Ready, Willing &Web-enabled

Posted: 2/2003

Ready, Willing &
Web-enabled
Key SMBs Prime Targets for Web Collaboration Tools

By Helen Chan

THE
USE OF THE INTERNET for collaborative purposes among some small and medium-sized
businesses (SMBs) is an emerging trend. The increase in SMB broadband adoption
— estimated at a 17 percent compound annual growth rate (CAGR) from 2001 to
2006 — also fuels this market opportunity. However, rather than using a
collaborative application (e.g., from Intranets.com or Webex Communications
Inc.), SMBs that collaborate over the Web do so informally by piecing together
different functions such as e-mail, or by accessing the company network via the
Internet. As a result, there exists an opportunity for vendors and service
providers to offer a collaborative solution that is affordable, demonstrates ROI
and can target the right market segments.

Web collaboration tools (see
Collaborative Toolbox on page 58) are displacing dollars from existing
technologies (i.e., file and e-mail servers), particularly if these tools are
used internally to centralize management, access and storage of business
information. For SMBs, Web collaboration tools will be more suited for internal
knowledge management rather than for training and sales, given their
organizational structure complexity. If these tools are for internal/external
use to train sales people on new product initiatives or to demo a product to a
client, Web collaboration vendors can take some dollars from a business’ travel
and on-site training/meetings budgets.

SMBs today manage business
information informally by storing files on desktop/laptop hard drives, disparate
file servers and paper. They share information and work on projects by sending
e-mail, accessing the network or posting company bulletins — and they get by.
Though Web collaboration/intranet seemingly is the answer to a business’
information clutter, it would be unrealistic to expect all SMBs to pay $49.95
per month for a five-user work group collaboration tool. Intranets.com is one of
the few survivors in the space.

So which SMBs will be early adopters
of Web collaboration tools? Answer: SMBs that already use the Internet to bridge
distances. These primarily are SMBs with 250 to 499 employees, with small
pockets of firms with 50 to 249 employees (see table below). Why? Because these
larger SMBs have multiple locations, are in industries in which collaborative
workflow between inter- and intradepartmental workgroups is intrinsic to their
business way of life and already have adopted broadband. Broadband-connected
businesses are proven to do more and rely more on the Internet for their
business. Examples of these are engineer designers, application developers or
financial analysts.

The propensity to adopt Web
collaboration tools can be measured by how SMBs use the Internet in their
businesses today. Data from the Yankee Group’s 2002 "SMB E-Business and Web
Hosting Survey" shows SMBs with 250 to 499 employees are the heaviest users
of instant messaging/chat (27 percent) and Web conferencing (28 percent) — both
pieces of the online collaboration puzzle. As with SMBs’ e-commerce efforts,
businesses have a tendency to implement technologies they understand and rely on
from a user standpoint first. That’s the reason for widespread use of e-mail
marketing to direct traffic to Web sites, a strategy that rides on the only
Internet application that has reached critical mass.

Early adopters of Web collaboration
will be SMBs that pieced or intend to piece together uses of their Web site as
their "homegrown" solution. Of SMBs with 250 to 499 employees and with
Web sites, 34 percent already adopted Web conferencing on their site and 26
percent plan to. In the next 12 months, 38 percent plan on developing a
corporate intranet and 41 percent plan on allowing users to create customized
home pages (i.e., portals). This group demonstrates the strongest intent for
implementing collaborative applications, compared with other SMB groups. Yankee
Group does not expect the market to grow significantly for at least another
eight months or even through year-end 2003, given today’s market conditions in
which IT spending is primarily reserved for repairs.

Key winners of this trend are
obviously the telco and data service providers that continue to hunt for high
bandwidth-consuming applications to traverse their networks and to demonstrate
the value their broadband connection brings to the business end users.

Web collaboration tools will not be
adopted by all SMBs. Vendors have no choice but to focus and sell to SMB
segments that "get it" and that understand the business benefits of
adopting these tools, if they want to survive. Characterizing these businesses
are broadband, multisite locations and industries that rely on workgroups.

Providing value-added services, such
as helping customers develop a workflow/business process plan and properly
training customers, can go a long way. If vendors can’t hook customers to
actively use the Web collaboration applications, businesses won’t see the ROI
and will perceive the business benefit of the applications as being low. If
vendors promote the application with a 30-day free trial without showing
customers how to and why they should use it, the promotion will fail and the
customer prospects will leave.

Vendors that host the application
for customer must dispel the belief that setting up an intranet is cheap and
easy. Vendors must emphasize the total cost of ownership (TCO) of having a
homegrown intranet, because it is an ongoing, living and breathing project.
Businesses don’t realize that the set up is much easier than the ongoing
maintenance.

Helen Chan is an analyst for the
Yankee Group. This article is based on her research brief, "The SMB Web
Collaboration Market: Small Today but Key SMB Segments Ripe for Adoption."