What Is Happening? Saugatuck’s survey data analysis indicates that small and mid-sized businesses (SMBs) are focusing a much larger percentage of their Social Business IT investments on customer-focused applications than are larger enterprises. The data indicate, in fact, that the smaller a company is, the greater proportion of its Social Business IT investments will be focused on customer-oriented applications. Figure 1 summarizes the data from Saugatuck’s 2011 Social Business IT survey (for more on our Social Business research program, please see Figure 1 below).

Saugatuck sees this as both a natural progression of emergent-IT adoption and use, and as an indicator that SMBs will continue to face substantial challenges when competing against larger enterprises.

In essence, Social Business IT, like other IT revolutions/evolutions before it, is not necessarily enabling SMBs to compete directly against large enterprises – despite the hype that it, like most other emergent IT phenomena, will help “level the playing field” for SMBs. Instead, Social Business IT is fitting into very predictable and easily-discernible patterns of IT adoption, wherein the vast majority of firms adopt and adapt IT into their traditional business operations and structures.

The most likely result is that SMBs will continue to find themselves lagging behind most larger enterprises in their ability to do business using Social Business IT – partly as a result of over-concentration on customer-facing applications.

Why Is It Happening? The Social Business IT investment patterns among SMBs are readily explained by several factors, including the following:

These factors help to drive what Saugatuck sees as a real and increasing gap between SMBs and large enterprises when it comes to the benefits realized from most forms of IT, Cloud-based or otherwise (read: “A Slice of SaaS Research: Can Small-to-Medium Businesses Really Catch Up to Large Enterprises in SaaS Deployment?”).

The net result: SMBs will continue to find themselves lagging behind most larger enterprises in their ability to do business using Social Business IT mostly because of the resource limitations inherent in their relative size. Simply providing or using an application or service via Cloud will not by itself enable greater SMB competitive capability against large enterprises.

Beyond this, the relatively low cost of acquiring and initially using such services – in this case, the “low-hanging fruit” of Sales and customer support – can easily lead to over-investment. Time and time again, Cloud (and other forms of relatively low-cost IT) has shown us that if it’s easy to do, it gets done, typically with minimal oversight or governance and especially within smaller firms (read: “A Lack of Formal IT Indicates Higher Costs of SaaS and Cloud IT”).

Such conditions often lead to over-investment in a specific area or type of application, to the detriment of others that could have equal or greater strategic value. Our data and experience suggest that SMBs are demonstrating the types of behaviors, and are in the type of situation, where this becomes likely.

Market Impact

First of all, we must reiterate that we completely understand why SMBs are focusing so much of their Social IT investment on customer-facing applications. It makes sense for all the reasons given above.

That said, it is also unlikely to be the best long-term course for SMBs to follow. Executives responsible for SMB Social IT investment and use need to quickly and carefully gather and analyze as much information as possible about their real costs of use and the real business benefits of that use. That information and insight has to be compared against the potential or likely gains, short-term and long-term, that the firm could realize from investments in improving internal communications and management, and from improving coordination and communication with trading partners. For most firms, but especially SMBs, investments in reducing these costs and improving their ability to manage will yield much more significant and sustainable improvements for the business in the long term.

The improvements enabled and delivered by such investments can then be used to fund more, and more coordinated, investments in Social Business IT across the firm, and not just in a single area of business. Until and unless that happens, larger firms will continue to enjoy greater rewards from using Social Business IT.

This blog originally appeared at Saugatuck Lens360.

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