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Answers to Your Questions About SMBs

Ask Yankee Group analyst Steve Hilton. Send your questions to Please include your name, city, state and a phone number. Only first names and locations will be published.

This month, I am going to look

at leading and lagging small and medium businesses (SMBs) in the VoIP world and begin to tackle the software-as-a-service (SaaS) opportunity. We have more columns waiting in the wings on leasing, managed services and mobility, so keep those great questions coming. Hopefully my answers are as great.

Q: In terms of VoIP adoption rates, which are the leading/lagging industry sectors?

Ed, New York

A: Anecdotal information would suggest that VoIP is appealing to myriad industry segments. Vendors and service providers regale us with tales of VoIP daring-do, bringing their solutions to the distraught SMB masses. However, the appeal of VoIP is less correlated with industry segments and more with communications intensity and purchase cycles for SMBs. That being said, lets turn to some industry-specific SMB survey data and see what we find; well consider those SMBs with 20-plus employees.

When we asked SMBs about their in-office (LAN environment) phone systems, executives from retail, health care, manufacturing and professional services segments were most likely to report having hybrid (TDM/IP) or full-IP phone systems. When we asked SMBs about their communications services (WAN environment), companies in the manufacturing, professional services, health care and construction segments were most likely to have selfdescribed VoIP (rather than T1s, analog lines, ISDN, etc.). Yankee Group believes lagging industries include education, nonprofit, government, accommodation/food services, utilities and transportation. That being said, some channel partners report great successes specializing in one of these lagging industries.

Q: What do you see as the key SaaS product types for resellers to incorporate into their portfolios? I have my own thoughts, of course, but Id like to hear what a guru has to say!

Mike, Dallas

A: Thanks for the question and for calling me a guru, Mike. Ive let my children know that someone thinks I know something!

Click to Enlarge

Source: Yankee Group 2006 SMB Business Applications and Web SurveyNote: Small business = 20-99 employees; medium business = 100-499 employees.

First, lets start with a definition. Software as a service (SaaS) refers to applications (usually business applications, rather than IT applications) delivered over the Internet via a standard Web interface. SaaS providers offer their applications on a pay-as-yougo basis, often with per-month, per-user pricing. Yankee Group differentiates SaaS providers from application service providers (ASPs) this way: SaaS providers write, own and host their own software solutions, whereas ASPs host and sell other parties software applications. SaaS solutions oftentimes are called ondemand solutions, since the applications are ostensibly available from any computer with Internet access.

In general, those business applications that drive revenue rather than lower costs are the best opportunities for agents and resellers. For example, as you can see on the chart to the left, SMBs express most interest in marketing applications, customer relationship management (CrM) and Web portals. Following closely is expense management applications, including accounting and financial packages. Sales force automation (SFA) is another hot SaaS offering, but it doesnt score as highly because its a relatively new concept for SMBs. Other relevant on-demand solutions are those touching the IT/infrastructure spaces, including security and backup/ storage solutions, but well save those IT-centric solutions for another day.

Steve Hilton is the vice president of Yankee Groups Enterprise Research Group with an expertise in converged solutions for SMBs. Hilton manages a team of analysts delivering consulting, research and programs to help vendors and service providers better serve SMBs, midmarket enterprises and large enterprises globally. Visit Yankee Group online at

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