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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Continuously improving IT security is both an SMB challenge and a USD68B opportunity for suppliers

Small and midsized businesses find it challenging to defend their users, applications, and data against external threats. Data from Techaisle’s SMB and Midmarket security research reveals 63% of US SMBs report that they experienced one or more cyberattacks in the last year, contributing to an average of 3.6% of revenue loss attributable to security incidents. For 46% of SMBs, preventing cyber-attacks is one the most pressing and critical IT issues. Yet, 59% of SMBs are very confident that their firms could recover from a cybersecurity incident. Nevertheless, security issues cast a long shadow over SMB IT priorities, especially as firms embrace the benefits of hybrid work, hybrid IT, only to find that their environments become more complex and more challenging to manage and protect. SMBs respond by expanding security budgets – but they lack the staff and expertise to construct effective shields around their organizations. The channel, working with leading-edge products like those from Fortinet, Cisco, Dell Technologies, Palo Alto Networks, has an essential role to play in defending their clients’ SMB businesses against security threats.

The origins of the saying “it’s about the journey, not the destination” may be unclear. Ralph Waldo Emerson, theologian Lynn H. Hough, Canadian rapper Drake, or others may have said the phrase, but its applicability in an IT security context is clear. There is no endpoint at which security is ‘done’; security requires constant updating to stay current with expanding threat vectors.

This requirement for continuously improved IT security is both a challenge and an opportunity for security suppliers.

What is the opportunity?

Techaisle has pegged global SMB security spending in 2023 at $68 billion. However, high IT security spending levels and growth rates mask an underlying sense of confusion concerning safeguarding emerging cloud and hybrid IT environments – and a lack of resources to address this problem. Compounding – or perhaps, causing – the lack of clarity into cloud security issues and the relatively tepid adoption rates for cloud security solutions is that SMB IT operations are under-resourced. Without specialized staff, SMBs cannot keep pace with the constantly changing threat vectors and security options.

The lack of insight by small businesses becomes clear: only 5% have IT security staff. 44% of midmarket firms have an average of three full-time internal security staff, but the demands of a business of this size would exceed a single individual’s bandwidth. The percentages more than double for upper-midmarket firms. Simply put, SMBs lack the bench depth needed to dedicate IT resources to security. Everywhere within the SMB segment, there is a mismatch between available resources and the depth of the skills required to keep pace with security needs.

The lack of understanding of a threat associated with a widely-used platform on the one hand, and the lack of IT staff resources available to address security concerns on the other, produces a clear conclusion: SMBs need suppliers to step up to the delivery of secure IT environments.

In many cases, these suppliers will be the mainstream channel partners who supply the SMB’s technology and act as the IT management presence within the SMB’s business. In other cases, including in many midmarket environments, the source of security products and services will be specialized managed security providers who focus tightly on operating SOCs and protecting client environments. In some scenarios, firms will ‘land’ by entering a client account from one of these positions and then ‘expand’ to serve a broader range of IT supply needs – crowding out competitors who can’t address the risk and compliance issues that are central to the CEO’s mandate.

What is the security supplier call to action?

As security suppliers move towards managing SMB security needs, they need to address the pace at which their clients absorb new offerings. Small businesses will not embrace eight new technologies, nor are midmarket firms going to integrate fourteen new solutions into their environments. Even if this were possible from a budget perspective, it would cause chaos in the business.

Instead, suppliers of security services need to co-create a security roadmap with their SMB, which starts with assessing the customers’ executive teams’ tolerance for risk. What absolutely must be secured, and in what order? The security supplier can then identify the solutions that best fit the customer’s immediate and longer-term needs and then deploy, integrate and manage the solutions over time. After all, data shows that 45% of SMBs feel it will be beneficial for them if an external services firm can help define and implementing security policies.

One key point of exposure in this process is the ability to ensure that different solutions work together. In the cloud world, and increasingly in the on-premise world as well, channel partners and MSPs focus on integrations: the breadth of a single vendor’s product line, plus – and importantly – the extent to which third parties develop and support links to a firm’s products.

There will be no slowdown in the digital transformation of SMBs; their business infrastructure will increasingly rely on technology. Likewise, there will be no slowdown in the threats to that infrastructure; as reliance on technology increases, so does the potential bounty for attackers. And as a result, there will be a continuous and growing need for IT security services – which will sustain firms adept at delivering and managing security solutions that combine expertise and industry-leading technology.

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Collaboration is 2nd top IT priority for SMBs and the top IT challenge for upper midmarket firms

Collaboration is pervasive and critical to SMBs. Techaisle's most recent Small business (1-99), midmarket (100-999), and upper midmarket (1000-5000) survey looked at collaboration as a discrete category and found that it is the second-most prominent solution area and IT priority, behind the cloud. Collaboration is a top IT priority for 96% of SMBs. In 24% of small businesses, 40% of midmarket firms, and 62% of upper midmarket firms, IT is being challenged to implement modern collaboration software solutions and hardware devices. There is a wide-ranging trend towards seeing collaboration as part of the fabric of business activity, rather than merely a means of enabling connections between discrete tasks. It is a core component for digital transformation, and innovative businesses embed it in their organizational DNA.

What is innovation? Innovation relates to SMB's ability to unlock business value through the effective use of digitally transformed infrastructure. Techaisle's SMB survey research data shows that high-growth, highly innovative SMBs differ significantly from low-growth and less innovative firms in their use of collaboration technologies. They are using collaboration solutions enterprise-wide, not in silos. Collaboration is a central component of virtually all of their business processes. They know that innovation happens best in collaboration and not in isolation.

Collaboration solution adoption business drivers are changing

The collaboration adoption drivers are changing. There is a 100% increase in speed of innovation and a 200% increase in support for hybrid work as collaboration adoption drivers. In recent years, the need to build synergy across dispersed team members and respond to customer conversations has become vital business drivers for collaboration solution adoption. Still focused on creating central information repositories, new SMB buyers also emphasize speed of innovation and the need to speed decision making and improve teamwork. Collaboration is necessary for decision agility, business agility, and innovation agility. Our data shows that 72% of SMBs consider collaboration contributes to topline revenue growth which is an outcome of business agility.

The future of work has become very complex. Collaboration is more important in complex, interconnected digital transformation work environments. For example, 58% of SMB employees expect to continue to work from home post-pandemic. As a result, mobility, cloud, and collaboration are important trends in today's market, and they are tightly interconnected. This interconnection empowers collaboration. Collaboration is most powerful when connected, intuitive and pervasive, so deeply ingrained in the employee's infrastructure fabric that its use is a natural extension of their work environment.

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Causation or correlation - The link between approaches to digital transformation and business success

Techaisle’s 2021 US SMB and Midmarket Digital transformation adoption trends research covering businesses from 1 to 4999 employees (collectively named mainstream businesses by Techaisle) shows a correlation between digital transformation and business growth. Unlike many IT market terms, which tie to specific technologies, digital transformation is most often used to indicate an amorphous state. A state in which firms can seamlessly deploy new digital capabilities that streamline current or next-step processes, eliminating the friction inherent in basing these capabilities on manual tasks and physical documents/inputs. SMBs and midmarket firms view digital transformation as a proxy for business process efficiency. For many years, it has been a management goal, embedded, usually without a consistent set of steps and defined outcomes, in the IT plans of a substantial majority of small businesses (1-99 employees) and more than 90% of midmarket (100-4999 employees) firms. The pandemic brought urgency to these plans. The speed reflected the management’s understanding that highly automated processes are essential in a business environment where physical interactions are awkward or forbidden, adding necessity to efficiency as compelling reasons to invest in digital transformation.

Digital transformation segments

To refine the current and planned digital transformation adoption status perspective, Techaisle segmented the market to one of four phrases to characterize organizations’ attitude or approach towards digitalization of existing processes –

  • Holistic: Digitalization is an essential aspect of overall business strategy
  • Inclusive: Digitalization is a meaningful but non-essential aspect of overall business strategy
  • Siloed: Digitalization strategies are underway in some departments, but there is no overall digitalization strategy for the business
  • In the shadows: Digitalization may be occurring in areas of the company, but it is neither a departmental nor overall business strategy
  • Nonexistent: Business has no digitalization activity or plan; firms have yet to begin digital transformation adoption.

Small business adoption of digital transformation is still at a primary stage. In 27% of small businesses (1-99), digital transformation is either “nonexistent, “in the shadows,” or “siloed.” However, this is vastly lower from 51% in 2020, indicating that small businesses drastically improved their approach to transformation within the last year. Midmarket firms, which have higher overall digital transformation adoption rates, are also much more advanced in their approaches. 90% of midmarket firms take either an “inclusive” or “holistic” approach to digital transformation today. Data shows that there has been an increase of 34% within midmarket firms (100-999) and a corresponding increase of 26% within upper midmarket firms (1000-4999) in their approach to holistic digital transformation from siloed or inclusive approaches.

Digital transformation and business growth

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SMB and Midmarket Hybrid work is here to stay – not so fast, says the data

The industry is abuzz with hybrid work discussions, home office, safe return to the office, shared space, meeting room, and hot desk. Although most agree that hybrid work is here to stay, many cannot ascertain the trend's longevity because forecasts tend to be very wrong in volatile times: the companies that issue them revise them frequently. Forecasts extrapolate from current conditions – an approach that works well when current conditions vary from previous periods only incrementally, which doesn't work when the present is changing in ways that don't follow clear, recent patterns. To understand the hybrid work trend, Techaisle surveyed 2096 US SMBs and midmarket firms with employee sizes from 1 to 5000. The results are fascinating.

58% of employees within the US SMB and midmarket firms expect to work from home at least till the end of 2021, in sharp contrast to pre-pandemic in 2019 when 29% of small business (1-99) employees, 9% of employees within midmarket firms (100-999), and 7% within upper-midmarket firms (1000-4999), who worked from home. However, the work from home trend may not play out in the longer term. Encouraged by the increasing rate of vaccinations and economic recovery, 61% to 67% of firms plan to bring back all employees to the office by early 2022. Only 22% are planning for a phased or staggered approach to re-opening offices as soon as it is safe to do so. Higher employee size businesses are likely to be more aggressive in their re-opening plans than the smaller businesses. 11% of firms will most likely permanently adopt an approach allowing some of their employees to work from home indefinitely.

Overall, 97% of mainstream businesses (1 to 5000 employees) feel unprepared to having a long-term remote and hybrid workforce work environment. Between 17% and 44% of small businesses to upper midmarket firms' IT staff is challenged in identifying and deploying hybrid workplace solutions.

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