When you hear digital transformation or DX for short, most people think about large enterprise businesses. But it’s everybody, including local gyms, your favorite restaurant, and even the doggie daycare are all streamlining business practices, improving customer experiences, and increasing their bottom lines through modern digital solutions.
To better understand the opportunities this movement presents for the channel, Pax8, with sponsorship support from Microsoft, Veeam, and Wasabi, engaged Channelnomics to create a study of SMB IT initiatives. More than 400 senior leaders at SMB organizations across North America were surveyed to determine where they stood in their transformation journey. The results were eye-opening, and they revealed a clear path forward for MSPs and the channel as a whole. These results were shared in an extremely informative report entitled “The Transformation Imperative: Evolving Customer IT Needs.” Let’s dive into it.
According to the Channelnomics study, a whopping 84% of SMB decision-makers polled said they plan to buy more IT solutions related to their digital transformation initiatives in the next 12 months.
I could just post that stat and end this blog right here with a link to the recording of our recent webinar where we discussed the report findings. But there is so much more to unpack around the useful takeaway of this study.
Experts say that digital transformation will account for 53% of IT spending by 20231. That seems unbelievable until you realize that a lot of digital transformation is actually based on technologies and products already in the market. Their adoption is being accelerated, and they are being applied in new and innovative ways. This is why we see predictions that digital transformation and services will continue to grow at almost 16% year-over-year for the next decade2.
 “IDC: Digital Transformation Spending Will Eat Up 53% Of IT Budgets By 2023”. 2019. Techrepublic. https://www.techrepublic.com/article/idc-digital-transformation-spending-will-eat-up-50-of-it-budgets-by-2023/.
 “Cloud Services Market Size, Share & Growth | Forecast – 2030”. 2022. Allied Market Research. https://www.alliedmarketresearch.com/cloud-services-market.
The Actual COVID Effect
Of course, we have to address the elephant in the room — the COVID crisis. It’s not unreasonable to think that the pandemic was the driving force behind many businesses and companies engaging in digital transformation efforts. The reality we found in doing this research is that a large number of SMBs were already well into their digital transformation journey. The pandemic served as a catalyst to accelerate these timelines and continues to do so.
We have seen this ourselves here at Pax8. When we were a startup, we built a cloud-based infrastructure, but we felt it was important for everybody to collocate. We wouldn’t hire somebody who could not come to our office. When the pandemic happened, we couldn’t adhere to that policy anymore. This pivot has allowed us to tap resources in places we would never have looked before because we are fully embracing a business and IT structure that enables people to work wherever they are, not necessarily where we are. SMBs are no different and need somebody to help them with their own hybrid infrastructure.
SMBs Facing Workforce Pressures
SMBs have to contend with the same workforce challenges your enterprise clients face. Yes, I’m talking about what is commonly called “The Great Resignation.”
As we see it, this is actually a coalescence of two different factors. This first is a shift in mindset within the workforce. People are choosing not to work for companies and businesses that don’t embrace their values or workstyle needs. The second is a shrinking workforce. As older workers are choosing to simply opt-out of the workplace, a declining birthrate over the last few decades means there are fewer workers to fill those spots.
In the webinar, Channelnomics CEO, Larry Walsh, talks about how a reduction in available workers has driven businesses to adopt new, more automated tools to account for the smaller workforce. He cites self-checkout as a great example of businesses turning to digital transformation, enabling a process that used to require a human employee. Utilizing automated tools to allow clients to do more with less is another great opportunity and area of focus to add to your SMB sales talk track.
SMBs Facing a Shrinking Global Supply Chain
We don’t need to get into the economic or political factors causing the collapse of the global supply chain. From a channel standpoint, all we need to know is that it’s becoming more difficult for all types of businesses, especially SMBs, to get the products, materials, and supplies they need to not disappoint their customers.
Digital transformation is an opportunity for us to help SMBs find new and innovative ways to effectively source and manage their supply chain and their inventories, so they can meet changing customer expectations.
How SMBs are Finding Their Solutions
With digital transformation happening at a double-digit rate, let’s look at how SMBs are approaching their initiatives and how this creates one of the greatest growth opportunities across the channel.
What the SMBs told us is that they’re adapting to change. They recognize the world is moving around them and realize that they have to get to market faster. They have to change their delivery models and accommodate the needs of their customers and their markets in ways they haven’t had to before — all while trying to enable today’s fluid workforces.
What we should take from these results is that SMBs are seeking advice on digital transformation projects, and they look to the channel to provide it just as often as they turn to Google. The more educated we are as service providers, the more we can position ourselves in the minds of SMBs as their go-to resource for digital transformation information. This is the first step in building a powerful relationship. For SMBs, working with a service provider, it is all about trust.
How SMBs are Buying Their Solutions
So, if SMBs look to us for information, why don’t they buy from us more often? According to our survey, the difference seems to be the perceived complexity of their initiative. Their thinking is, “If I have a complex solution that requires deployment services, I’ll call my partner. For other technology, where I think I could get it faster and with clearer pricing, I’ll go directly to the vendor.” I call it “perceived complexity” because many businesses don’t take into consideration that most new solutions still require some form of integration and training to be successful. These aspects open a wealth of opportunities for MSPs who can effectively support the solutions they sell.
How We Contribute to the Failure of Digital Transformations
One of the most enlightening questions in the survey was why SMBs feel their digital transformation efforts fail. Three of the top four responses revolve around product knowledge and education. I say three because it’s a big contributor as to why employees push back on adopting new technology.
This should be a wakeup call to the channel, and not only because more than a third of SMBs feel we aren’t supporting what we sell. SMBs think we’re failing because as service providers, we’re not trained enough, and they think that their digital transformation efforts are failing because their employees aren’t trained enough either. This is an imperative for SMBs, so it should be an imperative for all of us in the channel.
Adding education and enablement to stack offerings can not only reverse this perspective, it’s also a great way for MSPs to speed time to market, accelerate delivery time, and counter the idea of being too expensive by demonstrating added value around solution success. This is something we talk a lot about with our vendors and our partners at Pax8, and it’s an essential element of our business model — everything you need to grow your business.
We provide education and enablement to our partners through the new technology exposure of our Mission Briefings; through the technical intensives of our Bootcamps; through the courses, peer groups, and coaching of Pax8 Academy; and through the bandwidth-extending support of our ProServices.
How We Can Boost Everyone’s Success
I know I threw a lot at you here, but I really only scratched the surface. These and a lot more ideas are discussed in greater depth in our webinar and the report.
To sum it up, let me leave you with this:
• As a channel, we need to shift our own thinking around digital transformation.
• We need to become more than just purveyors of solutions.
• We need to be advisors, educators, and trainers as well.
• The MSP who is able to deliver a solution and support its success for their clients is the MSP who will build long-lasting relationships that will deliver strong recurring revenue.
Watch our webinar, read the report, and use the insights to guide your own evolution and success as a provider of digital transformation. And if you have any questions, please feel free to reach out to us here at Pax8.