Benchmark Bytes: How Are SMBs Adopting Online Services?

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’ mobile app adoption, we pan back this week to examine their broader online services adoption.

Starting at a high level, 85 percent of SMBs are using online services to help run their businesses. This is up from 72 percent last year and 35 percent in 2017. That means that SMB online services adoption has grown 143 percent in four years. These data were gathered in January and February so have some Covid-influence.

If we drill down into the types of online services they’re adopting, the plot thickens. Specifically, finance and operations solutions are in the lead with 66 percent adoption. That’s followed by payroll and HR (53 percent), marketing and advertising (52 percent), supply chain services (49 percent) and CRM (40 percent).

Localogy members can access full charts and SMB survey reports.

What Does it All Mean?

Going a bit deeper, a few things jump out at us:

— 85 percent penetration among SMBs (with 143 percent growth over four years) is healthy growth, while still leaving some headroom for further expansion.

— Finance and operation software’s adoption lead isn’t surprising, due to “mission-critical” functions like bookkeeping and accounting.

— The same can be said for payroll and HR functions, which had the second-highest adoption among functional areas of SMB software

— Marketing and advertising’s third-place spot was somewhat surprising because these aren’t critical operational functions.

— In fact other operational functions like supply-chain services and CRM scored lower than advertising and marketing, which is telling of SMBs emphasis and perceived value of marketing.

— The fact that CRM scored lowest of all of these categories was somewhat surprising, given its growth as an SMB software function over the past decade, and its close ties to business operations and marketing.

— Beyond current adoption levels in each of these functional categories, they had varying growth rates.

— For example, though supply chain serves had the fourth largest adoption among SMBs (49 percent), it has the greatest growth in its adoption rate (75 percent in four years).

— Finance and operational solutions had the second-highest growth rate at 57 percent over four years, followed by marketing and advertising solutions, whose adoption has grown 30 percent over the same time period.

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 shown in these survey results could represent permanent adopters — a concept that’s accelerated in the Covid era as SMBs are forced to accelerate 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 pandemic-driven areas of SMB technology adoption. That will include top goals and what types of SMBs are adopting. 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.

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