THE ABCS OF SMB TRANSFORMATION: APPS, … SMB segment are around end-to-end solutions that work from...

2013

THE ABCS OF SMB TRANSFORMATION: APPS,

BROADBAND, AND THE CLOUD

THE ABCS OF SMB TRANSFORMATION: APPS, BROADBAND, AND THE CLOUD

2 © Copyright 2013, All Rights Reserved. Use without permission is strictly prohibited.

Table of Contents Executive Summary ........................................................................................................................ 3 Introduction .................................................................................................................................... 4 Drivers for adoption ........................................................................................................................ 5 SMB is a leading indicator of technology adoption .........................................................................7 It is all about the ROI .....................................................................................................................10 Computing industry will be transformed ...................................................................................... 13 SMB segment will continue to aggressively adopt mobile data solutions ..................................... 16 Areas of solutions growth .............................................................................................................. 18 Case Studies ................................................................................................................................... 19 Conclusions .................................................................................................................................... 21 Appendix ....................................................................................................................................... 22



Executive Summary In 2013, the US mobile data revenues will exceed $90 billion accounting for over 165% growth in the last 5 years.1 This makes US the biggest market for mobile data solutions and services. The smartphone penetration in the US went past 50% by mid-2012. The number of applications available to consumer has quadrupled in just the last two years. While the growth in the smartphone segment has been quite impressive, the tablet adoption rate has been the highest in the consumer electronics history. The advent of mobile broadband, powerful computing devices, reliable cloud services and applications have changed the computing landscape forever. At the same time, the Consumerization of IT is changing the face of the enterprise architecture as well. This is felt more acutely in the small-and-medium business (SMB) segment. US is also the biggest enterprise market in the world and the SMB segment represents the more agile and technology-savvy of the ecosystem. In fact, we think it is a leading indicator of how technologies are going to be adopted in the enterprise ecosystem, what trends will prove to be disruptive, which vertical segments will embrace efficiency, and most importantly, how should we think about the ever-changing landscape as we look towards rest of the decade. Small businesses are at the heart of the US economic engine. They represent roughly 45% of the non-farm GDP.2 Every administration, every president focuses on small business growth and job creation. Given the importance of small businesses to the economy, it is worthwhile to look at how their technology needs are changing. Additionally, it is important to understand how they are adopting technology and the impact it is having on their productivity, competitiveness, and efficiency. The technology adoption is also putting some of the traditional industry segments at risk while creating several new growth areas. To understand the impact of mobile broadband, devices, and cloud applications, we conducted a survey of eighty SMB companies of different shapes and sizes across the US serving different verticals. We also looked at the data from over twelve thousand companies in the SMB segment and over twenty thousand larger enterprises. Additionally, we conducted a series of interviews to better understand the motivations, requirements, and feedback of these companies. These companies have been in business for twenty years on average with over two years of experience with mobile data solutions. By understanding how they use and benefit from mobile data solutions, we can better identify the course of enterprise mobility in the US and around the world. 1 Source: US Mobile Data Update 2012, Chetan Sharma Consulting, 2013 http://chetansharma.com/research.htm

2 US Small Business Administration, 2012 http://www.sba.gov/advocacy/7540/42371

http://chetansharma.com/research.htm

http://www.sba.gov/advocacy/7540/42371



Introduction

The global mobile market has undergone a significant transition over the last decade. We are virtually on the verge of exceeding 100% penetration. Connectivity has become the core value of the global economy. The GDP growth is directly impacted by the broadband infrastructure and access to low-cost computing platforms. In 2012, the global mobile industry revenue hit $1.5 trillion.3 This revenue has tripled in the last 10 years. Mobile has indeed become the most dynamic industry and is at the center of technology, business, and policy innovation. Enterprises are not new to mobile technology. They have always looked for solutions and services that help them reach their customer faster, more efficiently and economically. Their investments are ROI driven and need to impact the bottom-line. During the last few years, enterprise mobility market has been maturing at a steady pace. Wireless networks are becoming more reliable and delivery bandwidths are increasing with nationwide 4G networks. Solution provider space has gotten more competitive giving more choice to the enterprises. The landscape is also altered by the slew of smartphones and tablets entering the marketplace. The iOS and Android platforms have given enough reach for thousands of developers to invest their energy in building applications and services for the enterprise segment. Another major change has been that the enterprises are demanding more complete solutions. Implementing too many point and incomplete solutions increases total cost of ownership (TCO) and decreases the ROI in the long run. Companies are increasingly looking to enable their investment to support other enterprise functions such as sales force, field force, supply chain, IT, knowledge management, etc. Also, CFOs are increasingly involved with their CTOs/CIOs to make an informed decision on their enterprise mobility related purchases. Management of devices is an IT function now, but manageability of occasionally connected devices is a challenge especially with the BYOD (bring your own device) phenomenon. While larger enterprises might invest in their own IT department to help install and manage the enterprise applications, the SMB segment wants to only focus on what the application enables. The less resources they spend on managing the mobile data solutions, the more they can focus on generating new revenue. Hence, the requirements of SMB segment are around end-to-end solutions that work from day one. In summary, the combination of fast mobile broadband networks, the ever improving smartphones and tablets, and the cloud driven applications and services are changing the enterprise ecosystem dramatically. The SMB segment is adopting these solutions at a faster pace and this is a significantly positive indicator for the wider market and economy. The ones that are not adopting mobile solutions are going to be left behind their competitors and their service and performance will suffer. 3 State of the Global Mobile Industry, Chetan Sharma Consulting, 2012 http://chetansharma.com/research.htm

http://chetansharma.com/research.htm



Drivers for adoption

The SMB segment has to manage their costs and revenue much better compared to the large enterprises. A single bad decision can derail the progress and set them back. Hence, the solutions they adopt are very ROI driven with short-term payback. We asked our panel about the key drivers for adopting mobile data solutions. The top four reasons (as shown in figure 1) were:

Cost reduction – Over 70% of the respondents said that cost reduction was their most important driver for adopting mobile data solutions. Traditionally, some of the basic functions like customer relationship management (CRM) or field force automation (FFA) used to require a lot of paper work and visit to the central office for instructions and information lookup. All of this can be easily automated and workers can have the information available to them in real-time. For e.g. if during the course of the day, a customer appointment is cancelled, software can automatically route the worker to the next optimized customer location based on context and relevancy without having to disrupt the work flow. Similarly, workers don’t really have to take time away from work to file mundane yet very important timesheets; they can all be automatically updated based on location. All this saves time which in turn reduces cost.

Figure 1. Drivers for adopting mobile data solutions in the SMB segment



Figure 2. Mobile devices and solutions as a percentage of the overall SMB IT budget Work flexibility – Using the always connected devices, the whole operations can be optimized for efficiency giving the central command center several options to deal with exceptions and emergencies. Quicker access to people and information – Over 65% of the respondents picked quicker access to information and people as an important virtue for them to consider mobile data solutions. Take for example, a utility worker who is sent to repair a damaged electrical line but after reaching the site, he finds out that the equipment relies on an older version of the schematic that is only available in the office. Instead of making yet another trip to the back office or have someone describe him over the phone, the drawing can be directly accessed on a smartphone or a tablet. Furthermore, the replacement parts can be ordered directly from the site thus completing the task more efficiently. Use of PTT (push-to-talk) technology enables field workers to diagnose the problem on the spot. Better customer service – The same technology can be used to keep customers up to date about the appointment in real-time instead of providing 2-4-8 hour time windows for repair and delivery. The financial transaction can take place on the spot with a touch of the button. This saves the customer time and hassle and improves service provider customer service.



The number of people using the mobile data solutions in an enterprise depends on the number of workers who are predominately away from the office. A general rule of thumb is that if the person works for 20% or more outside the physical office, they will need some form of mobile data solution – be it vertically focused medical app or horizontal focused solution like CRM. The distribution of the percentage of workforce using the mobile data solutions is shown in figure 3. Amongst our panel, 55% of the respondents have 50% or more workers armed with mobile data solutions.

Figure 3. Percentage of the SMB workforce using mobile data solutions

SMB is a leading indicator of technology adoption

We believe that the SMB segment is a leading indicator of how larger enterprises and consumers in general will adopt mobile data solutions to enhance productivity and reduce costs. While we didn’t conduct research on large enterprises and their adoption of mobile solutions, data from other research4 suggests that the percentage of mobile adoption lags the SMB segment. For example, the 4G adoption amongst the SMB segment (figure 4) is way ahead of the large enterprise segment as well as the consumer base. This clearly shows that SMBs crave speed, efficiency, and performance.

4 Research ---



Figure 4. SMB’s wireless technology use by technology type Similarly, while the national smartphone and tablet penetration is roughly 55% and 22%, the SMB penetration is over 90% and 65% respectively. We took a deeper look into the SMB smartphone penetration by analyzing data from over 12,000 SMBs. Over 26% of the companies have empowered 100% of their employees with smartphones. Over 50% of the SMBs have higher than 75% penetration of smartphones (figure 5).



Figure 5. SMB smartphone penetration Mobile is going to impact enterprises both vertically and horizontally. A number of solutions are horizontal – they are packaged software solutions customized for the use of SMB segment like CRM, fleet and asset tracking, time capture and management, payment processing, form processing, and others. Messaging remains a strong solution being used by almost 80% of the respondent base (figure 6).



Figure 6. The top mobile data solutions used by the US SMB segment

It is all about the ROI

As we mentioned before, for the SMBs, it is all about the ROI. Mobile data solutions have a significant impact on productivity/worker at an enterprise and hence the bottom line. Roughly three-quarters of respondents were satisfied with the ROI of the deployed solutions.



Figure 7. SMB segment ROI from deployed mobile data solutions A deeper look into how these mobile solutions are helping provides some interesting insights. Figure 8 shows how mobile data solutions have helped the SMB panel. Around 80% saw improved efficiency. Roughly 40% saw workers tangibly save time and thus reduce cost of the operations. Approximately 20% saw their profits increase. Many also saw mobile solutions as their competitive advantage which helped them gain more customers. Digging further into the time savings, the panel reported that on an average they saw approximately 40 mins/worker/day savings. For a workforce of 100 operating at $100/hr., this is a direct annual savings of over $1.5 million. Many organizations are seeing significantly more savings by optimizing their workforce for efficiency and profits. Mobile data solutions not only help in making faster decisions but also empower SMBs to make better decisions. With all the relevant information and resources at one’s disposal, the pharmaceutical sales representatives can make the case for the sale on the spot versus waiting days or weeks for scientists and doctors to talk to address concerns and questions. Similarly, using field force automation solutions, companies can reduce errors, increase efficiency, and expand their customer base with the same resources.



Figure 8. Benefits of mobile data solutions for the SMBs



Figure 9. Time savings from using mobile data solutions

Computing industry will be transformed

The enterprise software and solutions industry will be completely transformed because of the use of smartphones and tablets. The IT software spend of enterprises will start to shift from desktop to smartphones and tablets. Any function that can be mobilized will be mobilized. The industry is already seeing significantly high adoption of smartphones and tablets in the SMB segment. We believe that the whole application development industry will move towards the mobile platforms. While desktops will continue to play an important role, the new generation of application developers is focusing primarily on the mobile platform. Even the Internet players like Salesforce, SAP, Oracle, and Microsoft are putting in lot of resources to keep up with the changing phenomenon that is morphing the enterprise landscape.



Figure 10. SMB mobile data devices in use for data solutions As shown in the figure 10, the adoption of smartphones and tablets is significantly higher than the national average. Not surprisingly, the iOS platform dominates primarily because of ease of use of the device, it being the platform of choice for a lot of enterprise developers, and lesser amount of security vulnerabilities. Figures 11 and 12 are illustrative in showing how mobile is impacting the traditional way of doing things. For e.g. the over reliance on paper, fax, desktop and even notebooks is giving way to smartphones and tablets. Roughly 50% of the respondents have replaced their paper forms, around 45% don’t use faxes, over 30% aren’t dependent on their desktops, and approximately 20% of the companies don’t use their call center for command and control. For businesses that rely on their fleet for completing the tasks, they see savings in both the fuel and vehicle costs.



Figure 11. What are mobile data solutions replacing?

As mobile solutions become more pervasive and more robust, we can anticipate transformation and even elimination of certain industries. This has impact on how the policy makers think about job creation and investment and how workers think about their own career growth.



Figure 12. Impact of mobile data solutions on SMB processes

SMB segment will continue to aggressively adopt mobile data solutions

While the overall US (and global) economy is sputtering, the good news is that the SMB segment is planning on continuing its investment into the 2013 calendar year. The panel is planning to provide more mobile data solutions to more employees next year (figure 13). The spend is for both upgrading and purchasing new devices (over 50%) but also for buy cloud based and packaged software solutions (figure 14). Figure 15 shows the areas they are planning invest in. Again, messaging, CRM, SFA, FFA, MDM, payment processing, fleet tracking are the top categories. The new emerging categories of investment are in analytics and business intelligence solutions, mobile marketing and adverting, and supply chain integration.



Figure 13. SMB plans for 2013

Figure 14. SMB purchase plans for 2013



Figure 15. SMB plans for mobile data solutions for 2013

Areas of solutions growth

The SMB community in the US has embraced mobile data solutions but there are several areas of concerns as well. All these are also opportunities for the service provider and vendor community to improve and innovate new technologies and services. As figure 16 shows, security remains the top concern for the SMB panel. Given that the number of devices per worker is increasing rapidly and workers tend to bring their own devices into the enterprise, the management of devices and applications is a key concern. Once enterprises have deployed various mobile solutions, the need for robust MDM (mobile device management) solutions becomes fairly obvious. Over time, workers become dependent on mobile solutions to carry out their day-to-day tasks; roughly 40% expressed concerns about the performance and reliability of the applications as well as the network.



We have also noticed that if an application is introduced into the work place without employee input, it finds resistance and little support. SMBs need to become proactive in their education and training efforts so the deployment is widely appreciated and accepted.

Figure 17. SMB areas of concern (mobile data solutions)

Case Studies

In addition to the analyzing the data from the survey, we touched base with several SMBs to gain further insights into how mobile data solutions and services are changing their enterprise. A couple of the case studies are discussed below:

Westward Pharmaceuticals is a manufacturer and distributor of more than 95 drugs in the US. The company has been using mobile device management and mobile productivity products for over 12 months with over 100 users per solution. These solutions are being used a mix of iPhones, Android and Blackberry devices. Westward’s key motivation for the use of mobile data solutions was to monitor and maintain the business processes to ensure they have real time communication across the entire organization while keeping the costs to a minimum. Additionally, the mobile solutions help the company staying in compliance.



Mobile data solutions have helped the company to use multiple devices without any additional major expense in applications and have streamlined their telecom expenditures and improve efficiency.

Absolutely, we’ve been able to lower overall telecom expenditures in a significant way as well as ensure proper use of devices. As an added benefit it has helped us to bring greater responsibility to our employees. It has allowed us to support our infrastructure better, and make better use of our time so we can focus on other initiatives. I would have to say it has allowed us to deploy applications that create efficiencies in a responsible way, which we can monitor and ensure use is within company guidelines. This in itself is worth a lot, and perhaps gains us back an hour of productivity per employee per day.

The company is looking at new mobile data solutions and bringing in additional 150 users in 2013.

Genco Energy Services has been servicing the rental equipment needs of the oil business. The company leases more than 2000 pieces of equipment like light towers, generators, mobile homes, water systems, and air compressors. The two products it has been using the most are asset management and enterprise business messaging. The asset management application is being used by 525 users while the enterprise messaging application is being used by 140 users. The key motivation for the use of mobile data solutions was the strong desire to communicate with personnel in the field quickly and the need to track the assets that are being used in the field in very remote locations. Prior to mobile data, the company used to use data on paper and fax or email the data. The secretary used to call everyone for messages. However, with the new set of data solutions, the process has been automated and can reach all users instantaneously.

The mobile data solutions have helped us become more efficient with collecting data in a timely manner and have provided information to track our equipment. The benefits have increased productivity and efficiency. In today’s world we need to work smarter and not harder thus making everyone’s job easier which is where mobile data solutions become effective.

Genco is planning to expand both the number of mobile solutions as well as the number of employees using mobile solutions in 2013. Similarly, there are thousands of small and medium sized businesses who have embraced mobile data solutions not because it is “cool” but because they solve specific business problems. As is evident from the case studies of customers in different verticals in different parts of the country, mobile is being used to improve operators, competitiveness,



responsiveness, and overall productivity of an enterprise whether it is a ten person operation or a concern with over thousand strong work force.

While the focus of the research and this paper has been US-centric, the implications of the lessons learned are clearly global. The enterprise market is more mature in the U.S. and as such there is a higher adoption amongst the SMB segment but the lessons can be applied to the SMB community worldwide. In fact, in some of the developing nations where the penetration of landline broadband is low, enterprises are already relying on mobile connectivity and solutions to help them compete locally and globally.

Conclusions

The SMB segment of the US economy plays an important role in creating jobs and improving upon the GDP. The research discussed in the paper illustrates the extent to which the small businesses are using mobile solutions to empower their work force to become more productive and efficient. The use of mobile data solutions have tangible results in terms of hours saved per worker, lower cost of operations, higher revenues and margins, improved ability to reach more customers and compete effectively. The adoption of smartphones and tablets in lieu of notebooks and desktops also gives us an early view of the dramatic shift taking place in computing needs of mobile workers. They are not only abandoning traditional ways of process and data management but the application development environment is also shifting which has huge implications for the ecosystem. The automation of tasks and a focus on worker empowerment to increase margin/worker has implications on competitiveness at every level and how the larger economy grows as well. Nations who invest in mobile broadband, cloud services, applications and services will have a clear and distinct advantage over others. The SMB segment is a clear leading indicator of the enterprise market in terms of solution adoption and direction of the mobile enterprise market. As mobility transforms every industry it touches, the SMB segment adoption of technologies, solutions, and devices will give us a better indicator of wider adoption and use amongst larger enterprises. Majority of the companies in our research indicated a high propensity to invest in the areas of messaging, tracking, CRM, device management and security. The next two years are likely to bring in a tighter integration of mobile data solutions with operations and business processes that yield high ROI and higher efficiency.



Appendix The appendix contains more details about the SMBs researched in this paper.



Disclaimer This project was supported by AT&T. AT&T provided the segment data for analysis and access to its SMB customer base for the purposes of survey and interviews. Chetan Sharma Consulting prepared all the questions, conducted the survey and the interviews, and completed the analysis for this paper.



About AT&T

AT&T Inc. (NYSE:T) is a premier communications holding company and one of the most honored companies in the world. Its subsidiaries and affiliates – AT&T operating companies – are the providers of AT&T services in the United States and internationally. With a powerful array of network resources that includes the nation’s largest 4G network, AT&T is a leading provider of wireless, Wi-Fi, high speed Internet, voice and cloud-based services. A leader in mobile Internet, AT&T also offers the best wireless coverage worldwide of any U.S. carrier, offering the most wireless phones that work in the most countries. It also offers advanced TV services under the AT&T U-verse® and AT&T |DIRECTV brands. The company’s suite of IP-based business communications services is one of the most advanced in the world.

Additional information about AT&T Inc. and the products and services provided by AT&T subsidiaries and affiliates is available at http://www.att.com/aboutus or follow our news on @ATT, on Facebook at http://www.facebook.com/att and YouTube at http://www.youtube.com/att.

About Chetan Sharma Consulting

Chetan Sharma Consulting is one of the most respected management consulting and strategic advisory firms in the global mobile industry. We are focused on evolving trends, emerging challenges and opportunities, new business models and technology advances that will take our mobile communications industry to the next level. Our expertise is in developing innovation-driven product and IP strategy. Our clients range from small startups with disruptive ideas to multinational conglomerates looking for an edge. We help major brands formulate winning, profitable, and sustainable strategies. More information and other research material is available at www.chetansharma.com. Follow our views on Twitter @chetansharma.

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