What is the SMB SAMIT Video
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Today on SAMIT, we're gonna talk about what is an SMB.
I had this conversation today and someone asked me, "what's an SMB, I looked it up and I couldn't find it anywhere" and it occurred to me that we use this term all the time. We use it all the time the ninety but it's a business term it's not an IT term, and yet we throw it about and just kind of assume that everybody knows what it means. And two things, one a lot of people don't know what it means and two, there's a lot of disagreement as to what it means.
First of all what is it. SMB stands for small and medium business. That's all it really means and it's kind of a loose designation based on a little bit less loose designation by the US government, or maybe some other governments. They try to define small business and categorize it in some way for statistics and those kinds of things. Well in most business we tried to define it so that we have some idea of ways of communicating, right? We need to know do you work in the SMB segment because SMBs behave differently than enterprises, for example.
So how do we define SMB? Well we kind of don't and this is really hard - we kind of just all know what we mean by small business; and small business and SMB can be used basically interchangeably. SMB is just the quick designation for this, but typically we refer to SMBs as being companies from about ten to five hundred users. Of course you'll find people who disagree with that. Some people might say it's one to two thousand. I've met places like IBM that defined SMB as starting at five hundred and everything less than five hundred is simply not being a business, but generally the most common definition that I come across is the ten to five hundred with SOHO (small office / home office) taking the three to ten person range. One and two people are generally considered not a consideration for IT just because they don't have IT - so they're not even like to SOHO.
And then above SMB is the SME range which might be something like 500 to 2,000 people. Then comes medium businesses. Large businesses and eventually the enterprise. Which is mostly the fortune 500. The reason that we have these designations, especially within IT, is because we tend to see pretty typical behavior patterns that are shared within these groups. Nothing's guaranteed, and that's why we don't always use the number of people as a guide, and I should also point out that this is only appropriate for for-profit, traditional businesses. Things like non-profits and government agencies do not fall into these designations regardless of their size. They may share characteristics with companies in these size ranges, but they also have characteristics that are not normal to them and so we don't use those designations in those cases. Your local village government might have 10 people in it, but we would never call it a SOHO or an SMB - it simply operates differently and those things would be confusing.
So what we generally find is that people below the SOHO range, one and two person businesses, they typically have no idea at all. This SOHO range from three to ten people fall below what we think of as Microsoft's Active Directory threshold. These are the number of people that you just kind of manage everything manually - there's exceptions, but generally this is how they behave. They have very simple IT needs and what little bit they have they generally don't automate. They also don't have their own IT staff, they always bring it in from the outside because they use so little IT. So little it's crazy, but they share that you'll almost never find a SOHO that violates that unless they are, you know, startups or sometimes given a pass because the startup might be two people but have alot of needs because they're expecting to be say 50 people in maybe two months. So startups are kind of their own animal.
We're kind of talking about businesses that are functional, right, they've already reached more or less a steady-state, not that all businesses don't try to keep growing and that most may be do or are failing or whatever but we're not talking about those first days of a business that's in the process of going from one size to another.
We kind of just refer to them as startups or as SMBs that are becoming SMEs or still hiring or whatever, but SMBs tend to have relatively similar needs between them. They all need some amount of management, but they can rely on a lot of manual when it's appropriate they try to automate but automate very little but they do need central control systems like Microsoft Active Directory has 10 people was the traditional number that Microsoft used or if you have fewer than10 don't even look at Active Directory. If you have more than 10 seriously considered if you have more than about 12 basically you need it, right. Today, Active Directory is no longer that guide; we don't use it in that way but that's kind of a foundation for where some of these numbers came from traditionally, and what we find across the board pretty much is that around five hundred people the behaviors between an SMB and an SME start to change.
For one you start needing more than a single full-time IT resource. That doesn't mean that you have to hire in-house, that's a different discussion, just the amount of time that's needed. You start needing more dedicated and more vertically focused applications. Line of business starts to take over instead of infrastructure things like that we see behavioral changes around these lines. Now things that do alter where these lines are include really heavy IT focus for IT to define them as SMB or not you can certainly have a person with 300 people, I'm sorry a company with 300 people, that has a huge investment. It really works heavily with IT and it's focused on bespoke line business apps on all kinds of things. We might not consider them an SMB simply because their behavior doesn't fall within that range, but when we may also have a company of a thousand people that acts like an SMB. So sometimes we fudge those numbers a little bit. They're just guidelines; they give us an idea of what we're talking about so that we can easily share concepts between people.
The other thing that tends to influence this is revenue. There's kind of an average revenue for a company of say 300 people. If your revenue is 3 or 4 times larger than the average we might start considering you and that's an e even with fewer people simply because that larger revenue changes your behavior, you're investing in technology rather than simply using it to meet an end or you're using it for a competitive advantage or you're having extra staff because you simply want things to be more automated or whatever and because you have the investment capital to do so. So revenue is often a big factor.
I have working companies as small as 1,400 that were categorized as either a large or an enterprise business simply because their investment capital was in the fractions of trillions is how it was measured right hundreds upon hundreds of billion dollars of revenue with only 1,400 people these kinds of things will change behavior of the company, right and their IT staff was more than 450 full time internal IT - not numbers you expect in something that would normally be categorized as an SME in other circles. So that revenue was very influential in taking that one out of its normal place. And I've also seen enterprises that may have closing in on ten or twenty thousand staff, but with behaviors that very much fall into the SME. Know very little line of business and very little investment, very little technical knowledge and just kind of break-fix.
It happens right, but in general you're going to find that each category is relatively useful and one of the reasons that we need that utility is so that if your experience, for example, if you work in SMB IT which is the largest IT category the skills and experience that you have is going to be far more applicable to other SMBs and it's going to be to SMEs, mediums, larger, or enterprises. And so if you're in an enterprise space working in the Fortune 100, for example, they typically want to find other people with experience in the Fortune 100; because those people are going to more likely understand the way that they work and understand the culture in the way that their environment interacts, as opposed to people coming from the SMB who may be pretty shocked to find that IT in the enterprise space, while technically overlapping in some technologies, is nothing like what you are used in the SMB. The world's really do change significantly.
And conversely sometimes like the enterprise or where the SMB may look for people from the opposite end of the spectrum because they want to breathe fresh life into their projects. I have certainly worked in enterprises that have brought people directly from the SMB; excited to get people who had done more end to end work and less focus, and I've met a lot of SMEs that are excited to hire people from the enterprise, because they want to get people with a different perspective and who have seen things in a more financially stable environment or a more financially investment based environment. So these are just simple guides that we use to understand sizes of businesses based primarily on their behavior, but since we can't know the behavior of a company we don't work at we typically use the size of the company in the number of people that they employ to kind of define that.
I should also mention that when we use the number of people we do also then generally categorize that by the number of people who use computers versus don't. If you're in a factory you may have a thousand but only 50 of them have computers we would still categorize that as an SMB in nine out of ten cases. Whereas if you're a one thousand person company and you have 1,000 people all doing very technical work such as financial analysts or accountants or something like that we may easily categorize you as an SME or medium business based on the intensity of the work using the IT infrastructure. So those are just some factors that may alter things in one direction or another.