What Does SMB Really Mean?
It stands for “small- and mid-sized business,” but what it means depends on whom you ask. Whatever the range of employees defining an SMB, it is the hottest segment in HR technology, primarily because of the huge number of companies that size. Established vendors have served it successfully for years, but endless start-ups want some of their fruit.
By Bill Kutik
The TLA (three-letter acronym) SMB stands for “small- and mid-sized business.” But what it really means is absolutely in the eye of the beholder.
An IBM executive once told me Big Blue considers your company “mid-sized” if it has fewer than 59,000 employees! Quite a world view from the top of the mountain.
SAP once put the cut-off at a company having less than $2 billion in annual revenue. If you consider an arbitrary figure of each employee generating $200,000 in revenue that would be 10,000 or fewer employees. Perhaps SAP’s answer today would be different.
ADP really takes us down to earth by assigning its Small Business Services division companies from 1 to 50 employees; Major Accounts, 51 to 999; and National Accounts, 1,000 employees and more.
I talk to a lot of vendors and the consensus seems to be SMB goes up to about 3,000 employees, maybe more. A little hard for me to wrap my mind around a 3,000-person company not being big, but they’re certainly not when you consider the size of the Fortune 500.
I take you through the math for a reason. While many of us may enjoy watching the drama being played out in the Fortune 500 market -- Workday fighting to take away ginormous customers from Oracle and SAP; Oracle still birthing Fusion; SAP still integrating with SuccessFactors; and IBM readying its new HR initiative Smarter Workforce with Kenexa for a full launch sometime this year -- the real action is in the historically underserved SMB market.
There are simply so many more companies there! Millions of them.
SuccessFactors and Taleo long ago figured out how to sell to them, while simultaneously going elephant hunting for the big customers. SF has a separate business unit for companies up to 1,250 with separate engineering (mostly for tweaking the large company BizX product), plus separate marketing, sales and support organizations. All of that is still cooking since the SAP acquisition.
The key has always been hands-free selling. ADP and a few others have figured out how to make money sending salespeople to talk to small companies, but few others have. The secret to success is keeping customer acquisition cost low, which for other vendors has largely meant “freemium” offers via email of 30-day free trials, self-provisioning for SaaS products and self-implementation with a little telephone support.
Taleo had the same arrangement for Taleo Business Exchange, but with the added challenge that the central recruiting product had been acquired from recruitforce.com and really needed its own engineers to keep it going as a separate code base. Oracle is busy trying to make all that continue to work right now.
Cornerstone also acquired a separate product, Sonar 6, and its various talent management applications, for its SMB offering. Companies like Ultimate, NuView and Halogen have been successful with SMB’s for years, while constantly trying to climb up-market.
What’s really exciting is that the new HR software companies being born like fruit flies (hopefully with a longer life span) are largely focused on SMB. They will also be the focus of the new column on HREOnline™ by Steve Boese called Inside HR Tech. Read his first one, if you haven’t.
In a marvelous bit of synergy (which means we just stumbled into the connection), Steve will be programming this year’s Awesome New Technologies (ANT) signature general session at the HR Technology® Conference, which features demos mostly from start-ups. I presume you know he will be taking my place entirely for the conference in 2014.
So all you fruit flies out there, ping him at firstname.lastname@example.org if you have a product to demo. But it needs to be more than a great idea and a PowerPoint presentation.
Many find it confusing, but the “Top HR Products Awards” are judged and decided by the magazine Human Resource Executive® and awarded at lunch the first day of the conference. I’ve kibitzed about the value of contestants with Editor Dave Shadovitz for close to two decades, but never with a formal vote on the winners, because I’m not a staffer. I presume Steve will do at least the same, maybe more.
But the Top HR Products have their own set of rules and a deadline coming much sooner than you think: June 14. And you do now have to pay a little to enter, unlike ANT. There you just need to convince Steve (with my concurrence) that you are indeed awesome.
Great to see the SMBs getting it first!
HR Technology Columnist Bill Kutik is co-chairman of the 16th Annual HR Technology® Conference & Exposition, returning to Las Vegas, Oct. 7-9, 2013. Only mind-blowing new speaking proposals are still being considered via e-mail. You can comment on this column at the Conference LinkedIn Group, which doesn’t require prior or future conference attendance to join. He is also host of The Bill Kutik Radio Show®. He can be reached at email@example.com.