Segmentation nation

You gotta love a good AMI-Partners study. The most recent release out of the consultancy is the 2006-2007 U.S. SMB Business Applications and Solutions Segmentation Report.

Based on AMI’s 2006-2007 U.S. Small and Medium Business end-user surveys, the report is authored by AMIs Sau Lam and Laurie McCabe. Lam and McCabe detail major trends and spending forecasts across accounting, CRM, ERP/SCM, web-based solutions, and IT and business process outsourcing services.

Employed in the study is “AMI’s proprietary segmentation methodology,” which appears to be another spin on statistical categorization. In any event, the study shows that enterprise adopters (a.k.a. Tier 1 SMBs in AMI parlance), who view the use of IT solutions as a strategic way to drive growth, are significantly more likely to use enterprise software solutions than SMBs in other tiers.

“Tier 1 SMBs account for the smallest percentage of the overall SMB universe,” said study co-author and AMI-Partners research analyst Sau Lam. “But, in general, they outspend Tier 3 and 4 SMBs on IT. In the enterprise software arena, this gap is even more pronounced.”

AMI-Partners’ proprietary segmentation model categorizes and analyzes SBs and MBs in four distinct tiers, based on IT behavior, adoption, needs and attitudes for customer targeting, product positioning and focused offerings.

The four tiers are defined as:

Tier 1, or “Enterprise Adopters,” as mentioned above.

Tier 2, the “Early Adopters.” These folks embrace new IT solutions to optimize productivity, but lack resources needed to deploy full-scale solutions. AMI has this population estimated at less than twenty percent of SMBs.

Tier 3, the “Value Adopters,” who implement IT solutions after others have done so, and have “a relentless focus on costs.” This group needs education on the business benefits of IT solutions, and are a “pragmatic, economically driven target for IT vendors” comprising over 25 percent of the big pie graph.

Tier 4, the “Needs Help Adopters,” who employ IT solutions “only at the threat of losing customers or suppliers.” This group is nearly half the IT universe.

Among findings from the study (be prepared to refer to the above list frequently):

• Tier 1 SBs make up just over 6 percent of the field, but spend an average of ten times more on IT, and twice as much on CRM and ERP solutions as Tier 4 counterparts.

• Tier 1 MBs spend about four times more than Tier 4 MBs; Tiers 1 and 2 MBs account for more than three-quarters of CRM and ERP spending.

• 41 percent of Tier 1 SBs, and 33 percent of Tier 2 SBs expect to increase Software as a Service spending. Tier 2 MBs are most likely to expect to spend more on SaaS.

• Tier 1 and 2 SBs are more likely to buy software directly from packaged software vendors, while Tier 3 and 4 SBs are more likely to do so from regional or national retail chains.

The 2006-2007 U.S. SMB Business Applications and Solutions Segmentation Report is available at the AMI-Partners website.