IT Vendors Should Study Small Businesses' Differences To Seize Opportunities, IDC Says.

Often viewed as a single entity, the small business market is very diverse and hard to reach. To be successful targeting the growing small business market, technology providers must recognize and understand the distinctions between small business segments. In a new report, Small Business Vertical Market Profiles, IDC analyzes the differences between small businesses by industry.

"Because small businesses are so diverse, it isn't possible for vendors and service providers to effectively reach all vertical markets with specialized programs," says Mary Porter, senior analyst for IDC's Small Business Market research. "Instead, to succeed in the small business market, vendors need to identify the most attractive targets based on current and future technology acquisition potential."

Banking/finance, accounting, real estate, and insurance industries stand out as the most sophisticated and intensive IT consumers in the small business space. Retail firms are at the other end of the spectrum, with the lowest technology spending and adoption rates. Nevertheless, IDC won't single out an industry as the most or least attractive for IT vendors because each has its strong points. For example, the real estate industry exhibits high use of wireless communications and many retail firms invest in ecommerce-enabled Web sites. Transportation/communication has high use of local area networks, and accounting firms tend to use portable PCs.

IDC also cautions IT vendors to beware of targeting industries just because they have a large number of firms. Instead, they should look at the number of employees per company. "The number of employees per company is a useful segmentation scheme because it usually relates closely to technology adoption patterns," Porter said. Although retail trade boasts the largest number of small businesses, this industry has very few employees per company when compared to other vertical markets. Transportation/communications/utilities (TCU) firms have the highest number of employees' (18.2), on average.

For technology vendors targeting small businesses, Porter offered this advice: "By aiming to meet the needs of the most advanced small business, technology providers will be well positioned to serve the majority of firms as they grow more sophisticated."

Small Business Vertical Market Profiles, 1999 (IDC #B22181) is based on IDC's 1999 US Small Business Survey of 3,500 small businesses. The report examines small business technology use and demographic characteristics across industry segments. The report discusses small businesses' use of communications technology, personal computing, printers and peripherals, office products, software applications, local area networks, and Internet applications. It also looks at Internet access and the technology acquisition process at small businesses.