Adoption Trends for SMBs

of cloud services. This is not just a North American trend, rather the phenomenon of SMB cloud adoption seems to be observable worldwide. This article takes a look at what this trend will mean for those working with, or interested in cloud services.

A close look at SMBs

The firm Parallels, specialist in hosting and cloud services enablement, recently released a study entitled Parallels SMB Cloud Insights, which offers a close look at the cloud buying behavior of SMBs. Their research indicates that this group is indeed the fastest-growing segment for cloud services. Their work is based on the assumption that SMBs will choose to buy services over hardware in the coming years and extrapolates the total market opportunity for SMB cloud services in the US, as well as in specific areas of incremental growth.

According to the report,

“Parallels believes that in the coming years, SMBs will significantly increase their consumption of cloud services, choosing to rent services rather than buy hardware. Parallels estimates the additional, untapped, incremental market opportunity for SMB Cloud services in the U.S. alone to be worth $12B, bringing the total market opportunity to more than $21B.”

What does the market look like?

According to research, cloud services for SMBs in the US represented an $8.6 billion market in 2010 alone. This is broken down into the following categories:

• Hosted infrastructure: $4.9 billion
• Web hosting: $2.3 billion
• Hosted messaging and collaboration: $1.4 billion

The numbers indicate that in emerging markets, for instance China, India, Brazil and Russia, SMB cloud services spending and investments through service providers will increase almost six fold, from $111 million in 2011 to $615 million by 2015. This is a four-year annual growth rate of 54%, the largest among all routes-to-market (RTMs). This far outpaces the growth in total software-as-a-service (SaaS) spending over the same period.

Rohan Bose, associate from IT research firm AMI-Partners commented,

“Service providers in emerging markets will gain considerable market share in the cloud services space, due to several key factors… Cloud services allow service providers the ability to meet the growing SMB demand and differentiate themselves from other competitors.”

Segmenting Cloud Services

There are three main segments of cloud services: hosted infrastructure, web hosting and hosted messaging and collaboration. The following is a brief explanation of each:

• Hosted Infrastructure – This is also referred to as infrastructure-as-a-service (IaaS) and includes elements such as dedicated servers, virtual private servers (VPS), managed hosting and utility/elastic computing.
• Web Hosting – As the title suggests, this category includes web hosting, blogging services, domain registration, SSL and e-commerce add-ons and site-building tools.
• Hosted Messaging and Collaboration – This is made up of business-class email services and hosted PBX services, such as email security, email archiving, mobility and phone services through VoIP.

Finding Opportunities

So how will the SMB market for cloud services increase? Two main drivers were identified:

1. 1.       Increase small business use of cloud services.

At the moment, small businesses are currently lagging behind medium businesses in terms of their consumption of cloud services. In fact, smaller businesses are behind medium-sized businesses 19% in terms of their use of hosted infrastructure; only 15% of small businesses have hosted servers, compared with 36% of medium businesses. While 96% of medium businesses report website penetration, just 63% of small businesses can say the same. Averagely, small businesses are behind in terms of hosted messaging and collaboration by 10%.

1. 2.       Convert in-house solutions to cloud services.

Surprisingly, there is still a substantial proportion of small businesses with fewer than 20 employees relying on in-house solutions for services that are easily available in the cloud. Observers believe that this is not a good long-term strategy, given the eventual end-of-life for existing hardware used for in-house solutions, as well as the rapidly diminishing costs of cloud services. For instance, 33% of small businesses still use in-house servers; 18% of small businesses use in-house email; and 38% use in-house PBX. The reality is that small businesses rarely have dedicated IT personnel to manage and maintain such technologies.

Summary

This article takes a look at cloud computing service adoption and use in small and medium businesses (SMBs). Research has shown that the SMB market for cloud services is already rather substantial, at around $8.6 billion in the US alone. It is also expected to grow rapidly in emerging markets. The article looks at the three main segments of cloud services: hosted infrastructure, web hosting and hosted messaging and collaboration. It briefly explores the two main drivers for the increase of cloud services in the SMB market.

CCSK Exam Preparation

In preparation for the Certificate of Cloud Security Knowledge (CCSK), a security professional should be comfortable with topics related to this post, including:

• Cloud vs. Outsourcing (Domain 3)
• Provider Selection (Domain 8)