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Why the IT industry’s focus on the big end of town is hurting innovation

Why the IT industry’s focus on the big end of town is hurting innovation

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Implementing the latest technology can give small and medium enterprises the edge over their competitors. But very often, IT firms focus on selling their technology to larger firms and are not thinking about how they can better serve SMEs. Gabe Monroy, Chief Executive Officer at DigitalOcean, says that offering the right technology to SMEs will help set them up for success.

The rapidly evolving Information Technology industry has a strategy of thinking ‘big’. IT firms want to achieve ‘big’ profits by making ‘big’ sales to ‘big’ customers.

It’s a strategy that makes sense because larger enterprise customers have deep pockets and are in a position to invest heavily in technology. Established firms are also more likely to undertake large-scale Digital Transformation programmes that can prove very lucrative for technology vendors.

However, this laser-like focus on the big end of town means many IT vendors are not thinking about how they could better serve the many small- and mid-sized firms that also need technology to support their operations.

Everything from cloud platforms and Artificial Intelligence to the Internet of Things (IoT) and virtual reality could be readily put to use in firms of all sizes. However, unfortunately, vendors working in these areas tend not to have smaller firms on their sales radar screens.

Setting themselves up for success

Unfortunately, history shows that a significant number of start-ups and small businesses fail within the first few years of operation. Despite having a compelling product or service offering, they are unable to gain market share and grow revenues.

In many cases, these failures occur because small firms lack the technical capabilities used by their larger rivals. With customers increasingly looking to interact with businesses digitally, not having the capabilities to do so can spell the end of the road.

This gap in capabilities came into sharp focus during the global pandemic which forced many staff to work from home and businesses to make sudden changes to critical workflows. Research undertaken by McKinsey at the time found a clear link between technology endowment and economic outperformance. In other words, those businesses that had better technology capabilities were outperforming others that didn’t.

The research also found a high proportion of smaller firms don’t believe their current business models will remain viable over the longer term. Many understand they need to build new digital capabilities if they are to remain in business and profitable.

At the same time, however, many smaller businesses are unclear on how and what technologies to adopt. With options evolving at a great pace, the challenge of making the right selections and undertaking effective deployments seems daunting if not impossible.

Out of reach

Of the many evolving technologies being deployed by large companies that could also deliver significant benefits to smaller businesses, one of the most exciting is Artificial Intelligence (AI).

AI can be used for anything from spotting patterns in large volumes of data to streamlining delivery networks through the better scheduling of drivers and trucks. However, the high prices demanded by vendors for these tools can often put them out of reach for smaller firms.

Another area that is developing quickly is the concept of ‘serverless computing’. This allows a business to access computing resources on demand and pay only for what it uses rather than having to pre-provision capacity on a cloud platform.

However, this technology is still very challenging for smaller companies to adopt as migrating existing workloads to a serverless model often requires those applications to be totally rewritten. There can also be a level of technical support required which puts the strategy out of reach for all but large enterprises.

Adopting a product-led approach

The gap between enterprise and small business use of technology is increasingly being overcome by vendors adopting an approach known as ‘product-led growth’. This involves a go-to-market strategy where end-user product experience is the primary driver of growth.

When IT vendors focus on product-led growth, it results in the delivery of simple, easy-to-use products that appeal to smaller businesses. Larger enterprise customers win too because staff prefer products that are easy enough to use without handholding by an IT support team.

Large enterprises should not have a monopoly hold on the IT resources and innovations that will underpin future growth. If IT vendors can switch to prioritising product-led growth over enterprise sales, small businesses will be able to gain access to the technologies they need to build the digital infrastructures they require to help them succeed.

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