Small is beautiful: Tech’s focus on enterprise customers is hurting innovation – SiliconANGLE

The tech industry is obsessed with enterprise customers. Growth, both on and off the balance sheet, is almost considered synonymous to the number of enterprise contracts secured within a given quarter. This enterprise fixation holds true across the spectrum from early startups to large, well-established companies.

It makes sense, as enterprise customers often equate to “large spend,” and most tech companies take pride in helping legacy companies with their digital transformation. An enterprise focus is also financially validating for many startups – the quickest and easiest path toward showing product momentum.

However, this focus on enterprise customers comes at the expense of smaller companies that could benefit from access to innovative digital products and the latest technologies. If the companies creating the next big thing in cloud, the “internet of things,” artificial intelligence, augmented and virtual reality, robotics and the like are all looking for their next enterprise customer, who is looking out for entrepreneurs and small businesses?

Technology and competition

According to data from the U.S. Bureau of Labor Statistics, about 20% of small businesses fail in their first year, with 50% failing by year five. This number is said to be even higher for startups, with estimates predicting a 50% to 90% rate of failure. And that doesn’t even begin to capture the number of ideas that don’t even get off the ground because of the host of barriers to entrepreneurship.

For the startups and small businesses that do get to market, we have a pretty good sense of what matters to their overall success: initial capital, a strong product-market fit and the ability to keep up with (and outpace) the competition. Access to technology is essential for all these success drivers, but it is especially important to help compete in a marketplace that increasingly values innovation in mobile apps, software-as-a-service or other digital products.

In 2021, McKinsey published a comprehensive look at the pandemic’s impact on technology adoption among businesses of all sizes and how they were faring as a result. Their findings overwhelmingly showed “a clear link between technology endowment and economic outperformance.” In other words, companies with more developed technology capabilities were coming out ahead of their peers – and this trend had only accelerated compared to before the pandemic.

Even more urgently, only 11% of these business leaders believe their current business models will be economically viable through 2023, with 63% claiming their companies need to “build new digital businesses to help them get there.” These new digital businesses will be based on technologies that the pandemic itself popularized – real-time video, e-commerce, cloud computing and robotics.

However, as the pandemic demonstrated, building and integrating new technologies into existing operations isn’t easy. Many small businesses struggle to adapt to these changes and fail as a result. As any entrepreneur will tell you, digitization takes time, training and capital — all elements that small businesses are short on.

Resource gaps

Within the past few years, artificial intelligence has emerged as an example of technology that is out of reach for most small businesses and increasingly the domain of the “tech elite.”

Wired magazine writes of search startups and health information technology companies that would benefit greatly from more advanced AI across their operations, but they find that their ability to train these models pales in comparison with giants such as Google LLC and Amazon.com Inc. Part of the problem? The cost of training these models can “cost more than $50,000, paid to cloud computing companies to rent their computers and programs.”

The exorbitantly high sticker price of adopting new technologies isn’t a new phenomenon, nor one specific to the cloud industry, but the cloud industry is guilty of making it harder for small businesses to manage these costs better. Cloud costs at some of the largest cloud providers in the industry can quickly balloon if users aren’t careful, and hyperscalers typically offer little to no support in helping users understand exactly what they are paying for.

In the past few years, serverless technology has stepped in to allow developers to pay for computing resources “on demand,” essentially paying only for what they use rather than pre-provisioning capacity in the cloud. However, this tech is still challenging to operationalize at smaller companies, and migrating existing workloads to a serverless model often requires rewriting applications from scratch, not to mention a level of support and guidance that enterprise-focused cloud providers don’t readily offer to smaller customers.

Without a helping hand from vendors, smaller businesses tend to opt out of the latest advancements in cloud. And when they do, it’s a loss for these businesses, and a loss for innovation overall.

Redefining success

The term “underserved market” means different things across different industries. In the tech industry, entrepreneurs and small to medium-sized businesses building digital products continue to be underserved, as tech companies increasingly define success through the lens of acquiring new enterprise customers.

Nowhere is this more true than in big tech, across companies such as Amazon, Google and Microsoft Corp., where the obsession with enterprise customers has reached a new peak. Small businesses are being neglected by big tech precisely when the technologies these companies excel in – cloud, AI and machine learning, IoT – are growing in importance and impact.

When enterprise revenue is the singular focus, there is no incentive to build products and features that are geared for a 25-person company. Small businesses might complain about bloated enterprise products, or the lack of SMB-friendly pricing, but it’s hard to complain when the sales team doesn’t prioritize answering your call.

These barriers don’t need to exist. In the past few years, tech leaders have been talking more and more about product-led growth, a go-to-market strategy where the “end-user product experience is the primary driver of growth.” In other words, rather than a tenacious salesperson driving growth, growth starts with a customer’s love for your product.