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SMBs account for 50% of $370 Bn tech spend (US), purchasing more direct or via #marketplaces

SMBs have large buying power, accounting for 50% of $370 Bn tech spend (US). They purchase 🎁 more direct or via #marketplaces, prefer best-in-breed solutions and assisted channels - here is a recent snapshot of their preferences.

🔎 McKinsey surveyed 3,500 US SMBs on their tech needs and buying preferences.

It's insightful to follow how SMBs are changing their spending in this uncertain environment, because enterprise usually follow after some time.

☁️ Importantly #SaaS and #cloud are getting more usage, as companies grow from 25 FTE to 500 - see the graph.

Spend on both of these categories grows 50%,,while other categories are shrinking.

At the same time, SMBs are becoming more sophisticated in spending decisions:

Requesting proposals (RFPs) from multiple providers

Conducting extensive competitive research before making purchase decisions,

Price-shopping across resellers, value-added resellers (VARs), and direct channels.

⚖️ Direct, marketplaces vs partnerships

60% of SMBs (75% below 25 FTEs) have purchased products from Amazon, reporting 90% NPS

SMBs increasingly prefer to have direct relationships with technology suppliers vs going via 3rd party sellers

SMBs with less than 100 FTEs with simpler technology requirements 2X as likely to go directly to providers vs via partners.

To thrive, resellers and VARs need to be genuine 🤝 partners for SMBs - helping them think through their tech requirements, help to optimize costs, etc.

📦 How and what they buy

~50% of SMBs place orders via digital and e-commerce platforms

“Assisted” channels (chat, email) are even more popular than pure self-serve options

Less than 15% of SMBs want to interact via phone or AVR.

50% prefer to buy best-of-breed products rather than bundled ones.

Clear opportunity to cross-sell and to create “stickiness” by offering customers more personalized solutions.

💸 High price elasticity & flexible pricing terms

40% of SMBs will consider switching providers if they can get a better deal. 60% will do that in below 25 FTEs segment

SMBs with 25+ FTEs will 📍 4X more likely to factor in the quality of support and technical specs when they make tech-buying decisions

50% of SMBs prefer traditional software subscription terms

20% experiment with freemium models

50% prefer monthly subscription to longer contracts

Source: McKinsey

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