Since 2017 Localogy has tracked the transition of small businesses owners’ mindsets from analog (e.g., “This is how we’ve always done it”) to SaaS (e.g., “There must be an app for that”).
The evolution since we first launched Modern Commerce Monitor has been remarkable. According to the just-released MCM Wave V-1 report, the number of small businesses adopting at least one SaaS tool to run their business has grown by 106% since our first wave of research in 2017. Today, an estimated 72% of small businesses use at least one SaaS tool for business operations during the course of a given month. When we began this study, adoption was less than half its current level.
Measuring Across the SMB Operations Stack
MCM is an ongoing survey of small businesses asking a battery of questions about their technology use across the full business operation (marketing, payroll and HR, finance, supply chain and customer relationship management) We also ask about their business outlook.
The most recent wave was conducted in late January – early February and included 1,117 respondents. The responding business decision-makers span five verticals (retail, home services, personal services, automotive and professional series).
The survey addresses software applications for all elements of a small business’s day-to-day operation. These include online website hosting platforms (e.g., Wix), marketing automation tools (e.g., Hubspot), online payments and e-commerce solutions (e.g., Shopify), cloud accounting (e.g., Quickbooks), HR (e.g. Gusto), and so on. We want to know what parts of the business SMBs are automating and why. This data provides context, validation, and ideas for deeper inquiry to sales, marketing, and product teams at SMB SaaS companies.
Adoption Isn’t Losing Steam
We also know that the future for SMB SaaS adoption is bright. According to the latest MCM wave, 40% of the shrinking number of companies that haven’t adopted any SaaS tools will do so in the future. And of those already using SaaS, 55% plan on adding tools in the future. The two leading areas where SMBs plan to shift business into the cloud (or SaaS) are the two areas closest to the customer — CRM and marketing & advertising.
Importantly, SMBs that say they plan to shift say they will do it soon. Sixty-five percent say they will make the shift within a year. Another 21% say they plan to do so within two years. We consider those who plan to shift in less than a year as serious. The others, more aspirational.
Digging Deeper: Why SMBs Use SaaS
While it’s a generally rosy picture for SMB SaaS, it’s worth exploring what’s driving the adoption. An what are some of the potential friction points unearthed by the latest data?
SMB respondents have been very consistent in expressing a need to save time or be more efficient, and this is the leading expectation they have for the SaaS tools they use. Notably, when we ask SMBs what benefits they receive from using SaaS, the top response is, “We spend more time with customers.” What better use of that extra time than devoting more hours to selling or serving new or existing customers?
One source of potential friction we’ve been tracking in MCM is product under-utilization, which may be a reflection of products that are too complex or try to do too much. When asked what would get them to utilize more of a particular tool’s capabilities, the top response was, “A simpler product. Too many features made it difficult to use.” One interpretation of this finding is that software can be overdesigned, leading to frustration or at least under-utilization of a product.
There is much more to unpack in the Wave V-1 report. Localogy members can access the full Wave V-1 report here. All others interested in accessing the data should contact us to discuss membership.
Localogy Insider will post more in the coming weeks about additional findings from Wave V-1 as well as future Modern Commerce Monitor waves.
