Finding growth by understanding SMB needs

Enterprise Platforms, Executive Briefing Service

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Recent pressure on telecoms spending from larger enterprises has led telcos to put more focus on the fast-growing and dynamic small and medium business segment, but telcos need to properly understand how best to service this segment if their efforts are to bear fruit.

How well do telcos know the SMB segment?

SMBs are an engine for economic growth

The SMB segment is a significant driver in all economies, particularly developed ones. Around half of GDP and over 90% of employment is accounted for by companies with less than 250 employees, according to the World Bank. The proportion of the economy attributed to SMBs varies in different markets

Examples of SMB variations by region


Source: STL Partners (adapted from various sources)

The segment is growing faster than larger enterprises, as the agile, service-oriented businesses have responded more quickly to the changes brought about by the COVID-19 pandemic and the rise in costs brought about by current conflicts. As environmental, social and governance issues increasingly impact the business environment, small and medium-sized businesses may again be expected to react with more agility, further increasing their importance in the overall business environment.

Other sources broadly agree with the World Bank, estimating as high as 400 million small businesses globally. This is a huge segment that it is important for telcos to properly address, especially in the light of recent losses of margin and revenue in the enterprise space. However, the SMB is different to a larger enterprise. Its requirements and approaches are different and large telcos have been underperforming in terms of direct sales to the segment.

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Telcos lack direct relationships with SMBs

Telcos ultimately supply the small business segment with connectivity whether or not they have a direct business relationship. An ecosystem of aggregators, wholesalers, value-added resellers and other specialist companies has grown to complete the value chain between the network owners and the small business users.

Many telcos also service the smaller end of the SMB segment through their retail estate and online stores, which may be considered as a consumer-plus offer.

If SMBs are being connected by the network owners via the value chain, why should they concern themselves with a more direct approach? There are three main reasons:

  • Profitability: A significant portion of the SMB spend on connectivity is providing margin to intermediaries along the value chain – a more direct sales approach could potentially repatriate those moneys to the connectivity provider.
  • Improved share of wallet: The spend by SMBs on connectivity represents only a fraction of the spend on applications and support for communications within the business. By addressing the SMB segment more directly with platforms and support, telcos may increase revenues.
  • Improving market share (increasing revenue): The value chain has considerable influence on connectivity provider selection, so by having a direct presence, telcos have a better opportunity to compete.

The most common definition of a SMB is an enterprise with fewer than 250 employees and this is the definition used in this report (unless a different measure is explicitly stated). The aim of this report is to identify whether an opportunity exists for telcos to drive revenue growth in the SMB space, and how to address it if it does, utilising telco and channel case studies.

This report comprises:

  • An overview of the SMB market, including the size and development of the segment and an examination of the key issues being faced and the opportunities that they may present for telcos.
  • Telco and service provider case studies, demonstrating how telcos have most commonly addressed the small and medium business market opportunity.
  • Conclusions regarding the approaches taken by telcos to address the SMB segment and why they need to update their strategies to work better with the channel to attain the level of trust required to maximise the benefits of engaging with the fastest growing section of the economy.
  • Recommendations to help telcos improve revenue and profits deriving from the SMB segment.

Table of Contents

  • Executive Summary
  • Introduction
    • SMBs are an engine for economic growth
    • Telcos lack direct relationships with SMBs
  • The small business market
    • Defining and addressing the segment
    • Key business trends for SMBs
    • SMB priority summary
    • Opportunities for telcos arising from SMB trends
  • Telcos and service providers addressing the SMB segment
    • AT&T
    • BT
    • Orange
    • Vodafone
    • Service provider
  • Conclusions
    • Value of telco involvement
    • Strategy options
  • Recommendations
  • Index

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Rosalind Craven


Rosalind Craven

Senior Analyst

Rosalind Craven is a Senior Analyst at STL Partners, specialising in telecoms strategy, customer experience and consumer telecoms services.