A look at the opportunities and challenges for technology solution providers

1. PEELING BACK THE
LAYERS OF THE SMALL
BUSINESS MARKET
A look at the opportunities and challenges for
technology solution providers
Copyright (c) 2015 CompTIA Properties, LLC, All Rights Reserved | CompTIA.org | research@comptia.org

2. Setting the Stage
 Check-in on the state of the small business market (confirm known assumptions)
 Assess how SMBs learn about, procure, and manage technology
 Evaluate factors driving or inhibiting SMBs from adopting new technologies
 Explore issues related to the relationship between SMBs and the channel
RESEARCH OBJECTIVES
CompTIA members
have access to a
library of over 100
research and market
intelligence reports,
white papers, case
studies, buying guides
and more.
Research can be used
strategically or shared
directly with
customers as part of
the sales process.
 Data from 500 U.S. micro, small, and medium businesses
 Senior decision makers; mix of business and technology-focused individuals
METHODOLOGY
Copyright (c) 2015 CompTIA Properties, LLC, All Rights Reserved | CompTIA.org | research@comptia.org

3. Point 1
The SMB Market Is NOT a Monolith; There Are Many
Nuances and Differentiating Factors

4. 1,000+
500-999
250-499
100-249
50-99
20-49
10-19
5-9
1-5 employees
Large Business Segment
• 0.2% of market by establishments
• 16.8% of market by employment
• 25.8% of market by wages
Total of 9 million business establishments
Medium Business Segment
• 1.7% of market by establishments
• 25.6% of market by employment
• 27.0% of market by wages
Small Business Segment
• 20.4% of market by establishments
• 42.4% of market by employment
• 35.1% of market by wages
Micro Business Segment
• 77.7% of market by establishments
• 15.2% of market by employment
• 12.1% of market by wages
Source: Bureau of Labor Statistics | EMSI | CompTIA
SMB market as defined by the U.S. Small Business Administration equates to firms with 1-499 employees
By firm count, there are about 28 million small businesses; of which, 75% are single-person sole proprietors.
Business Dynamics in the U.S. Economy

5. Segmenting the SMB Market by Industry Verticals
Health care and social assistance, 1.4m
Professional, scientific, and
technical services, 1.1m
Retail, 1.0m
Construction, 744k
Accommodation and food services, 656k
Wholesale trade, 620k
Admin and Support / Waste Mgt. / Remediation Services, 491k
Finance and insurance, 468k
Real estate and rental and leasing, 357k
Manufacturing, 334k
Transportation and warehousing, 227k
Information, 148k
Arts, entertainment, and recreation, 130k
Educational services (does not include public schools), 106k
Mgt. of
companies, 59k
The Top 4 Industry
Verticals Account
for 54% of All SMB
Establishments
Source: Bureau of Labor Statistics | EMSI | CompTIA

6. High Rate of Churn in the SMB Space
• Smalls businesses are a primary source of job creation. However, small businesses also
fail at high rates – only about half of startups survive five years, which means SMBs also
destroy a lot of jobs.
• 10-12 percent churn annually means there is a continuous pipeline of new SMB
prospects
Small Business Owners Come From Many Backgrounds
• Using the broader definition of small business to include sole-proprietors, women-
owned businesses account for 28.8% of the total. Minority-owned businesses
account for 21.5% of the total.
Scaling from Small Business to Large Business is Difficult
• According to McKinsey Consulting, just 19 of 3,197 of publicly traded software companies between
1980 and 2013 reached $1 billion in annual sales. This translates to a 3% success rate for scaling to a
very large size.

7. Point 2
Small Does NOT Mean Simple; SMBs Must Contend With
Many of the Same Challenges That Enterprises Face

8. SMBs Wrestle with Challenges on Many Fronts
People
#1
Technology
#2
Process
#3
Top Strategic Priorities
Reported by SMBs
1. Reducing costs / overhead
2. Reaching new customers
3. Improving operational efficiency
4. Improving staff productivity / capabilities
5. Innovating more effectively
6. Managing competitive threats
7. Improving use of data analytics to make better
/ faster decisions / improve agility
Rank Order of Challenges in
Optimizing Their Business*
*As reported by SMBs
Underlying Many Strategic
Priorities Is the Desire to Simplify
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

9. Ranking of Strategic Priority
Micro
Firms
[1-9 staff]
Small
Firms
[10-99 staff]
Medium
Firms
[100-499]
Reducing costs / overhead 63% 58% 52%
Reaching new customers 68% 57% 40%
Improving operational efficiency 42% 47% 57%
Improving staff productivity / capabilities 28% 41% 41%
Innovating more effectively 22% 28% 27%
Improving use of data analytics to make faster decisions 10% 25% 33%
Managing competitive threats / keeping up with competition 21% 22% 26%
Segmentation of SMB Strategic Priorities
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

10. Point 3
The Democratization of Technology Has Created
Many New Opportunities for Small Businesses;
Yet, “Getting There” is Easier Said Than Done

11. Marketing
CRM
Infrastructure /
operations
Communications
Inventory mgt. /
Supply chain
Staffing /
Expertise
Web presence /
e-commerce /
m-commerce
Productivity
SMBs now have the means to leverage technology across every functional area to level the playing field….

12. SMBs Ready for Improvement in Technology Use
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses
Profile of SMBs Exactly Where
They Want To Be With Technology
21% Micro
15% Small
16% Medium
17% IT role
11% Business role
15% <5 years in business
23% 5-9 years in business
18% 10-14 years in business
13% 15+ years in business
17% Have internal dedicated IT staff
15% Do not have dedicated IT staff
23% View IT provider as a Trusted Advisor
8% View IT provider somewhat/not a TA
Exactly where
we want to be
in tech use
Very close to
where we want to
be in tech use
Moderately close/not
close to where we want
to be in tech use
About half of SMBs feel well positioned with a technology
vision and strategy; the other half, not so much
17%
36%
47%

13. Frequently Occasionally
Seldom/Nev
er
Staff bring issue to execs 14% 52% 29%
IT staff bring issue to execs 18% 42% 33%
Technology vendors pitch 17% 43% 33%
Staff bring issue to IT team 17% 42% 35%
IT firm pitch / recommendation 13% 42% 37%
Departments operate independently 15% 35% 43%
IT staff make own decisions 15% 29% 49%
Triggers for Technology Decisions
32% IT support specialist / helpdesk
29% IT director
22% Web administrator
22% Database administrator
19% Network engineer or administrator
18% Software developer
17% CIO
16% Analytics / business intelligence specialist
30% None of the above
7 in 10 SMBs Have IT Personnel on Staff Incidence Highly Correlated with Firm Size
87% % of medium firms with IT personnel
79% % of small firms with IT personnel
32% % of micro firms with IT personnel
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

14. 6%
20%
16%
48%
42%
22%
11%
21%
36%
39%
44%
43%
20%
20%
50%
25%
30%
57%
Business/operations consultant
Local general retailer
IT solution provider, VAR or tech consultant
Local electronics or computer retailer
Online electronics or computer retailer
Direct from a hardware/software company
Medium SMBs
Small SMBs
Micro SMBs
Sales Channels for SMB Technology Purchases
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

15. 28%
34%
34%
36%
43%
Better understanding of ROI
Examples from other companies /
case studies
Easier way to compare options
Better understanding of integration
Mechanism for staying on top of new IT
products/services
SMB Perspectives on Ways the IT Purchase
Process Could Be Improved
Interestingly, the more sophisticated SMBs appear more likely to seek improvements in the
buying process. The less sophisticated SMBs are generally content with the status quo.
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

16. Point 4
SMBs Rely on IT Service / Solution Providers for a Range
Core of Needs; But, Some Disconnects Do Exist

17. Most SMBs Rely on IT Services / Solutions
71%29%
65% Use IT firms regularly work with
31% Use various IT firms
Tendency Towards Familiarity
and ContinuityHave NOT
used any
type of IT
firm in past
12 months
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses
Inclusive of reselling, break/fix, integration, custom software development, managed services or consulting

18. IT Service / Solution
Micro
SMBs
Small
SMBs
Medium
SMBs
Repair/troubleshooting of computer, network or related IT issues 26% 38% 38%
Deployment, installation or integration of IT or software system 10% 29% 33%
Web design or e-commerce related 14% 29% 29%
Procurement of hardware or software 8% 27% 31%
Cloud computing initiative 8% 23% 35%
Cybersecurity related 7% 22% 31%
General IT consulting / advisory / strategy services 7% 25% 28%
Telecom, communications, A/V related 4% 16% 25%
Mobile app development / mobility initiative 2% 17% 19%
Workflow or business process automation initiative 2% 10% 20%
Analytics / business intelligence / data related 2% 5% 13%
None of the above 58% 20% 16%
Segmentation of SMB Use of IT Services / Solutions
Source: CompTIA’s SMBs and Technology study | Base: 357 U.S. small and medium businesses using IT firms

19. 23%
27%
28%
30%
32%
33%
46%
Needed specific vertical industry expertise
Wanted a second opinion on direction
Systems were getting too complex
Needed to reduce cost of IT support
Wanted help driving business with tech
Wanted to focus internally on core business
Needed greater expertise for new areas
40% among
IT executives
46% among
IT executives
Drivers for Using Solution Provider / IT Services Firm
Source: CompTIA’s SMBs and Technology study | Base: 357 U.S. small and medium businesses using IT firms

20. Disconnects Highlight Realities of Working with SMBs
1. Break/Fix
2. Deployment, installation or integration
3. Web design or e-commerce related
4. Procurement of hardware or software
5. Cloud computing initiative
6. Security related
7. General IT consulting / advisory / strategy services
8. Telecom, communications, A/V related
9. Mobile app development / mobility initiative
10. Workflow or business process automation initiative
11. Analytics / business intelligence / data related
Top SMB Uses of Tech Firms
1. Security related
2. Effectively managing and using data
3. Modernizing aging equipment or software
4. Managing increasingly complex technology
5. Understanding/deciding among choices
6. Getting more ROI from tech investments
7. Integration challenges
8. Aligning business and IT needs
9. Next-gen customer engagement
10. E-commerce or mobile-commerce
Top Tech Areas SMBs Want to Improve
Higher-level, strategic, proactive investments can quickly take a back seat to “keeping the lights on” initiatives
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

21. The Role of Outsourcing and Managed Services
69%
62%
63%
55%
50%
55%
26%
30%
27%
30%
36%
25%
6%
8%
10%
14%
14%
20%
Call center / customer service
Financing and accounting
functions
PR / communications
Fulfillment / delivery
IT related
Payroll
Among micro and small businesses (5-99 employees), the reality is that most functions will be managed internally.
Even if there is a desire to outsource or it makes economic sense, outsourcing may not be embraced.
60% Concerns over costs
38% Concerns over ROI
38% Concerns over quality
33% Not comfortable turning over
sensitive data/systems
27% Don’t want to lose internal
expertise
21% Tried outsourcing in the past and
had a negative experience
Top Reasons SMBs Do NOT
Outsource Business Functions
Mostly
Outsourced
Mostly
Internal
Partially
Outsourced
Source: CompTIA’s Managed Services Trends study | Base: 200 U.S. small businesses

22. Point 5
There is SMB Demand for Digital Business Services and
Opportunities for the IT Solution Providers That Can
Provide Them, But There Are a Few Caveats…

23. Marketing
CRM
Infrastructure /
operations
Communications
Inventory mgt. /
Supply chain
Staffing /
Expertise
Web presence /
e-commerce /
m-commerce
Productivity
SMBs now have the means to leverage technology across every functional area to level the playing field….

24. 77.8%
21.8%
0.3%
The “Sweet Spot”
- Customers with 10-249 employees
- About 2 million establishments
- Typically sufficient scale and budget
to be candidates for many digital
business services
DIY / Budget Conscious
- Customers with 1-9 employees
- About 7 million establishments
- Most likely to use IT services for
break/fix or web design
- Often too small or budget
constrained for many IT solutions
Competitive Targets
- Customers with 249-499 employees
- About 31,000 establishments
- Scale, budget and sophistication to
attract many suitorsNote: this chart depicts a top down approach to market sizing, which means it will not capture
every nuance of the market place. There are certainly examples of very small customers with
sophisticated IT needs and substantial budgets. Similarly, there are examples of larger customers
in the early stages of adopting digital business services with limited resources.
Sizing the Addressable Market for Digital
Business Services in the SMB Space
Source: CompTIA’s SMBs and Technology study | Bureau of Labor Statistics | EMSI

25. Industry Vertical by 2-Digit NAICS
Source: EMSI | BLS | IDC | CompTIA
Average
Sector
Spending
on IT
Sector
SMB
Summary
[1-499 staff]
DIY / Budget
Conscious
Customers
[1-19 staff]
Sweet Spot
Customers
[20-249 staff]
Competitive
Target
Customers
[249-499 staff]
Accommodation and Food Services Low 655,707 322,176 332,371 1,160
Retail Trade Medium 1,036,981 719,717 312,481 4,783
Healthcare and Social Assistance Medium 1,377,558 1,130,114 243,264 4,180
Professional, Scientific, and Technical Services Medium 1,100,248 948,077 150,227 1,944
Manufacturing High 333,818 192,855 135,662 5,301
Construction Low 743,967 617,910 125,051 1,006
Wholesale Trade Medium 620,035 497,473 121,307 1,255
Administrative/Support; Waste Mgt.; Remediation Medium 491,391 382,263 105,699 3,429
Finance and Insurance High 468,400 381,847 85,003 1,550
Transportation and Warehousing Medium 227,103 166,505 59,218 1,380
Real Estate and Rental and Leasing Low 356,675 315,345 41,083 247
Information High 147,583 110,288 36,348 947
Arts, Entertainment, and Recreation Low 130,494 97,742 32,269 483
Educational Services (does not include public schools) High 105,740 72,845 32,169 726
Management of Companies and Enterprises High 59,071 38,529 19,577 965
Segmentation of SMB Market by Industry Vertical
Source: CompTIA’s SMBs and Technology study | Bureau of Labor Statistics | EMSI

26. 16%
17%
18%
22%
26%
29%
42%
Lack of cloud service offerings
Difficult to work with
Lack of industry vertical expertise
Did not put my needs first
Unreliable / poor response time
Lack of innovative solutions
Cost / too expensive
Reasons SMBs Leave One IT Firm for Another
40% very much view
their IT firm as a
TRUSTED ADVISOR,
while 53% do somewhat
Source: CompTIA’s SMBs and Technology study | Base: 111 U.S. small and medium businesses that have used new IT firms

27. Areas for Solution Provider Improvement: a
Combination of Core + Higher Level Areas
• Availability / 24/7 support
• Better communications
• More proactive
• Faster response time
• Respond to issues in a more timely manner
• Meet project deadlines
• Prompt and courteous replies
• More end user training
CORE AREAS FOR
IMPROVEMENT
• Listening to true needs (aka reading between lines)
• Understanding business / vertical better
• Technical roadmap / vision of future
• Make systems more user-friendly
• Better customization to specific needs
• Cloud services
• More/better ideas for integrating different areas
HIGHER LEVEL AREAS FOR
IMPROVEMENT
Based on verbatim comments from SMBs
Source: CompTIA’s SMBs and Technology study | Base: 500 U.S. small and medium businesses

28. The Channel Transformation Balancing Act
Self-Reported Degree of
Business Transformation
12%
52%
36%
11%
59%
30%
12%
59%
28%
High
Degree
Moderate
Degree
Low
Degree
2013
2014
2015
Top Reasons for NOT Transforming
1. Solid performance by existing business
2. Lack of customer demand for new
services / capabilities
3. Lack of resources to pursue new
ventures
Top Reasons for Transforming
1. Cloud
2. Customer demand for new services /
capabilities
3. Desire to move from transactional to
recurring revenue model
Source: CompTIA’s Industry Outlook 2015 | BLS | EMSI

29. BUILT TO LAST
REVENUE

30. Thank You | Questions | Comments
Copyright (c) 2015 CompTIA Properties, LLC, All Rights Reserved | CompTIA.org | research@comptia.org