SMB Communications Pain Study White Paper

Uncovering the hidden cost of communications barriers and latency

The following white paper outlines the findings of a study sponsored by Siemens Communications and prepared by SIS International Research. It discusses and quantifies the hidden cost of communications barriers and latency that small and medium sized business in 8 different countries, across 8 different verticals, and up to 400 employees experience in their daily business activities.

This white paper will demonstrate the inherent need for Siemens Enterprise Communications SMB unified communications solutions.

Executive Summary

An SMB with 100 employees could be leaking a staggering $524,569 annually as a result of communica-tions barriers and latency. Communications barriers and latency surrounding everyday business process and collaboration is referred to as, “communications pain”. Not addressing these everyday communications pains leads to increased operating costs, unsatisfied customers, and impaired competitive advantage. Siemens commissioned a study performed by SIS International Research to uncover the real costs to small and medium businesses (SMBs) around the globe.

Key findings from the study include:

 SMBs and LEs experience similar communications pain
 Communications barriers and latency are widespread
 Communications pain is costly for SMBs
 Addressing communications inefficiencies is a high priority for SMBs
 Evolving business environment is driving mobility among SMBs
 SMB mobility is driving the need for improved communications solutions
 Fragmented and varied technologies limit communications efficiency
 Unified communications is taking root with SMBs

Achtergrond

Siemens Enterprise Communications is a global leader in unified communications. They have commissioned several studies on the topic of communications barriers, including those by Forrester, SQM Research, BaseX Research, Aberdeen Research, and Insignia Research.

Unified communications (UC) and mobility are emerging solutions areas in SMB communications. The promise of UC is to make communications technology seamless, easy, and cost effective via internet protocol. The promise of mobility will speed the nature of communications. Many large enterprises have been evaluating and adopting these technologies to improve business processes, reduce costs, and increase customer satisfaction.

Unlike previous studies, this study was designed to explore and quantify communication difficulties ex-perienced specifically by small to medium-sized businesses (SMBs) of up to 400 employees. This has al-lowed us to understand the pain points, delays, and costs experienced by SMBs. Further, we were able to uncover that, like large enterprises, SMBs are seeking solutions to communications latency and to improve communications for mobile employees.

Doelstellingen

This study is designed to address four main objectives:
1. Compare communications pain points between small to medium-sized businesses and large enterprises;
2. Examine communications barriers and latency surrounding process alignment and collaboration;
3. Examine the current use of and interest in non-traditional technologies by SMBs;
4. Understand how unified communications can help SMBs improve processes and costs through improved communications.

Methodologie

Telephone surveys of 513 respondents were conducted September through November 2008. Contacts were managed to achieve balance across three key segments: employee size, industry vertical, and country.

NOTE: The numbers used in the figures, tables, and diagrams in this white paper have been rounded and may not always add up to 100%.

Profile of Respondents

Respondent companies were located in one of eight countries from three of the world’s major economic zones: the United States, Western Europe, and three of the BRIC nations. Specifically, the countries included in the survey are: Brazil, France, Germany, India, Italy, Russia, United States (US), and United Kingdom (UK).

The businesses identified for participation in the survey fall into one of eight industry verticals: communications, finance, healthcare, insurance, manufacturing, professional business services, real estate, and wholesale or retail trade.

For the purposes of this study, Communications refers to a collection of communications-related professions including computer technology and hardware and software development. Similarly, Professional Business Services refers to a collection of professions including accounting, consulting, and legal business services. Finally, care was taken to ensure respondents within the Healthcare vertical were employees of non-government healthcare-related businesses.

All respondents were knowledge workers in small to medium-sized businesses of up to 400 employees. This document makes use of the terms “knowledge worker” and “employee”. For the purposes of this document, a knowledge worker is defined as an employee that primarily utilizes information/knowledge to accomplish work tasks. Knowledge workers include resources that regularly leverage communications technology and are in roles such as management, information technology, customer service, and sales and marketing. “Employee” refers to all employees of an organization, regardless of their role or use of communications technology.

Compensation Rates

Salary information was gathered from www.salary.com for knowledge workers in each of the eight verticals within each of the eight countries in review. The data reported from this source does not include the cost of benefits, therefore a standard 30% was added to account for these costs. For the purposes of this report, compensation rates are shown in US dollars and based on exchange rates as of December 1, 2008.

Belangrijkste bevindingen

This study was designed to build upon research and findings from a communications pain study con-ducted on behalf of Siemens Enterprise Communications by Insignia Research in 2007. SIS International Research’s analysis of the Insignia data looked at the relative importance of the ten pain points across small to medium businesses (SMBs) and large enterprises (LEs). As shown in the table below, the cost in USD per knowledge worker per year was used to determine the relative ranking of pain points.

Various communications barriers and latency surrounding process alignment and collaboration can be called communications pain. Coordinating communications between team members, juggling multiple means of communication, and handling unscheduled or low-priority communications that disrupt the flow of work are all types of communications pain experienced by SMBs. Individually and collectively, these various types of communications barriers are referred to as pain points.

SMBs and LEs Experience Similar Communications Pain
While differences in productivity cost exist in absolute dollar terms and in the relative ranking of individual pain points between SMBs and LEs, the top five pain points are the same. Waiting for information, unwanted communications, inefficient coordination, barriers to collaboration, and customer complaints were the five most expensive pain points for both groups. Further, the cumulative annual cost of the status quo for these five pain points was not significantly different between SMBs at $35,196 and LEs at $36,443 per knowledge worker per year. This is based on the time spent addressing these pain points and an aver-age hourly compensation rate of $37.

Communications Barriers and Latency are Widespread

In the 2008 study, SMB respondents were asked to tell us about their experience and that of their col-leagues with each of the top five communications pain points. On average, 70% of respondents said they have experienced these pain points. The respondents also stated that they spend, on average, a total of 17.5 hours per week addressing them.

Inefficient Coordination
68% of respondents stated that they experience difficulty coordinating communications between team members, which affects a team’s ability to respond quickly to time sensitive customer requests. Further, they spend an average of 3.7 hours per week attempting to coordinate communications between team members, hindering a team’s efficiency in moving towards goals and deadlines.

Waiting for Information
68% of all respondents experience work delays while waiting for information from others that they have attempted to reach live multiple times using multiple methods. The average delay is 3.5 hours per week per knowledge worker. This is a considerable amount of time to spend before making progress on a par-ticular task, which could negatively affect critical business processes.

Unwanted Communications
Unwanted communications, including low-priority calls and voicemail, is the pain point most frequently experienced by the survey group. 77% of respondents cited spending two or more hours per week dealing with unwanted communications. These interruptions create distractions and disrupt workflow, leading to lower productivity and missed deadlines.

Customer Complaints
74% of all respondents stated that they spend, on average, 3.3 hours per week dealing with negative comments or complaints from customers, specifically because the customer was unable to reach them in a timely fashion. While an 8% loss in productivity is itself significant, the true cost of customer dissatisfaction is surely much greater.

Barriers to Collaboration
61% of respondents find difficulty in establishing collaboration sessions with colleagues. Further, they spend an average of 3.3 hours per week attempting to address issues of inaccessibility, or other communication-tool based lack of full collaboration with colleagues.

Consider that 40% of the work week is lost to these communications inefficiencies and that the majority of respondents are in customer-facing and decision-making roles. The negative impact on critical business processes, new revenue, and customer satisfaction becomes painfully apparent.

Communications Pain is Costly for SMBs

The cumulative cost of the status quo due to productivity losses resulting from communications barriers was estimated to be $26,041 per knowledge worker per year. This was calculated by factoring the time spent dealing with each pain point with the compensation rate for knowledge workers in each of the countries and verticals surveyed.

When one considers that the respondents further estimated that an average of 20% of all employees within their companies similarly experience these pain points, the cost of the status quo for an SMB would amount to $5,246 per year per employee, assuming that 100% of the time reported addressing these issues is unproductive. Thus, for example, a SMB with 100 employees could be leaking a staggering $524,569 annually as a result of inefficiencies in communication.

Addressing Communications Inefficiencies is a High Priority for SMBs
Survey respondents were asked about the priority for their companies to have improved communication solutions that would address each of the pain points. Respondents were asked to consider a 1 to 5 scale, with 1 representing “Not at All a Priority” and 5 representing “Extremely High Priority”.

Overall, 41% of respondents stated that having a system to reduce the time spent addressing all of these pain points is a very or extremely high priority for their businesses. Figure 3 illustrates that even in countries where the time spent per week addressing these pain points and the resultant cost of the status quo are relatively low, the priority for a solution is high.

For example, SMBs in Russia and Brazil reported spending the least amount of time addressing these pain points and have the lowest cost of the status quo. The priority to address these pain points, however, is reported at or above the global average.

Time spent per week addressing communications issues varies by vertical from about 14 hours in Finance to almost 20 hours in Healthcare and Manufacturing. This variation can be attributed, in part, to the fact that certain verticals are characterized by highly transactional businesses. The transactional nature of a businesses drives up the frequency and severity of communications needs.

For example, Wholesale/Retail Trade, a vertical characterized by a high volume of low value transactions, reports above average frequency and severity of pain points. Conversely, Finance and Professional Business Services report lower than average frequency and severity of pain points, as they are better characterized by a lower volume of higher-value transactions.

While the time spent addressing pain points and the cost of the status quo vary by vertical, the priority to address these communications inefficiencies is, with few exceptions, very high and tightly grouped around the global average of 41%.

As the number of employees in an SMB increases, the company is more likely to assign a greater priority to resolving communications inefficiencies. There is a clear inflection point at 20 employees. The priority assigned by SMBs with over 20 employees is more than 43% higher than that by companies with fewer employees.

This correlation stands to reason as the utility of communications solutions increases exponentially with the number of users in the network. Causally, the time spent per week by knowledge workers in companies with over 20 employees is more than 50% higher than that of companies with less than 20 employees.

Evolving Business Environment Driving Mobility
The business environment in the information age continues to evolve. As this evolution occurs, businesses:

 Service customers over broader geographic areas;
 Must provide more information, better service, and improved collaboration;
 Must reduce response times and deliver goods, services, and information faster.

Small to medium-sized businesses are not insulated from these business realities. As a result, SMB employees are expected to be accessible whether they are at their desks at work, working around the office, in a meeting, on the road, or working from home.

High SMB Mobility Driving Need for Improved Communications Solutions

SMB employees are highly mobile, with over 50% of respondents identifying themselves as mobile workers. Further, 48% of these respondents perform more than one type of mobile work.

Overall, 76% of all mobile SMB respondents are on the road a lot, going out to meet clients, drumming up business, or talking to vendors. These mobile workers are road warriors. 64% are office roamers that are hardly at their desks; constantly roaming around the office for meetings or talking with colleagues. Finally, 27% work from home either occasionally or 100% of the time.

In reviewing the survey results aggregated by country, two key clusters emerge. It appears that the underlying state of economic and infrastructure development of a country has a significant impact on the necessity and ability to enable a mobile workforce. Thus, the developed economies in Western Europe and US exhibit higher levels of mobility relative to the emerging economies of Brazil and Russia.

While India would traditionally be classified as an emerging economy, the country’s emphasis on developing an information economy has accelerated its utilization of a mobile workforce. In this way, India behaves more like the developed nations.

In the aggregate, respondents estimated that 20% of their company employees are road warriors; 19% are office roamers and 15% find occasion to work from home. Typically, this relationship holds within individual countries as well, with road warriors and office roamers being more prevalent than home workers.

Respondents were asked about the priority for their companies to have improved communication solutions for each of the three types of mobile workers, considering a 1 to 5 scale, with 1 representing “Not at All a Priority” and 5 representing “Extremely High Priority”.

With few exceptions, even in countries where the percentage of company-wide mobile workers of a particular type is low, SMBs placed a high or very high priority on improved communications for those mobile workers.

Fragmented and Varied Technologies Limit Communications Efficiency
SMBs are increasingly using communications technologies to improve productivity as well as to innovate. Further, they seek to leverage solutions that enable mobile working. We asked SMBs to tell us the types of communications technologies that they currently utilize in their businesses. We found that:

 60% of SMBs surveyed currently use a contact center system to receive, route, queue, and respond to large volumes of phone calls, emails, faxes, and instant messages;
 79% of all SMBs surveyed use a traditional PBX;
 41% of SMBs surveyed currently use VoIP;
 47% of all SMBs surveyed stated that their companies utilize social networking for business activities such as sales, marketing, and recruiting; and
 49% of respondents cite the need for wireless internet access for work.

Additionally, SMBs utilize the internet to accomplish various tasks. Of the tasks we asked about, instant messaging, video conferencing, and fax services were the most prevalent. Instant messaging is the clear leader with 73% of all respondents using the internet to IM, while 56% use the internet for video conferencing and fax services.

Given all of the technologies deployed by SMBs, one would expect that communication and collaboration would be very efficient. However, as shown in this study, significant inefficiencies persist.

It is true that these technologies have improved the communications capabilities of these organizations. However, the proliferation of varied and fragmented communications technologies has created the need for users to contend with multiple devices, tools, and applications. Therefore, rather than improving the efficiencies in communication and collaboration, these fragmented communications solutions have become a barrier to effective communications and collaboration. The need for a unified communications solution is apparent.

Unified Communications is Taking Root with SMBs
Respondents were asked how familiar they are with the term “unified communications”. 83% of all respondents stated that they have at least heard of unified communications.

In general, familiarity with unified communications increased with company size. Thus, while 78% of respondents in companies with less than 20 employees stated that they had at least heard of it, employees in businesses with 300-400 employees averaged 85%.

Respondents from the developed economies cited higher levels of familiarity with unified communications. Survey respondents in Brazil and Russia were the least familiar with unified communications, with 37% of respondents in each country stating that they are unfamiliar with or did not know the term “unified communications”.

Workers in the Communications vertical reported some of the highest awareness levels, with 56% stating that they were either fairly or very familiar with the term. By contrast, respondents from the Finance vertical averaged the highest levels of unfamiliarity with unified communications. Not surprisingly, respondents with job functions related to technology reported higher levels of familiarity with unified communications.

62% of respondents were able to name at least one unified communications provider. Of those Cisco, Microsoft, and Siemens were the most frequently top of mind. Within the developed economies, global providers are most frequently top of mind. However, in the emerging economies of India, Russia, and Brazil, regional players are more frequently top of mind.

Respondents were also asked if their companies currently utilize a unified communications product. 41% of all survey respondents stated that their companies currently utilize a unified communications product. Microsoft, Siemens, and IBM were reported as having the highest share among the current UC users.

There is a clear correlation between employee size and current utilization of UC. Further, there is a significant jump in use of unified communications products by SMBs with more than 20 employees and, again, for SMBs with more than 300 employees. Thus, only 20% of SMBs with less than 20 employees currently use UC while 53% of SMBs with over 300 employees do.

By country, significant variation exists in the use of UC products today. There is a clear divide between the emerging economies of India, Russia, and Brazil and the more mature US and European economies. Averaging 53%, usage of unified communications in the more developed economies is more than twice that in the emerging economies.

Examining the use of unified communications products by vertical, Communications emerges as the industry with the highest level of current use with 55% of those SMBs. Finance SMBs report the lowest number at 27%.

SMBs recognize the utility of unified communication products and are fairly familiar with the technology and current providers. Usage of UC products is gaining traction among SMBs, however nearly 60% of SMBs do not currently employ a UC solution. This represents significant growth opportunity for UC penetration.

Conclusies

Communications barriers and latency are widespread among SMBs. On average, 70% of respondents said they have experienced the five pain points. The respondents also stated that they spend, on average, a total of 17.5 hours per week addressing them.

Communications pain is costly for SMBs. The cumulative cost of the status quo due to productivity losses resulting from communications barriers was estimated to be $26,041 per knowledge worker per year.

Further, the respondents estimated that an average of 20% of all employees within their companies similarly experience these pain points. Given this, the cost of the status quo for a SMB would amount to $5,246 per year per employee, assuming that 100% of the time reported addressing these issues is unproductive. Thus, for example, a SMB with 100 employees could be leaking a staggering $524,569 annually as a result of inefficiencies in communication.

Addressing communications inefficiencies is a high priority for SMBs. Overall, 41% of respondents stated that having a system to reduce the time spent addressing all of these pain points is a very or extremely high priority for their businesses. Even in countries and verticals where the time spent per week addressing these pain points and the resultant costs of the status quo are relatively low, the priority for a solution is high.

As the number of employees in an SMB increases, the company is more likely to assign a greater priority to resolving communications inefficiencies. This stands to reason as the utility of communications solutions increases exponentially with the number of users in the network.

The evolving nature of business is driving the necessity for mobility. As the business environment becomes more complex, businesses must take action to remain competitive. Such actions include servicing customers over broader geographic areas, providing more information, better service, and improved collaboration, and reducing response times to more quickly deliver goods, services, and information.

Small to medium-sized businesses are not insulated from these business realities. As a result, SMB employees are expected to be accessible whether they are at their desks at work, working around the office, in a meeting, on the road, or working from home.

SMB employees are highly mobile, with over 50% of respondents identifying themselves as mobile workers. Further, 48% of these respondents perform more than one type of mobile work. These high levels of mobility are driving the need for improved communications solutions. With few exceptions, even in countries where the percentage of company-wide mobile workers of a particular type is low, SMBs placed a high or very high priority on improved communications for those mobile workers.

SMBs are increasingly using communications technologies to improve productivity as well as to innovate. The deployment of varied technologies has improved the communications capabilities of organizations. However, the proliferation of varied and fragmented communications technologies has created the need for users to contend with multiple devices, tools, and applications, allowing significant communications inefficiencies to persist. The need for a unified communications solution is apparent.

Unified communications is taking root within the SMB segment. SMBs recognize the utility of unified communication products and are fairly familiar with the technology and current providers.

Usage of UC products is gaining traction among SMBs, however nearly 60% of SMBs do not currently employ a UC solution. This represents significant growth opportunity for UC penetration.

Over SIS Internationaal Onderzoek

SIS International Research is a global research firm specializing in market research and market intelligence. Established in 1982, the SIS global coverage spans over 120 countries in Europe, North America, Latin America, Asia and the Middle East.

Our core competency lies in the strategic analysis of global trends, market segmentation and emerging markets opportunities. Our sector coverage includes B2B, Consumer, Pharmaceuticals, Technology, Transportation, and the Service and Education sector.

About Siemens Enterprise Communications

Siemens Enterprise Communications is a joint venture between the private equity firm The Gores Group, a leading private equity firm, and Siemens AG. The joint venture incorporates Siemens Enterprise Communications GmbH & Co. KG, its worldwide affiliates and the businesses of Enterasys Networks and SER Solutions, creating a new leader in enterprise communications – strong in unified communications, contact centers and secure networks. More than 14,000 employees worldwide follow an Open Communications approach, providing enterprise communications and data networking solutions for enterprises of all sizes. This enables business processes to be more productive, faster and more secure within any network or information technology infrastructure. In fiscal 2007 Siemens Enterprise Communications generated revenues of approximately 3.2 billion Euros.

For more information about Siemens Enterprise Communications, please visit www.siemens.com/open

About OpenScape Office

OpenScape Office is a unified communications application suite built from the ground, up to address the problems of needless communication costs, overload, and latency for small and medium size businesses.

SMBs using OpenScape Office show dramatic savings in the areas of third-party conferencing services, mobile phone service fees, and travel costs. In the areas of business agility, faster decision-making, and task execution result in accelerated customer response times, sales cycles, and time-to-market. Improve-ment in just one of these areas can mean increased revenues and a clear competitive advantage for SMBs of all sizes in any industry.

What makes OpenScape Office unique is its cost saving advantages through UC, intuitive user interfaces, easy integration with existing business applications like Microsoft Outlook, and tailored contact center specifically designed for SMBs.