In the past, sophisticated technology was only accessible to large businesses and enterprises. These days, small and medium-sized businesses (SMBs), which are generally defined as businesses with up to 100 employees and up to 1,000 employees respectively, can access the same tech solutions at affordable prices. However, this leveling of the tech buyer playing field means that SMBs must also enhance their strategies when buying technology by engaging multiple stakeholders, leveraging information technology (IT) decision-makers, and understanding tech purchasing models.
This guide provides essential tips and strategies for how SMBs buy technology and make informed technology purchasing decisions that enhance productivity, streamline operations, and drive business growth.
The Importance of Strategy When Buying Technology for SMBs
For SMBs, choosing the right tech is essential for business growth and maintaining a competitive edge. However, SMBs stand to lose more than competitiveness and innovation if they make the wrong decisions.
With limited resources to spare, SMBs must maximize the value of every tech investment. Poor technology buying decisions can result in wasted resources, operational inefficiencies, and missed growth opportunities that could jeopardize business continuity and viability.
Navigating the complexities of tech buying requires considering various factors, including multi-departmental stakeholder input and the evolving role of IT. Business owners may not have all the expertise necessary to make these decisions alone, so involving diverse perspectives is essential for strategic tech purchasing.
Whether your SMB has a dedicated IT team of one or 100, tech buying is no longer relegated to the IT department. SMBs must involve various stakeholders from different departments in the tech buying and decision-making process to ensure that the solutions address the diverse needs of the business.
Why SMBs Need Multiple Stakeholders for Buying Technology
The involvement of multiple stakeholders in the tech buying process serves a pragmatic purpose: Different departments have unique tech requirements, and involving them in the tech buying process ensures that their needs are accounted for. For example, accounting may prioritize financial management software, while marketing may require customer relationship management (CRM) tools or social media analytics platforms.
Without input from each department, SMBs risk purchasing technology that only serves one area. By involving the right stakeholders, SMBs gain visibility into how technology is used across the business and can identify solutions that meet the needs of multiple departments. Involving various stakeholders also ensures a more comprehensive evaluation of technology solutions, especially when buying from some of the best martech companies.
Team members from different departments bring varying perspectives that allow for unique insights into the usability, scalability, and integration of new tech tools. For example, an IT decision-maker may focus on the technical requirements of a new software solution, while a finance executive will be more concerned with the cost and return on investment (ROI).
Further, engaging multiple stakeholders fosters a sense of ownership and accountability. When different team members are involved in the decision-making process, they are more likely to support the implementation of new technology and actively work to ensure its success.
Ultimately, creating tech purchasing committees of key individuals in the organization can bring stakeholders from different departments together to make tech buying decisions in small businesses.
Creating a Tech Purchasing Committee
SMBs must first identify the key stakeholders in the decision-making process to build an effective tech purchasing committee. These individuals typically include:
- Business owners or C-suite executives who provide strategic direction and approve the final decision. Their focus is on how the technology aligns with the company’s long-term goals and whether it will provide a competitive advantage.
- Finance stakeholders who assess the cost of the tech, conduct cost-benefit analyses, and determine how the purchase will impact the company’s budget.
- Department heads who provide insight into how the tech will be used in day-to-day operations. Feedback from operations, marketing, sales, and human resources team leaders ensures that the solution meets the needs of end-users and integrates smoothly with existing workflows.
- IT department leaders or consultants who evaluate the technical aspects of the purchase, such as compatibility with existing systems, security risks, and scalability. For SMBs without an in-house IT team, external IT consultants play a similar role.
By involving these stakeholders in a tech purchasing committee, SMBs can make well-rounded tech decisions more likely to support the entire organization.
The Role of IT in Tech Purchasing Decisions
For many SMBs, the IT department plays a central role in technology purchasing decisions. However, this role varies depending on the size of the business and available resources.
According to a recent McKinsey report, business owners with two to 100 full-time employees make the majority of tech purchasing decisions. But for businesses with 100 to 1,000 full-time employees, the IT team is mainly responsible for tech purchasing decisions, with the owner taking slightly less responsibility.
IT teams also vary in SMB size. The majority of companies with over 50 employees have full-time IT staff. For SMBs with less than 50 employees, only 21% have full-time IT staff while another 41% do not have formal IT support.
In smaller businesses with fewer than 50 employees, IT functions may be outsourced to consultants or handled by a single IT administrator. In larger SMBs, with more than 100 employees, IT departments are often more formalized, with dedicated staff responsible for managing technology systems and making purchasing recommendations.
Outsourced IT and Tech Decision-Making
SMBs that outsource their IT functions should involve external IT consultants in the decision-making process. These consultants can provide valuable insights into which technology solutions are best suited to the business’s needs and help implement the new systems effectively.
Outsourced IT professionals also play a vital role in maintaining the security and stability of technology systems. They can advise SMBs on how to protect sensitive data, comply with regulatory requirements, and minimize the risk of cyberattacks.
That said, SMBs should be aware that some IT consultants may have existing relationships or interests with third-party tech vendors. When relying on outsourced IT support for tech buying decisions, SMBs should evaluate recommendations and purchases carefully to ensure that the solutions recommended or acquired by tech consultants are a good fit for the business.
Factors That Influence Tech Purchases in SMBs
Several factors influence tech purchasing decisions in SMBs, ranging from cost considerations to technological trends and external pressures such as regulatory requirements. The following are some key considerations SMBs should take into account in their tech buying decisions.
Cost is one of the most significant factors in the technology buying process for SMBs. Unlike large enterprises with expansive IT budgets, SMBs must carefully allocate their limited resources and consider upfront costs and perceived long-term financial impacts.
For example, while some solutions may have a lower initial purchase price, they may require expensive maintenance or frequent updates, leading to higher total costs over time.
Additionally, SMBs should consider the cost of implementation, training, and potential disruptions to business operations during the transition to new technology. A thorough cost-benefit analysis is essential to determine whether the investment will generate sufficient ROI to justify the expenditure.
SMBs must ensure that any tech investments deliver a positive ROI. To calculate ROI, businesses should track key performance indicators (KPIs) such as productivity improvements, time saved, and revenue growth post-implementation.
For example, a small business that invests in a CRM system may experience significant improvements in customer management, leading to increased sales and better customer retention. However, if the CRM system is too complex or expensive to maintain, the ROI may not justify the investment.
As SMBs grow, their technology needs will invariably expand and evolve. If the evaluated solution cannot scale with the business, the company will need to replace the technology at some point in the future. SMBs may be better off investing in a solution that positions them for future growth.
For example, a cloud-based ERP system is more scalable than an on-premise solution and allows the business to add users and features without investing in new hardware.
Moreover, SMBs should consider how the technology will adapt to changes in the industry. Will it support new business models, customer demands, or regulatory requirements? Choosing a flexible, future-proof solution can help the company stay competitive in the long term.
SMBs often use a variety of software and hardware solutions to manage different aspects of their businesses, from accounting to customer service. When evaluating new tech purchases, buying committees should consider how well they will integrate with existing systems. Poor integrations can result in inefficiencies, data silos, and increased operational costs.
For example, an SMB looking to implement a new project management software package should verify that candidate solutions integrate seamlessly with existing communication tools, back-office systems, and HR software. This ensures that data flows smoothly between departments and reduces the need for manual data entry or workarounds.
When evaluating tech solutions, buying committees should consider the user experience and whether extensive training is required. Solutions that are intuitive and easy to learn are more likely to be adopted by employees, leading to faster implementation and quicker ROI.
If specialized training is required, the time and cost required to train employees on new systems are critical factors. Some vendors offer free training as part of their packages, while others may charge additional fees for on-site or virtual training sessions.
Tech buying committees should pay close attention to a vendor’s reputation when evaluating solutions, and assess whether the vendor has experience working with similar-sized businesses in the same industry.
A vendor’s responsiveness and customer support are also essential. When technical issues arise, direct access to reliable customer support can prevent costly downtime and ensure that the technology continues to meet business needs.
Additionally, committees should inquire about the vendor’s service level agreements (SLAs) and warranty terms. SLAs outline the vendor’s commitment to performance and response times, while warranties protect the business if the technology fails or malfunctions.
With increasing cyber threats and stricter regulations, security and compliance should be top-of-mind for SMB tech buying committees. Candidate solutions should comply with relevant laws and industry standards (e.g., GDPR, PCI DSS, HIPAA) since non-compliance could result in significant fines and reputational damage.
Moreover, committees should evaluate tech security features, including data encryption, user authentication, and access controls. Vendors that prioritize security are more likely to protect the business’s sensitive data and minimize the risk of cyberattacks.
Common Tech Purchasing Models for SMBs
These days, SMBs can select from a variety of purchasing models to acquire new technology. These models vary depending on whether the business is purchasing software, hardware, or cloud-based services.
Software Purchasing Models
SMBs can choose from several software purchasing models.
- Metered SaaS: Businesses are billed based on actual software usage. This model is ideal for businesses with fluctuating needs, as they only pay for what they use.
- Flat-rate SaaS: Businesses pay a fixed subscription fee for access to the software, regardless of usage. This model provides predictable costs but may not be as cost-effective for businesses with low usage.
- Tiered Licensing: Offers different pricing tiers based on the size of the business and the features required. SMBs can select the tier that best meets their needs and upgrade as their business grows.
- Per-User Licensing: Charged based on the number of anticipated users accessing the software.
- Per-Feature Licensing: Businesses pay based on the features they activate. This allows SMBs to start with basic functionality and add features as needed.
Hardware Purchasing Models
When acquiring hardware, SMBs can choose from three models.
- Outright Purchase: Businesses buy hardware upfront and own it outright. While this requires a significant initial investment, it may be more cost-effective long term for businesses with stable technology needs.
- Hardware as a Service (HaaS): This model shifts the cost of hardware to a predictable monthly expense, similar to leasing. Businesses do not own the hardware but benefit from regular upgrades and maintenance.
- Leasing: Businesses rent hardware for a specified term, with the option to return or purchase the equipment at the end of the lease.
Balancing the Tech Budget
Balancing the tech budget requires input from senior management and finance to evaluate the long-term financial impact of each decision. Depending on the company’s needs, leasing hardware or adopting SaaS models may allow for more flexibility and cash flow.
But some tech purchasing models may be non-negotiable. For example, SMBs operating in highly regulated industries might need to purchase certain technologies outright to ensure compliance with data security and privacy laws.
Common Tech Buying Mistakes to Avoid
SMBs must be mindful of several common mistakes when purchasing technology.
- Overbuying: Purchasing technology with more features than required can result in wasted resources and increased security risks. SMBs should focus on solutions that address their specific pain points.
- Ignoring Employee Feedback: Failing to gather employee feedback during the evaluation process can lead to poor user adoption and ineffective implementation.
- Neglecting Cybersecurity: Failing to involve IT or cybersecurity professionals in the decision-making process can leave the business vulnerable to data breaches and cyberattacks.
- Skipping Legal and Compliance Reviews: SMBs should ensure that any new tech complies with relevant regulations to avoid legal and financial risks.
Bottom Line
Because today’s tech buying arena is highly democratized, SMBs should develop a strategy for making informed tech purchasing decisions that include forming a multi-departmental tech purchasing committee (including IT), weighing critical factors that influence SMB tech purchases, and selecting the appropriate tech purchasing model.
Whether implementing new software, upgrading hardware, or adopting cloud-based services, a well-planned tech buying strategy is essential for getting the most ROI for tech purchases. By involving multiple stakeholders in tech purchasing committees, aligning technology investments with business goals, and carefully evaluating vendors and solutions, SMBs can maximize the value of their tech investments and set the stage for long-term growth.
