Over the past few years, the media has well documented how software as a service companies have made it easier for large businesses to afford and implement best-practice software.

Companies like Workday WDAY +1.81%, SuccessFactors, Marketo, and Coupa are just a few of the SaaS businesses leading that charge. But markedly little coverage has examined the similar progress being made for the many companies that fall under the umbrella of small and mid-sized businesses (SMBs).

Few would dispute that SMB makes up a large market, but it is a fragmented and difficult one to sell into. Forbes estimates that there are 27 million small businesses in the U.S., and about 5.7 million of those have employees. In comparison, there are fewer than 4,000 companies traded on NASDAQ and the New York Stock Exchange.

Some business services companies are well known, and have had great success over the years: Intuit INTU +1.72%’s QuickBooks, now called QuickBooks Online; the suite of services offered by GoDaddy and LegalZoom. These businesses found success in the field of small businesses because they solved an acute business problem and did it at a cost that was palatable to the small-business owner. However, many pockets remain in need of a complete small business solution. Almost every SMB has a Fortune 500 analog, but many of those solutions are still offline.

The largest companies can afford, or even require, outsourcing to large accounting firms, law firms and marketing agencies. SMBs, on the other hand, have often shied away from outsourced SaaS solutions because they seem initially time consuming and too expensive. Outsourcing used to be looked at strictly as a cost-saving measure–something to consider when belts are being tightened. So as we enter the seventh year of expansion in the U.S. economy, with strong employment numbers and low interest and inflation, why should we consider outsourcing key areas of one’s business? Because it is not about cost savings, it’s about our old friend, “comparative advantage.”

 

Take manufacturing. While it is clear that with manufacturing outsourcing, jobs can be lost, the even greater loss is to the continued innovation of intellectual capital that come with those jobs. Manufacturing process improvements overseas have made the prospect of many of those jobs returning to the U.S. more unlikely, whether those jobs are desired or not. Put another way, when outsourcing manufacturing, the U.S. economy has lost more than jobs themselves.

It does not have to be that way for SMBs, which can clearly separate their core value propositions from functions better left to others. The regulatory, tax, and technical landscapes are complicated, making it easy for SMBs to run afoul of the best practices and subjecting one’s business to penalties and security breaches. These skills are not core competencies for a core service offering, so outsourcing them will not put the company at any existential risk. There are now services that manage the entire back-office process from inventory tracking, shipping, warehousing, procurement, and expenses.But not outsourcing could. SMBs can now have a holistic view of the back end of their business so that they can focus on delivering a better front-end experience, therefore generating more revenue and increasing their chance of survival.

 

Today’s technology outsourcing solutions all trade on the principle of comparative advantage–do what you do best, and pay someone else to do what they do best. Goodbye to in-house legal systems, payroll, benefits, accounting, and now even scheduling and inventory management. When a market slowdown inevitably occurs, those with the best core business practices will be better positioned to survive and thrive through the cycle.

Let’s look for innovations for the SMB market in areas like vendor management, cash management, inventory management, shipping, and other back-of-house areas that are headaches to running a business. Doing them right will not ensure success. But doing them wrong will lead to failure.