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Study Reveals Enterprise and Early Adopter SMBs Leapfrog SMB Peers in Business Software Spending

NEW YORK-(Business Wire)-June 18, 2008 - Though they represent the smallest percentage of the overall SMB universe, Tier 1 (or enterprise) SMBs spend far more than all other SMB tiers on business software; while they spend the most on IT deployment, the gap is widest in the ERP and CRM arena, according to a new study by New York-based AMI-Partners.

This study, "2008 U.S. SMB Business Applications and Solutions Segmentation Report," applies AMI's proprietary segmentation methodology to provide fresh insights on SMB business solutions adoption, plans and spending. The study shows that enterprise adopters, or Tier 1 SMBs, view the use of IT solutions as a strategic way to drive growth, and that Tier 1 and 2 SMBs account for about twice as much spending on ERP solutions as the other two SMB tiers combined.

AMI-Partners' proprietary segmentation model categorizes and analyzes SBs and MBs in four distinct tiers, based on IT behavior, adoption, needs and attitudes for customer targeting, product positioning and focused offerings. By viewing SMB IT adoption through this lens, vendors can gain new insights into the buying propensity of each tier for different types of IT solutions and services. The four tiers include:

— Tier 1 (Enterprise Adopters) - View IT solutions similarly to large enterprise counterparts. IT is an integrated part of their company strategy and they use IT solutions to drive growth. They account for the smallest proportion of the SMB universe, but they drive the lion's share of IT spending.

— Tier 2 (Early Adopters) - Embrace new IT solutions to optimize productivity, but lack resources needed to deploy full-scale solutions. They tend to opt for less costly options or point solutions. They account for less than one fifth of the total SMBs.

— Tier 3 (Value Adopters) - Implement IT solutions after others have done so, with a relentless focus on costs. They need to be educated on the business benefits of IT solutions, and are a pragmatic, economically driven target for IT vendors. They account for slightly more than a quarter of the total SMB universe.

— Tier 4 (Needs Help Adopters) - Employ IT solutions only at the threat of losing customers or suppliers. As laggards, they view IT as a support tool for business functions, rather than a growth driver. They comprise almost half of the total SMB universe.

Highlights from the report include:

— Tier 1 SMBs make up the smallest percentage of the universe, but their ratio of IT spending proportion in proportion to their segment size is the largest among all tiers. Tier 1 SBs spend about twice as much as Tier 2 SBs, and over fifteen times more than Tier 4 SBs on CRM solutions. The bigger and more sophisticated SMBs become, the more likely they will switch from homegrown and simple contact management applications to server-based CRM solutions. Tier 1 and 2 SMBs are also more likely to lead software-as-a-service (SaaS) CRM adoption, with 11% of Tier 1 and 8% of Tier 2 SMBs indicating that they currently use SaaS CRM.

— Tier 1 and 2 MBs spend about twice as much on ERP solutions than Tier 3 and 4 MBs. Tier 1 and 2 MBs spend four times more on ERP solutions than Tier 4 MBs. Overall, the SMB ERP market is still very fragmented, indicating that horizontally focused players alone are not able to meet industry-specific and other SMB requirements.

— Tier 1 SBs are more likely to currently use and plan to use SaaS solutions. For example, 46% of Tier 1 SBs currently use/plan to use SaaS, while just 21% of Tier 4 SBs use/plan to use SaaS. Not surprisingly, Tier 1 SBs also spend considerably more on SaaS solutions, and 27% anticipate increasing their SaaS expenditures in the next 12 months.

— Less tech-savvy Tier 3 and 4 SMBs tend to expect a faster return-on-investment (ROI) on business solution investments than SMBs Tiers 1 and 2. However, a majority of all SBs expect results within less than 5 months, while a majority of all MBs expect to see a return on their investment within 7 months.

About the Study

AMI's 2008 U.S. SMB Business Applications and Solutions Segmentation Report study highlights these and other major trends in the context of current/planned IT, Internet and communications usage and spending. Products and services covered include established and emerging hardware, software, applications and business process solutions. Based on AMI's annual surveys of SMBs across the U.S., the study track a broad spectrum of issues pertaining to budgets, purchase behaviors, decision influencers, channel preferences, outsourcing, service and support. Also covered are detailed firmographics and critically important technology attitudes and strategic planning priorities. This data points to key opportunities and messaging hot buttons for vendors and service providers seeking to match their offerings to SB market requirements.

For more information about this study, AMI-Partners, or our global SMB research, call 212-944-5100, e-mail ask_ami@ami-partners.com, or visit us at www.ami-partners.com.

About Access Markets International (AMI) Partners, Inc.

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence — with a strong focus on global small and medium businesses (SMBs), and extending into large enterprises and home-based businesses. The AMI-Partners mission is to empower clients for success with the highest quality data, business strategy perspectives and "go-to-market" solutions. Led by Andy Bose, the firm has built a world-class management team with deep experience cutting across IT, telecommunications and business services sectors in established and emerging markets.

AMI-Partners has helped shape the go-to-market SMB strategies of more than 150 leading IT, Internet, telecommunications and business services companies. The firm is well known for its IT and Internet adoption-based segmentation of the SMB markets; its annual retainership services based on global SMB tracking surveys in more than 25 countries; and its proprietary database of SMBs and SMB channel partners in the Americas, Europe and Asia-Pacific. The firm invests significantly in collecting survey-based information from several thousand SMBs annually, and is considered the premier source for global SMB trends and analysis.

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