Millennials (born between 1982 and 2000) are attractive prospects in three ways: 1) Interest in leveraging technology; 2) Comfort with advanced mobile capabilities and resources available on the cloud; and 3) Strong interest in doing things better and more efficiently to improve business outcomes, and also enhance the quality of life they enjoy. But only 6-9% of SMBs have them at the top. In ten years things will be different.
In keeping with springtime and a time for renewal, a number of major technology companies are rethinking their SMB strategies and planning game-changing moves. This is especially true for SAP, which has announced a number of tactical steps to support "profound" advances in the SMB market.
Like other Europe-based firms, SAP refers to the small and midsize business segment as "SME." While adhering to the basic definition of SBs as firms with <100 employees and MBs as firms with 100-999 employees, SAP joins with Dell, IBM, and others in extending that upward limit to 5,000 or even higher if the customer can be served with fairly standard products delivered effectively by channel partners. SAP has had success in reaching the SMB segment and notes that over 80% of its 254,000 customers are SMBs. But SAP believes there is significant opportunity to do more.
SAP demonstrated some of its new thinking with new product introductions at the recent CeBIT. It expanded its Edge solutions portfolio, announcing SAP InfinteInsight, Edge edition (following its acquisition of KXEN), and SAP IQ software, Edge edition, which will provide business analytics in an affordable and SMB-friendly way. The company is also offering a cloud edition of SAP's Afaria mobile device management solution that will help SMBs as they move to BYOD solutions that enhance rather than inhibit mobile worker productivity.
SAP also introduced a "Buy Now, Pay Later" plan that provides zero percent financing for up to 24 months on the purchase of SAP products. This addresses the perennial cash flow challenge of small and even midsize firms when it comes to paying for new technology. It makes it possible for companies to "self-fund" investments by having the productivity and profit gains of new technology help underwrite technology acquisition. The program is something of a trial, scheduled to end September 24, but like most trials, success may well lead to continuation.
IDC expects that SAP will likely see the same impact that IBM saw with its own finance plan that was introduced over a year ago. IBM developed a "rapid financing" app for partners and made available $4 billion in partner resources. This proved so successful thatIBMGlobal Finance announced another $4 billion in funding available to credit-qualified customers of partners, with "speed of close" an important objective. IBM's new mobile financing app, a key resource for partners working with SMBs, is now available in over 30 countries. IBM makes funding available for deals as small as $5,000, ideal for SMB prospects.
Taking high initial licensing fees off the table makes a difference to SMBs of all sizes. Sage Software adopted a related approach with its "subscription model" of pricing. Whether on-prem or cloud-based, solutions can be billed on a monthly basis in an arrangement similar to leasing. Financial comparisons between cloud and on-prem solutions will continue to be made, of course, but leveling the financial playing field will make other cloud attributes (ease of management, upgrades, adding new users) increasingly important. IDC expects continuing experimentation with regard to payment models for customers as well as compensation models for resellers and their sales staff.
While product and delivery fine-tuning are both important, the greatest opportunities for technology providers will come from the recognition (and related response) that SMB customers are changing. SAP, IBM, and others are showing new interest and awareness in the emerging attitudes that are informing SMB interest in technology on a global basis. Some like SAP are pointing to "Millennials" as the bellwether leaders (the company calls them "Next Generation SMEs") who are transforming business attitudes in ways that will have impact into the next decade.
IDC research indicates that while more and more Millennials (people born between 1982 and 2000) are achieving positions of importance in their organizations, they really aren't running the show. Only about 7-10% of small or midsize companies indicate that senior management are Millennials (under 35 years old). But it's safe to assume Millennial attitudes are gaining traction - especially among the senior managers who are in the next age bracket, 35-44 years old. We found 15-16% of firms indicate that their senior managers fit this next-older age group (the one Millennials will be moving to over the next 10 years.)
Past IDC survey work that looked at technology attitudes identified a key segment - a group we call SMB 2.0 firms - as having strong views about the importance of technology as a competitive differentiator, and also about the role of the Internet in transforming the ways their companies operate internally. These are exactly the views that characterize Millennials: Interest in leveraging technology, comfort with advanced mobile capabilities and resources available on the cloud, and a genuine interest in doing things better and more efficiently to improve business outcomes and also enhance the quality of life they enjoy. We believe that companies that address these views with effective technology solutions will have a distinct competitive advantage that will only increase as we head to 2020 and beyond.