Researcher Yankee Group surveyed small businesses, those with between two and 999 employees. It estimates that U.S. SME spending on Web-based professional services will grow from $2.9 billion in 2005 to $4.1 billion in 2010, a compound annual growth rate (CAGR) of seven percent.
Yankee also says SME spending on Internet marketing and advertising will grow 40 to 45 percent per year through 2010, from $1.3 billion in 2005 to $9.3 billion in 2010, a high CAGR of 49 percent. The report, “Shifting Web-Hosting and Services Market Dynamics, Part 2: SMBs Accelerate Adoption of E-Commerce and Online Marketing,” details the trend. It says many of the six million small businesses in the U.S. are trying to maximize their online efforts.
But many SMEs have a long way to go. More than 35 percent of those surveyed have no Web site. Some only have “do-it-yourself” Web sites with limited functionality and no customer support. Still Yankee says that a growing number want more online capabilities, including advertising and e-commerce. And many are electing to use outsourced Web services providers because they lack the skills to manage online tasks in house. “Most SMBs lack the necessary time, technical expertise and Internet marketing skills to maintain an effective Web presence and make it valuable, generating leads and revenue,” the report says.
“Do-it-for-me” Web services
“As business users and consumers spend more time on the Internet and broadband adoption has accelerated, more small businesses need robust Web sites and advanced Internet marketing to drive business results,” the report continues. SMEs know they need to have a strong online presence, but they aren’t always sure how to get there. Some prefer “do-it-for me” or “DIFM” arrangements, in which an external partner creates and manages the SME’s interactive site and online services. That allows the company to stay focused on its core business, selling eye glasses or manufacturing ski equipment or whatever.
SMEs want online catalogs, e-mail marketing tools and banner ads, for instance. And they will increase investment in things such as Web site development, search engine optimization, Internet marketing and sponsored search consulting. Search engine optimization is the process by which a company gets higher ranking within search engines such as Google and Yahoo!. The goal is to increase the number of site visitors. Yankee says SMEs may require outside help to perform this task. Likewise, SMEs are outsourcing sponsored search services, in which search engine companies accept paid placements within search results.
Web hosting, search advertising and e-mail marketing
SMEs are also turning to service providers for Web-hosting. As with other online tasks, they may lack the ability to create and maintain a high-quality site. Yankee says SME dollars spent on Web hosting services will rise from $4.4 billion in 2005 to $5.4 billion by 2010. More than ever SMEs understand the value of dollars spent on online marketing and that’s why they are willing to pay for it. Search advertising and e-mail marketing are popular routes.
With search advertising SME companies pay search engine companies each time a user clicks on a sponsored link. The idea is to drive customers to their SME site. With e-mail marketing SMEs can send information directly to customers or potential customers. “E-mail marketing is a powerful tool for opt-in and affinity program marketing to make customers aware of new offerings, presenting a powerful tool to up-sell,” the report says.
Help from web analytics tools
A growing number of SMEs want to know how people find and explore their sites. They can use such data for site refinements and marketing efforts. Web analytics tools or services can help. Yankee says 30 percent of small companies and 50 percent of mid-size companies use some type of Web analytics. “For SMBs that want to gain maximum ROI and value from each Web site visitor, these tools are necessary,” the report says.
And some SMEs want even deeper data analysis, in which their Web services are integrated with other business applications. With such integration, they can link e-commerce data with in-store sales data or data from a customer relationship management system, for instance. Using that comprehensive data set, the company can get a more accurate snapshot for forecasting and financial management.
Such enterprise-wide integration is something that many large companies have been working on for a decade or longer. SMEs lag a bit. As of 2005, Yankee found that just 32 percent of SMEs had integrated Web data with other applications.
SME E-Commerce with SAP Business One
A short section of the report is devoted to mobility and stresses the need for SMEs to develop Web sites that work well with both PCs and mobile devices. It’s a point that Steve Hilton, vice president, Enterprise Research, for Yankee Group highlights. “SMBs need solutions to support their ubiquitous connectivity needs – connecting employees, customers and supply chains anywhere and anytime,” he says.
Hilton also has a few points about SAP Business One, an application targeted for SMEs and offering strong e-commerce functionality. SAP Business One lets a company set up an online store that is integrated with inventory and financials. It includes catalog, shopping cart, order processing and notification, customer configuration tools and customer service, all online and all integrated.
SAP Business One customers include San Antonio, Texas-based PC Wholesale, which uses the application to manage warehouse, production and point-of-sale activities. They also include Wolf Peak, the Layton, Utah-based maker of eyewear, which uses it for accounting tasks. And they include Winnipeg, Canada-based Axe Houghton Group, a direct-response distributor that uses the application to help manage its growth.
“SAP Business One is a strong solution for medium-sized businesses and mid-market enterprises in this ‘anywhere’ world. As SAP continues to make the transition to serving smaller-sized businesses, SAP will continue to improve its SMB go-to-market strategy for Business One and other SMB-appropriate offerings,” Hilton says.