For over a decade, Hg has invested in and supported businesses that provide technology services to small and medium sized enterprises (SMEs) across Europe.
In our latest insight, Nick Jordan, Partner at Hg, discusses an area within tech services where the firm has made a number of investments – SME cloud services.
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With digital channels becoming increasingly core to many businesses, SMEs need to be able to reach, communicate with and sell to their customers through this channel effectively in order to stay competitive.
To help businesses deal with this challenge, SME cloud service providers help to digitally enable smaller business who want to get online by providing website, email, domain and productivity software services.
Hg has been an active participant in this industry as an investor and partner to five businesses over ten years. We’ve sat alongside management teams as they’ve watched their sectors evolve and new challenges present themselves. We’ve witnessed what’s worked and what hasn’t, and brought these experiences to bear in the businesses we’re invested in: from helping to implement transformational M&A, supporting the development of product propositions, through to reviewing how effective sales and marketing are across channels and geographies.
We see three major trends across the industry today:
As smaller hosting providers are unable to invest enough in product innovation and sales & marketing to meaningfully compete with their larger peers, we have seen platform companies implement successful M&A strategies to create large, strategic players across different product sets and geographies;
Small businesses are looking to outsource more and more of their tech requirements to third parties. Having one supplier of many services reduces complexity for the customer and can also be more efficient. Hosting providers are becoming one-stop shops for SMEs technology needs, replacing legacy IT vendors;
Hosting companies are starting to focus on two specific customer segments: a self-service model, where a provider supplies the tools for the customer to use inhouse; or a high-touch proposition, where customers look for help and support from their supplier to get and stay relevant online. It’s increasingly important for SME hosting providers to be flexible in their offering and accommodate both levels of demand.
We believe that the successful hosting companies of the next decade will continue to be those that have a clear proposition to help their customers be relevant online as they seek to grow their own businesses.