As part of the ritual of examining local commerce and SMB Saas strategies, Localogy goes right to the source: SMBs themselves. How do they feel about marketing and operational software? What features do they want? And how has their hunger changed during a global pandemic that has hit local businesses hardest?
Localogy’s Modern Commerce Monitor (MCM) Wave 6.1 answers these and other questions across the SMB SaaS product set, which we preview in this Benchmark Bytes series. After the last installment examined SMBs’ preferences for SaaS purchasing, we switch gears to examine how many vendors they work with.
Specifically, when purchasing online services, more than half work with 3 or more providers… however most would rather work with one. Drilling down further, the largest grouping of SMBs (37 percent) work with 5 or more providers. That’s followed by 28 percent who work with 3-4 and 26 percent who work with 1-2.
But again, their preference is overwhelmingly towards fewer vendors. When asked aspirationally how many providers they’d like to work with, 75 percent of SMBs said just one provider is ideal. 21 percent say that they’d rather work with different software providers that each represent a specialized approach. 
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What Does it All Mean?
Going a bit deeper, a few things jump out at us:
— The disparity between current behavior (many vendors) and aspirational sentiments (fewer vendors) is telling.
— This represents an opportunity to close that gap, and satisfy SMBs’ need for fewer vendors and “one-stop-shop” appeal
— The dilemma of course is that performance in various functional areas can better be optimized by a mix of best-of-breed software. So it’s a tradeoff between quality and convenience.
— SMBs are showing the former with their actions but opting for the latter in their words and stated preferences.
— The target (easier said than done) is to build software bundles that have functional excellence across the board.
— As we examined last week, the key word is integration, which is easier to achieve when disparate software is from the same provider.
— Notably, 5 or more providers wasn’t just the most popular response for current behavior, but it was also the biggest mover.
— This response grew from 28 percent in Wave V of the survey to 37 percent in Wave VI
— The corresponding decline was seen in SMBs who use 1-2 software vendors, going from 33 percent in Wave V to 26 percent in Wave VI.
— The biggest environmental change between the two waves was Covid, though it’s unclear if Covid factors caused this growth in quantity of vendors.
— It would stand to reason that Covid drove greater software adoption in general, which would explain the growth in quantity of vendors that SMBs work with.
Time to Shine
Stepping back, SMB online services adoption tracked by MCM continues to grow rapidly. SMB SaaS startups and online services providers are correspondingly thriving with exit velocity, funding, and public-market performance. SMB SaaS is becoming a leading subsector of the broader SaaS universe.
Meanwhile, new SMB SaaS users could represent permanent adopters — a concept that’s accelerated in the Covid era as SMBs are forced to boost their digital transformation. This sends them into the arms of SaaS providers to accomplish a range of operational and marketing functions.
We’ll return in the next installment to go deeper on other areas of SMB technology adoption. That will include the types of SMB SaaS software that resonate most. Let us know what additional insights jump out at you from the above data, and stay tuned for more breakdowns in our Benchmark Bytes series.
