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Software Companies Need to Design for the Constraints of the SMB

Software Companies Need to Design for the Constraints of the SMB

I’ve been in the software industry for 25 years, with most of that time dedicated to supporting and helping clients in the small and mid-sized business (SMB) sector. It’s a sector of the economy I love for many reasons. For starters, it’s a key source for much of the innovation we see today in technology. I often speak with entrepreneurs who, prior to founding their companies, worked in a particular industry and identified a persistent problem that hadn’t been addressed or spotted an opportunity to take their market in a new direction.

The impact of the entrepreneur’s ambition is keenly felt in the American economy. The sector accounts for nearly half of the GDP, and employs almost half of the private work. Since 1995, they’ve created two out of every three new jobs. Every politician likes to take credit for job growth, but those kudos belong with the entrepreneurs who are driving the economy forward.

They’re also transforming whole segments of the economy with business models that break the mold. Take the rise of direct-to-consumer (DTC) companies, a model that goes against all conventional retail wisdom. But the DTC founders sensed profound changes in consumer behavior and seized on it. Their success has led many manufacturing giants–enterprise-level household names–scrambling to catch up. Some, like Unilever, have gone so far as to purchase successful DTC brands at rather steep prices.

The businesses in the SMB sector have a need for software to run their businesses well. Last year IDC reported that worldwide, mid-market spending on software and services topped $600 billion, of which $186 billion was spent in the U.S. alone. This isn’t surprising, as every growing company needs a CRM, marketing automation, project management, GL, and dozens of other solutions to run their processes and businesses. That makes me wonder, “Why don’t more software companies focus on designing specifically for the needs of SMBs?”

All too often, software companies simply remove a set of features from their enterprise-class solutions and call it the SMB solution. They don’t recognize the very real constraints of SMBs. Chief among the barriers: high implementation costs. According to a 2018 AT&T survey of SMB executives, 75% of companies are eager to try new technologies, but only 30% are able do so thanks to financial and personnel constraints. Unlike enterprise-level multinationals, SMBs don’t have large IT teams and budgets they can dedicate towards a project. That, in turn, means that every platform investment comes with a higher risk. A failed ERP or CRM implementation can be fatal to everything they’ve worked for.

In my opinion, software companies need to rethink how they help their customers realize immediate returns on their investments, and that begins by developing software in ways that eliminate needless complexity and streamline implementation in order to reduce costs, both initial and ongoing.

As an industry, I think we need to recognize that serving the SMB market well requires an approach that caters directly to their needs and constraints. It’s not enough to sell SMBs an enterprise version of a platform; solutions should be built on market-tested and modern technologies that eliminate the high cost of implementation and maintenance, unnecessary product complexity, inflexible architecture and functional limitations that threaten project success.

Does this mean that every software company will need to make changes and investments? Sure, but those investments will be self-rewarding. By respecting the SMB market, we help to ensure its success. That success means they’ll grow, and upgrade their installations. It will also mean that everyone will benefit from their innovation, which is the best benefit of all.

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by John Murdock // John Murdock serves as CEO for Centage. Centage's Planning Maestro offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. John is the driving force behind the company's growth and transformation to become the leading cloud-native planning and analytics platform.

Opinions expressed by contributors are their own.