The surveyed group consists of 402 respondents with decision-making authority or influence on IT spending, representing companies with 1-500 employees.
- The majority of SMBs (69%) hire at least one type of IT service provider, and there is significant room for growth. 39% of SMBs with IT service providers plan to increase their spending in 2016.
- 59% of IT services have transitioned from the traditional break-fix model to a managed service contract.
- IT service providers have lower client satisfaction ratings than B2B service industry benchmarks.
1. Quantity of Businesses with IT Staff In House versus IT Service Providers
Overall, 63% of SMBs have dedicated IT staff in house, but this varies radically between smaller and larger businesses within the group.
When broken down further by company size, SMBs with 10 or fewer employees are significantly less likely to have IT staff in house, with just 31% reporting that they do. This is an influential group in the small business economy; according to the 2012 Census Bureau Statistics of US Businesses, nearly 80% of SMBs are made up of fewer than 10 employees. Our study’s overall sample skews toward larger SMBs.
In-house IT is generally difficult for small businesses to support.
"The value proposition of trying to hire an IT person in house for a small, non-IT company seems economically unfeasible. There's better value for them in obtaining work with a managed services provider, from both a financial and support experience standpoint."
– Adam Barney, Chief Operating Officer, Framework Communications
Larger companies, especially those with legacy systems, stand to benefit most from internal IT.
"As the organization grows, there will be more nuances and specific ways in which they use their technology, and internal IT becomes beneficial. Maybe they have a customized application built a long time ago, and not many people can handle it. Outside providers probably wouldn't have experience with it. Having someone in-house, intimate with your systems and processes is sometimes beneficial. That can still be augmented with outside providers who would manage various parts of their infrastructure."
– Adam Barney, Framework Communications
69% of SMBs hire outside service providers for IT, a proportion that is relatively consistent across company size.
Most SMBs can benefit from having a service provider in at least one IT area, regardless of whether the business already has IT staff in house.
"Organizations of all sizes turn to IT consultants and engineering firms for a variety of reasons, the most notable of which is time. The internal staff’s time is often monopolized by system administration and expanding existing services to the rest of the company. This dynamic leaves little time to study and gain expertise on the ever-innovating advanced technologies available. Smaller organizations outsource IT to ensure that they have expert level engineering resources necessary to guide critical decisions and solve issues."
– Ed Kapelinski, President, Tympani, Inc.
2. Spending on IT Services in 2016
39% of SMBs with IT service providers plan to increase their spending on IT services in 2016.
SMBs continue to see the value in IT services, and many will expand their investment in them as new challenges arise.
"This [increased spending] trend has been visible in the last 12-24 months. Businesses are realizing the benefit of technology investment in terms of enhanced capability, efficiency and productivity. As their infrastructure ages, software becomes outdated, or new threats are introduced, they are looking to new solutions. This continues to drive demand."
– Susie Cummings, VP of Managed Services and Infrastructure Solutions, SWC Technology Partners
3. Most Popular IT Services for Small Businesses
Small businesses most frequently hire Cloud service providers, with 36% indicating they do.
Although just a third of SMBs have a professional services firm managing their cloud, many SMBs still use the cloud for their business. A related study found that 52% of SMBs use cloud storage. There is still significant room for growth in Cloud for SMBs.
"Cloud is really prevalent, even more so than people realize. A lot of the time, people won't even know that they are moving more things to the cloud, particularly things like applications, email, and phone systems. There is a lot of traction, and people will move either from desire or convenience. But, rarely do I see companies that are moving everything possible. Sometimes, it's not a good fit, so a hybrid model works best. They'll have some services locally, and some that are provided as a cloud model."
– Adam Barney, Framework Communications
The least popular service among SMBs is mobile app development, indicated by just 17% of the sample. However, this area is expected to grow. Data from a previous Clutch study indicates that app development is a small but increasingly popular marketing strategy for SMBs supported by do-it-yourself app builders.
4. Transition to Managed Services
Managed service contracts are the dominant payment model for IT services, cited by 59% of SMBs.
Popularity of managed services varies by service type. Cloud, at 70%, is the most prevalent managed service, followed closely by Desk Phones at 69% and Mobile Phones or Tablets at 63%. Software Implementation and Management is slower to adopt this model, with 51% still working with service providers on a break-fix basis.
There are some positive and negative aspects to both the managed services model and the traditional break-fix model.
"For applications that can be implemented through both models, it is a matter of cost and trust. A contract can provide a cost cap for certain applications. There’s a comfort in knowing precisely how much something is going to cost in the coming year, and that reduces the level of risk involved. At the same time, companies may be hesitant to commit to one organization or another. A contract locks you in."
– Ed Kapelinski, Tympani
The market is moving toward the managed services model, which seems to offer the largest amount of mutual benefit.
"There is one distinguishing benefit to managed services, for both the client and provider, and that’s the incentive to be proactive versus reactive. We make more money if stuff works without us having to fix it, and the client benefits from the increase in uptime and decrease in outages."
– Andrew Tejero, VP Operations, IT Horizons
5. Client Satisfaction Ratings for IT Service Providers
Our study measured customer satisfaction using the Net Promoter Score (NPS), which is derived from the question: “How likely is it that you would recommend your service provider to a friend or colleague?”
The NPS scores reveal less than average satisfaction with IT services compared to benchmarks. Generally, business-to-business (B2B) companies average a 20 to 25 NPS, with B2B professional services firms often topping out at 30+. In comparison, IT services firms in Clutch's study averaged a 13 NPS.
There are several explanations for the low NPS.
One factor is that smaller, specialized IT services firms may lack the ability to deliver strategic, top-level recommendations for their clients.
"Some companies feel that their current IT service provider isn't able to recommend, implement, and support the technologies required to run a business today. Emerging technologies like cloud, mobile device management, and next generation security solutions can add complexity to the conversation. Many smaller service providers may not have the capability, expertise or scale to drive those conversations. Our customers are looking for IT advisers – a virtual CIO who can sit at the table, understand the business drivers, and lead the roadmap process to deliver technology to support those goals."
– Susie Cummings, SWC Technology Partners
A related issue is that IT services firms sometimes need to involve other firms in order to cover the full scope of work.
"An IT service provider has the means to fix a computer directly, but might need to escalate to third parties for Cloud, Server or Hardware and Software. Failures anywhere down the escalation pipeline can affect the satisfaction of the whole experience. By increasing communication throughout the escalation process we’ve found that this alleviates client concerns."
– Andrew Tejero, IT Horizons
Finally, a lack of understanding of IT and unrealistic expectations can contribute to lower satisfaction ratings.
"It’s very hard to judge performance and assess if you're getting good value when you don't understand some of the issues they ran into, why they had the impact they did, or why it took a certain amount of time. Clients will often think it's as simple as flipping a switch. The technologies that are easier to understand are rated higher [in the provided NPS data]. The further you move away from common knowledge is where you see the Net Promoter Score decrease."
– Adam Barney, Framework Communications