Cloud Computing In Midmarket, SMB Sectors Creates Big Opportunties2:30 PM EST Fri. Jan. 21, 2011
Small and midsized companies are making the leap into the cloud in droves, and it's not just to cut costs.
And the majority of those companies rely on solution providers to make their cloud plans a reality, creating major opportunities for solution providers.
"It's no surprise to anybody that the basic acceptance and intention to move to the cloud is very high in SMBs and midsized companies," said Tim Furey, founder of MarketBridge, a provider of technology-enabled marketing and sales managed services and solutions.
MarketBridge recently polled 1,000 North American small and midsized businesses about their cloud computing plans and found that about 70 percent to 85 percent fully expect to move major applications to the cloud in the next 12 months. Additionally, 44 percent of companies claim to have at least one business application in the cloud already.
What was surprising in MarketBridge's findings, however, was that slashing costs is no longer the main factor driving SMBs to the cloud, Furey said.
"The ones who follow through or intend to follow through with their cloud plans -- it's not just for reduction of cost," he said. Instead, Furey said, there are three different triggers prompting smaller companies to move to the cloud.
The main trigger to spark cloud adoption is company growth, Furey said. Companies need to invest in more IT and more IT capacity and see the cloud as a viable means, and companies that are growing at a rate of 10 percent or more per year are twice as likely to move software and infrastructure to the cloud.
The second trigger is mobility, which 38 percent of respondents indicated is a key need and a cloud catalyst.
Third is security. Forty-eight percent of SMBs that responded said they believe data security would be better in the cloud. "It can be more expensive and more difficult to do it yourself," Furey said.
MarketBridge also found that marketing and sales are currently the most accepted cloud applications for midmarket companies. Research found that 36 percent of companies that use marketing automation do so in the cloud and 29 percent of CRM is cloud-deployed. Additionally, more than 49 percent of companies plan to move on or more of their sales and marketing apps to the cloud in the next year. Additionally, 52 percent of respondents said they preferred to deploy on a private cloud versus a multi-tenant public cloud.
And the midmarket push will give the cloud computing channel a boost, as MarketBridge found that 67 percent of respondents preferred to purchase software and applications through a third party, value-added, managed service provider or solution provider due to the need for both higher service levels and functional expertise.
"Customers are looking to VARs not just to deploy the solutions," Furey said.
MarketBridge's research comes on the heels of a similar study conducted by IBM, which also found that the midmarket is moving to the cloud en masse. That study found that roughly two thirds of midsized companies are adopting cloud computing technologies.
IBM's research also found that 73 percent of midmarket companies surveyed said that cost reduction is the top business benefit of implementing cloud computing, other factors like manageability, 70 percent; redundancy, 68 percent; uptime and availability, 67 percent; and rapid provisioning, 66 percent, were among the top perceived benefits.
Next: Solution Providers Seeing Big Mid-Market, SMB Cloud Uptake
And solution providers are seeing midsized companies run toward the cloud. Atlanta-based cloud solution provider Cloud Sherpas is seeing business boom in smaller companies, so much so that it launched a dedicated practice for SMBs. Currently, Cloud Sherpas has hundreds of clients it considers midmarket customers and many more that are SMBs.
"While our business has grown rapidly by focusing on mid-market and enterprise accounts for the last three years, we've seen adoption in the SMB sky-rocket," said David Politis, Cloud Sherpas' vice president of SMB solutions.
Politis said smaller companies had been lured to the cloud by cost-savings, but lately it appears they're not willing to sacrifice functionality for cost. Cloud Sherpas, for example, is seeing smaller companies signing on with Google Apps to boost productivity while no longer having to support on-premise e-mail, while also reducing costs.
And midmarket and smaller businesses are also wooed by speedy time to deployment and swift adoption, versus enterprise deployments that can be more complex and can take much longer. For example, Politis said Cloud Sherpas can move an SMB client to Google Apps in days, midmarket clients take weeks, and a large enterprise deployment could take months. Politis added that smaller companies are also able to adopt a larger number of cloud apps in a shorter period of time and are often more "experimental" with what cloud apps they'll try.
Cloud solution provider Model Metrics works frequently with SMBs and midmarket companies in addition to its typical Fortune 500 and Fortune 2,000 customers. The company says it has witnessed first-hand the big benefits smaller companies are getting from the cloud.
"I think the smaller companies have more to gain from the cloud since they don't have the IT depth or infrastructure of a large company," said John Barnes, CTO for Chicago-based Model Metrics. "I also agree that cloud security is better than the security that an SMB or midmarket company would have on its own. It makes a lot more sense to plug in something like a Salesforce.com to meet a sales or marketing need than build something from scratch or to try and host it themselves."
Barnes, however, said that smaller companies may not be ready for private clouds over public clouds, as private clouds require a massive expense around hardware, software and expertise.
"I would argue that they are much more likely to use a public cloud provider or SaaS company to fill a need," he said.