Because of the company’s formidable presence in business environments, particularly in smaller companies, Microsoft makes up more than half of the managed service provider (MSP), reseller and services market. And that makes this week’s partner-focused Microsoft Inspire event full of implications for the channel.
A big focus of the conference is opportunities for Microsoft partners working with small businesses — security, cloud services, application migration, Office 365, and more.
Microsoft’s Landscape and Attitudes study — a collaboration with Analysys Mason — released at the conference was based on an in-depth look at 3,000 small and mid-sized businesses (SMBs) in 10 countries around the world.
This study discusses key findings in the SMB segment, their significance for the Microsoft partner community, and how Microsoft can help SMBs thrive in this modern, digitally enabled economy. It is a robust study, with a number of insights into SMBs representing all types of markets: mature, middle, and developing.
How Does Microsoft Classify SMBs?
Microsoft defines SMBs as organizations with one to 300 employees, which covers about 149 million customers. To date, the sector has been growing 20% year-over-year (YOY), and 80% of that SMB business is transacted through partners.
Microsoft estimates that in 2023, IT spending will grow to about $1.2 trillion for organizations between one and 300 employees. A lot of that will still be for on-premises solutions, but over $500 billion will be cloud-related spending.
Who Is Making Tech-Buying Decisions in SMBs?
Microsoft surveyed companies that have been in business for six to 19 years, with 4% of the companies being in business for less than three years—mostly startups created during or immediately after COVID-19.
The study correlates technology adoption patterns and business results by analyzing a mixed lot of SMBs that reported revenue growth or faced a staggering decline. Here is a brief breakdown of the tech decision-makers in these SMBs:
- Half of the tech decision-makers are senior and are mainly GenX
- A significant number (41%) of millennials are moving into decision-making roles
- 80% of men are tech decision-makers compared to 20% of women
In SMBs in both emerging and mature markets, baby boomers and GenXers are hitting retirement, and millennials are taking over the decision-making roles. Since Covid hit, many people are giving up their jobs and setting up their own businesses, mostly owned by millennials.
How Will Millennial Decision-Makers Affect the SMB Landscape?
Millennials come with a different mindset and buying behavior. They are digital natives born with a cell phone in their hands, bringing a consumer-driven approach. Moreover, millennials have very similar experience and expectations. For instance, they value reviews and demand more than the status quo. Here are some other market influencing millennial traits:
- Millennials are much more optimistic about the future and more confident (40% more) that their company will achieve business objectives
- Millennials prefer to work in companies that are early adopters of technology
- A majority (61%) are inclined toward working for a company with actionable business plans and strategies to make them come true
In short, millennials are early adopters of the technology, which is something that the SMB landscape can use—and a very good thing for MSPs and other channel partners.
Things SMBs Consider When Buying a New Technology
When SMBs start thinking about a new technology solution, 41% of them prioritize reliability, and 40% go for security. But that differs when you ask them about the key barriers to the adoption of new technology solutions. Cost is the key barrier here, especially in low-income markets. It is not true for SMBs in middle-income markets, such as Mexico, China, India, and South Africa.
In high-income markets like Germany, the UK, France, the USA, Canada, and Australia, 23% of SMBs take into account corporate social responsibility (CSR) and environmental, social and governance (ESG) policies and objectives of their potential technology partners when they are selecting the companies they want to work with.
SMB Priorities and Attitude Toward Technology
The smaller the organization, the more likely it is to be focused on survival. It is also less likely to have a business plan and be less optimistic about the future. However, a majority of SMBs (69%) prioritize growth, regardless of their size, with these other factors on the list:
- Profit — 67%
- Improve operations — 64%
- Social goals — 50%
- Keeping the doors open — 48%
60% of SMBs see technology either as important (46%) or essential (16%) for their business, as it offers faster and larger growth.
Last year, Microsoft saw 23% YOY growth in partners focused on SMBs, with a 58% growth rate in Azure sales focused on SMBs. SMBs are now adopting modern technologies like more advanced data security and AI, sending signals that they are ready to invest in technology and grow. Microsoft is helping SMBs through its program called Sure Step, which puts a specific focus on providing valuable solutions for technology problems faced by SMBs.
What Does the Survey Mean for Microsoft Partners?
Rethinking the relationship between business goals and technology is key to boosting SMB growth, and Microsoft partners play a key role in this.
Microsoft partners—and channel partners in general—can help SMBs see the relationship between technology and business success. Some SMBs need help transitioning to the cloud, especially for platform infrastructure and operational management. Others want to leverage the power of security and get more access to information about how their business is operating. Microsoft partners can help SMBs ease that infrastructure overhead and create resilient workforces.
Becoming resilient is the need of the hour for SMBs, as many of them have already seen the impact of not being cloud-ready. It is an opportunity for Microsoft partners to bring that practice forward and offer SMBs a smart digital strategy to support their business.
Sixty-seven percent of the SMBs are planning to increase their annual technology budget in the next 12 months. Looking at this quick rate of technology adoption, SMBs will surely expand their IT spending and see the benefit of having a sustainable, trusted, and investable business with a sound infrastructure. Microsoft’s consulting and managed solutions are meant to address this opportunity. Partners are sitting on the Microsoft technology stack that can serve across the entire domain.
What Do SMBs Expect From Microsoft Partners?
The smallest SMBs are more likely to buy technology from either telco providers or value-added resellers (VARs). Businesses with 10 employees or more have already started to favor managed service providers (MSPs) and cloud service providers (CSPs).
Customers want to work with technology partners that are proactively bringing them technology solutions. They want trusted advisors and local and personalized support options that can easily help them address market opportunities. And since many employees now work remotely, making security and mobile capabilities a necessity for their business success, SMBs are looking for help with becoming trusted, resilient, sustainable businesses.
Where Is the SMB Market Headed?
For Microsoft partners, the opportunity is to use a wide range of Microsoft solutions and services to deepen the customer relationship. They need to help SMBs leverage their diversity or areas of supporting sustainability. To do justice to SMBs’ expectations, Microsoft partners need to understand Microsoft’s solution opportunities, especially related to cloud and security in data. These are all immediate opportunities that are in demand, and SMBs need them to secure more customers, retain existing customers, and continue to grow.