, increased sales and marketing was the primary area of investment for 54% of respondents, which ties directly into responses around the release of new products and services. 43% of respondents are investing in Collaboration, up from 38% in This reflects a growing trend in how businesses communicate and operate both internally and with clients and vendors. Telecommunications surged up to 41%, with only 20% of companies in 2007 making an investment. This is tied directly to earlier responses around delivering better service to customers. Many of these communication investments are linked to conferencing solutions, with the remaining portion upgrading corporate phone systems. 38% of our clients are investing in Remote Access, up from 25% in % of our clients are investing in Increased Security, down from 34% in

9 Technology Investing When asked which technologies small businesses were investing in, the responses were understandably varied: Supporting results listed in areas of investing, 42% of businesses surveyed are purchasing collaborative software in % of business will be investing in Business Continuity and Disaster Recovery solutions. These solutions will bring elements of business continuity into the environment, but only 21% of surveyed business will have a full business continuity or disaster recovery plan in place. 24% of surveyed clients will be doing nothing beyond maintenance. While this appears to be bad in relation to the technological growth of a company and its placement within the Infrastructure Maturity Model, it is an important part of maintaining earlier investments in hardware and software. Proper maintenance ensures that systems will last for the duration of their service lifecycle and beyond, so long as they still fulfill the business purpose they were designed to perform. 9

10 Communications As with many key technologies, All Covered was interested in how small businesses viewed the role of communications in day-to-day operations. Not surprisingly, many of the results tie directly to earlier responses around investing, priorities and attitudes. For 85% of businesses, communications are a critical component of business with 56% of respondents indicating that most of their business is done over the phone or through . 43% responded that communication systems are tied directly into business processes, which directly impacts productivity and service quality. Most of these companies sell services and not products, and are in highly competitive fields. How our business communicates with our clients is what sets us apart from our competition was the response from 35% of our clients, which ties directly into how technology is viewed within the company, and its priorities. A majority of these same clients also responded that Our professional image is demonstrated by how we communicate with our clients and vendors. 10

11 Communication Solutions Earlier survey questions asked about the role of communications within small businesses, but the actual solutions installed are equally important. While not many results were above 15%, it is important to note that the top two being implemented in 2008 were Blackberries or Smartphones and video conferencing. Mobility solutions are seeing an increased penetration in the small business area, especially as the solutions are no longer dependent on a complex infrastructure at the office. Blackberries and smartphones are seeing increased usage by all types of employees, not just sales and management. For those businesses that have web-enabled applications, smartphones enable a mobile workforce to remain in constant contact with the office giving users access to resources when they need it. Video and web conferencing has been increasing due to higher costs in transportation, and lower costs in using a video or web conferencing solutions. Webex and GoToMeeting are the predominant leaders in web conferencing, with solutions available at prices that are reasonable to small businesses. 11

12 Business Continuity Business continuity is the ability for a business to continue operations in the event of an outage or disaster such as a fire, flood or theft. Many companies have different definitions of what business continuity means, as well as different processes around it. With any business, it is important to assess the need for a business continuity plan. If there is an identified need, then a formal business continuity plan is an excellent investment so long as it is tested annually. 61% of respondents stated that is important that their company can quickly return to business within an acceptable period of time and 48% said that it is essential that their company can remain running in the event of an emergency or disaster, but only 1/3 of them actually have a business continuity plan in place. Businesses need to build a plan to meet their backup needs or reset expectations of downtime. 28% responded that their company realizes that Business continuity is important, but doesn t have a plan in place. Not all businesses need a business continuity or disaster recovery plan, but most do. When disasters happen, less than 1/3 of small business survive another year if they don t have a business continuity plan. 24% stated that their employees know what to do if something happens to the main office, but this does nothing to actually address how the business will continue to operate. Employees knowing what to do is only the first step: an effective continuity plan needs to address how the business will continue to effectively operate. The U.S. Department of Labor estimates over 40% of businesses never reopen following a disaster. Of the remaining companies, at least 25% will close within 2 years. Over 60% of businesses confronted by a major disaster close by two years, according to the Association of Records Managers and Administrators. Successful planning will prevent a business from becoming another statistic. 12

13 Availability Solutions Availability solutions are used to ensure operational up-time of services and solutions. Often availability solutions are tied directly into business continuity, but they can operate with a singular purpose. Respondents indicated investments in the following areas: 32% are upgrading their backup software. This tops the list because small businesses are capitalizing on recent advances in backup software that have feature-sets relevant to their needs. 28% are upgrading their backup media. Many of these clients are moving away from traditional tape-media to removable hard drives, due to the increased speed and lower cost. 21% are implementing business continuity or a disaster recovery plan. This number is larger than last year, but probably due to events in 2007 that have made small business re-think how they respond to regional disasters such as fires, flooding and hurricanes. Hosted applications and servers are starting to show up in the small business environment due to their relative low cost in relation to having a physical server, and for businesses that have more than one site. 17% of respondents are implementing a hosted application, and another 10% are implementing a hosted server. Virtualization at the server and workstation level is starting to penetrate the small business space. Virtualization provides availability to businesses because the actual operating system is not dependent on hardware-type: if the hardware fails, the virtual system can be rapidly moved to another type with minimal configuration. 13

14 Collaboration Collaboration encompasses all aspects of how data is shared internally, with vendors and with clients. Collaboration methods are often closely tied to office productivity, and increasingly with enhanced customer service through portals and other web 2.0 solutions. An overwhelming 61% of survey respondents indicated that they have an intranet for employee productivity, document storage and collaboration. A dynamic intranet can be a valuable tool for employees and help with office productivity. Extranets and other client-level collaboration tools finished the survey at 17% and below, depending on the solution and how it is deployed. An effective extranet can increase client satisfaction and communication, as well as increase internal productivity because of features such as document sharing, document tracking (who is making edits), shared calendars specific to a project or a team, shared notes, shared tasks, and a central repository of knowledge or communication. Extranets are outstanding tools to collaborate with clients and vendors without exposing the corporate environment to security risks. 14

15 Sales and Finance Sales and finance investments in 2008 for small businesses are showing an increase in the use of applications and solutions for business intelligence and customer relationship management, which may be tied into the release of new services, and their associated sales and marketing activities. In this survey, respondents indicated the following when asked what investments their company is making in 2008 in the area of Sales and Finance: 34% Other. Respondents indicated that they were hiring sales and finance staff, as well as senior executives in sales and/or finance. 26% Utilize a 3 rd party payroll/accounting management service such as Administaff or ADP. 24% are investing in a billing or accounting software for their internal staff. 15% are investing in a business intelligence or analytics software. While this number appears small, it is large considering that business intelligence solutions are complex operationally, and require effective business process to be in place in order to effectively implement them. 13% use a localized CRM solution. 11% use Salesforce.com or other hosted solution. 7% utilize a finance company for capital expenditures. 15

16 Revenue Growth In our survey, we wanted to understand the revenue growth for our clients, especially in relation to the type of projects that were scheduled for Revenue growth between 2007 and 2008 showed a lot of changes from respondents indicating more growth anticipated in 2008, and a corresponding larger push for technologies that support new products and services, as well as clients. 8% of survey respondents indicated no growth or a decline in 2008, which is down from 21% in While growth is down, many of these clients are deploying solutions to enhance productivity and collaboration. 17% responded that less than 5% growth was anticipated. Many of these clients are deploying new communication solutions and implementing solutions around sales and marketing. 39% responded 5-10% which is a 5% decrease from These respondents are deploying a wide variety of solutions, with most implementing new storage solutions and upgrading existing systems. 34% responded with anticipated revenue exceeding 10%, up from 24% in These respondents have many solutions planned for implementation primarily designed to meet the needs of their clients, and enhance the operations of the business. These companies were early implementers of Exchange 2007, Vista, mobility, and collaboration software. 16

17 Data Administration Data is being generated on a constant basis, and each company uses different methodologies and solutions to effectively manage the document flow. Statistics indicate that businesses are generating about 30% more data each year, especially as regulations mandate data retention policies for many industries. For all businesses, the growth in data will result in increased needs for capacity, and more intelligent means of managing, archiving and administering data of all types. In 2008, respondents indicated the following solutions will be installed in their environment to manage data: 37% will be installing a document management solution to track, store and administer documents and/or images of paper documents. The move to a paperless office creates a significant demand for solutions that can effectively manage the volume of data that is generated. Images are not only created, but they need to be sorted, indexed, protected, secured and backed up. 34% will be implementing an archiving solution to manage the company s messages to preserve all traffic. Many regulations require businesses to archive their corporate for up to seven years. For businesses that have a high risk for litigation, often legal counsel recommends retaining for longer durations. Effective archiving solutions prevent from being altered or deleted, and provide the means to search for key data as needed. 18% will be installing a compliance solution tied to a specific regulation or compliance need, such as HIPAA or SOX. Compliance needs are specific to the business involved, but often include data protection, reporting, enhanced security and change-management around the type of data in the environment. 7% will be installing an Instant Messaging archiving solution to preserve all IM conversations in a searchable and indexed format. Similar to archiving, IM archiving solutions are useful in an environment where instant messaging is a common form of business communication, and where that type of information needs to be captured. 17

18 Storage Solutions Data needs are growing, and so is the need to effectively store the increasing volume of data. The type of data, how it is used, and how users access it, dictates the type of solution that needs to be in place within the business environment. In addition, the value of the data often creates the need for additional redundancy and availability. Survey results around storage solutions indicate: 44% of companies are performing hard drive upgrade for existing file servers to expand their capacity. Adding drives is the easiest way to maximize the value of file servers, extend their usability, and add capacity to an environment without adding complexity. Most servers have additional capacity for hard drives, and the capability to extend the additional capacity into their redundant systems. 28% are installing a disk duplication and replication solution to copy/replicate data from one device to another over the LAN or WAN. These types of solutions are designed for availability and not capacity. Disk duplication will keep identical copies of data at two locations, either local or remote, so that a problem at one site will not impact the operations of the other. Network-attached storage (NAS) and storage area networks (SAN) are simple ways of adding large amounts of capacity into an environment. Both systems are scalable to multiple-terabytes, but they are different in how they are utilized. NAS devices are networked and operate independent from a server environment. SAN devices are attached to a server, utilizing the server for security, permissions and administration. All indications are that SAN and NAS deployments will continue to grow beyond 18% in

19 Security Solutions In 2007, most security solution manufacturers started targeting small businesses with applications and appliances that are designed to meet their needs. These solutions were designed to provide best of breed protection with ease of use and administration. In addition, new security solutions are designed to be integrated within a defense in depth environment. Defense in depth is an approach that provides for layered security protections for businesses, covering the perimeter, internal systems, vulnerabilities, users and data. In 2008, businesses will be installing the following solutions: 38% of respondents will be upgrading their protection. For most businesses, is a critical part of their operations. Spam and virus threats continue to grow, and most businesses are upgrading their perimeter protection to ensure that they are protected against viruses, spam and phishing attacks. As part of a defense in depth security architecture, All Covered recommends that all businesses have a robust protection solution in place. As a second layer of defense, 34% of our clients will be upgrading their local anti-virus, at the workstation and file-server level. This reflects not only investments in security, but with workstation upgrades to Windows Vista, which has enhanced security capabilities. In alignment with initiatives around productivity and collaboration, 31% of respondents will be deploying Remote access or VPN solutions, enabling a mobile workforce to access corporate resources securely from any location. 19

20 Application Implementation It is not surprising that Vista tops the list for applications that will be installed by small businesses in Windows XP professional has officially been retired, leaving Vista as the only desktop operating system available for the Windows platform. As a result, 34% of survey respondents will be installing Vista this year. Other results are: 28% will be installing Microsoft Office 2007 on workstations. Because Office 2007 works exceptionally well with Vista and Exchange 2007, this number is not surprising, and reflects the results we received around Exchange % of respondents stated that they will be implementing Exchange 2007, which is up 10% from last year. 24% of respondents will be implementing Microsoft SharePoint Server, which is up almost 10% from last year, and represents an emphasis on both internal and external collaboration efforts and productivity. 24% of respondents will be deploying Windows 2003 Server, partially to replace older production servers in their environment, and the remaining number to support new installations of Exchange 2007, which has new hardware demands that typically negate the option of upgrading an existing server for installation. VMware, CRM and other specialized applications are being deployed in small numbers, but specifically tied to business initiatives. This trend is expected to continue through the year, but we expect to see the percentage of VMware installations increase, as it moves from a perceived specialized application to one that has broad usage in a standard business environment. 20

21 About All Covered Your business can perform better with smooth running information technology (IT) systems. All Covered can help. Do you have one or more of these issues? Losing access to information would quickly impact your business Running IT is not your priority, but it takes up time and resources You need help planning an IT strategy for your business Your business is growing, you are moving offices or opening new locations The IT help you use is either no longer available, overstretched, poor quality or expensive Valuable business information is stored on your computers, but you lack a good back-up system Viruses, spam and desktop problems are burning up a lot of time Staff need to be able to access information while traveling Have problems connecting multiple locations All Covered's unique process is to have our local consultants: Listen to your business and technology issues Recommend and manage an affordable solution customized to your needs Provide responsive on-site customer service from our local office, backed by around the clock monitoring All Covered does not sell hardware or software, so we can independently recommend the best evolution path for your company. Our staff are all full-time professionals. With All Covered, you can have all the benefits of hiring a permanent employee without the expense. You will increase the reliability, security, and performance of your computer equipment and software and improve the productivity of your employees through an IT solution that costs much less than you might think. Local Help On The Level You Need Contact us to arrange for an assessment of your current IT environment or to get more information about how our services can benefit you. With local offices across the United States, we're sure to have one near you. us at or call us toll-free at (866) Headquarters: All Covered Inc. 101 Redwood Shores Parkway, Suite 110 Redwood City, CA

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