Some might criticize connectivity service providers for ignoring the "small business opportunity." But that opportunity is smaller than one might think, not because there are few such firms, but because their buying patterns often are not so different than those of consumers.
Also, profit margins are slim enough that not much personalization or customization is possible.
Since perhaps 99 percent of global businesses are “small,” many would note, while the enterprise market is the “less than one percent,” it sounds logical enough that small business effort would pay off. Or not.
The traditional problem connectivity providers have serving the small and mid-sized business market (depending on which definitions are used) is profitability. No retail service provider serving the mass market can afford to sell using the same channels as dedicated to an enterprise account.
Most U.S. “small” businesses, for example, have zero employees. A small percentage have between 20 and 499 employees. At the high end, many would consider an organization to be “mid size.”
In Canada, for example, any organization with 100 to 499 employees is considered a “medium-sized” business. About 70 percent of businesses have one to 99 employees.
Of some 5.7 million U.S. companies in 2012, 90 percent had fewer than 20 employees
source: U.S. Census, DB Global Markets
U.S. firms with at least 500 employees, which we might all agree is the lower end of the enterprise market, represent a fraction of one percent of all firms. Even including firms with 100 to 499 employees, such firms represent just 1.6 percent of U.S. establishments.
The point is that the enterprise market is highly concentrated and operates at a scale vastly different than the typical firm.
source: Census Bureau, Advance Iowa
That is why channel partners--interconnects for enterprise phone systems; system integrators for local area networks; managed service providers for apps; distributors for LAN gear--historically have served the needs of smaller businesses and organizations.
In the same way, specialized business phone companies have served the needs of business and organization customers who want to “create their own voice services” using phone switches or key systems.
In other words, connectivity providers are never so good at serving the needs of either enterprise, mid-market or small business customers. That is why all the other channel organizations exist.
source: U.S. Census Bureau, The Conversation
The phrase “mass markets” illustrates the issue. As a practical matter, a retail connectivity provider cannot afford to market and sell to a small business in any way too different from the way it markets and sells to consumers, because the gross revenue and profit constraints are quite similar.
Enterprises are supported by a direct sales force. Other mid-sized organizations are supported indirectly, using channel partners. Consumers are reached using advertising and retail stores. And small business is supported the same way as the consumer segment.
As service providers have sought on-demand control for decades, so customers will benefit from on-demand provisioning and configuration, if possible.
Still, most of the value small businesses will seek is provided by apps, not connections. The ability to order, provision and change bandwidth levels on demand, while helpful, is not as helpful as the ability to add, drop and reconfigure apps.
Yes, there are many small firms, but the cost of marketing, selling and fulfillment does not leave very much room for personalized attention or customization, at least not the traditional way.
Beyond that, connectivity providers typically do not own the actual business apps customers want to buy.
The “small business opportunity, in other words, is smaller than many would hope.
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