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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

90 percent of US SMBs expanding cloud usage

SMB cloud is ubiquitous today and becoming even more so, central to the technology and management needs of both smaller and larger SMBs. Cloud is no longer a trend that is discrete from mainstream IT. Techaisle data shows that cloud is viewed as an IT priority by 96% of US SMBs and 90% of current cloud using SMBs are increasing their cloud usage within the next one year. Cloud is not a future issue, it is an essential component of SMB IT.

While cloud growth has been extraordinary, it is reasonable to expect continued high-trajectory growth resulting from three key factors:

  1. Cloud is established as essential IT infrastructure
  2. Cloud addresses real business needs
  3. Suppliers will work with buyers to overcome current SMB cloud adoption challenges

Where are these SMB firms who are planning an expanded cloud presence in the evaluation process? Techaisle asked SMB respondents to identify whether they would refer to themselves as “gathering information,” “identifying potential solutions” or “evaluating suppliers”.

As cloud adoption continues to expand within SMB organizations, Techaisle SMB & midmarket cloud adoption survey data demonstrates that 38% of SMBs are gathering information on cloud technology, solution options and appropriate cloud adoption steps. 32% have moved beyond to the stage of evaluating solutions and the balance are in the process of evaluating suppliers. However, Techaisle believes that these percentages are a moving target as SMBs continue to increase spending on cloud.

Among the midmarket businesses, fully 80% of those planning new cloud initiatives are at this stage, with only 7% focused on evaluating suppliers. Highest percent is within the 100-249 employee size businesses establishing a clear fact that as businesses transition from a small to a larger organization they increasingly gravitate towards cloud to solve their growing pains, establishing processes and supporting a dispersed workforce.

Combining the above information with the data that 94% of midmarket firms are already using some form of cloud solution, we get a picture of a midmarket enterprise market that is in the process of assessing where and how the use of cloud should expand through the enterprise. Small businesses, on the other hand, have a roughly normal distribution across these categories: 24% report that they are gathering information, 46% have moved on to identifying potential solutions, and 30% are evaluating suppliers.

techaisle smb midmarket dichotomous cloud adoption resized

Techaisle believes that the differences between the small and market organization findings reflect different stages of cloud adoption. The small business findings are consistent with a community that moves from point to point, working first on one discrete solution, and then on the next. The midmarket findings are consistent with a community that has already deployed point solutions, and is now trying to build a longer-term strategy for an integrated, flexible approach to incremental cloud expansion. This dichotomous approach is a real challenge for suppliers: they need to differentiate discrete solutions for the small business market, and demonstrate that their offerings are essential components of broader strategies for mid-market firms, while attracting attention to their companies and products and building brand preference in both segments.

This perspective is reinforced by data showing the current uses of cloud within SMBs. Generally, SMB IT departments have used cloud to supplement IT infrastructure resources – for example, by procuring cloud-based storage to offload data from on-premise drives, or by using cloud for backup. Cloud has also made its way into SMBs as a means of supporting non-core applications and related processes; for example, cloud might be used to automate previously manual tasks in HR or customer support that aren’t linked to financial and production systems. But data from the Techaisle SMB survey finds that use of cloud is expanding even into these business-critical applications.

When SMBs are asked to indicate the areas of their operations where cloud has been or will be applied, nearly half report that they are using/planning to use cloud for IT infrastructure, and 37% state that cloud will be deployed to support non-core processes and applications. However, nearly 30% state that they are using or are implementing cloud to run at least some of their core applications. Given that these core applications are not changed or re-platformed very often, 29% is a surprisingly high figure. Cloud is expanding beyond IT-specific uses and niche applications, and is increasingly seen as a viable platform for even business-critical process support.

techaisle-smb-midmarket-core-cloud-adoption-resized 

The shift in cloud’s positioning and dichotomous approach brings with it a shift in the kinds of insights needed to help connect suppliers and buyers to address common interests in deployment, integration and expansion strategies. SMB buyers need help in moving past initial cloud pilots and applications to integrated cloud systems that provide support for mission-critical processes. Cloud sellers need to adjust their messaging to address the needs of early mass market rather than early adopter customers.

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Midmarket technology & business buyers: two peas, two pods

Business decision makers (BDMs) are an intrinsic force in most midmarket organizations and are the primary decision makers in some high-growth technology areas, including collaboration, social media and analytics – meaning that increasingly, BDMs are ‘the boss of IT’. These BDMs view IT as a component of business processes, rather than as a stand-alone silo. Techaisle SMB & Midmarket Decision Authority data shows that twice as many BDMs as ITDMs (IT decision makers) in midmarket businesses say that it is critical for IT to understand how technology contributes to overall organizational success. These BDMs have specific objectives for technology usage, clear perspectives on adoption drivers and impediments, and tend to be influenced by information sources that are different from the inputs used by ITDMs.

This pressure from business managers leaves IT leaders scrambling to stretch limited budgets to meet seemingly limitless requirements, striving to deliver predictable, secure systems that respond to the increasingly varied needs of their business users and competitive environments. The growing divide between IT authority and responsibility, exacerbated by the fact that business perspectives on IT are shaped by information channels that are not part of the IT professional dialogue, has created an environment where businesses are struggling to develop the cohesion needed to promote or embrace new IT capabilities to achieve business objectives within existing IT and business process structures..

In a unique survey, Techaisle posed the same question, “expectation of associating business success factors to IT solutions” to both BDMs and ITDMs and probed to identify what each expected from the other. Techaisle data shows that BDMs tend to have higher expectations of IT; while business decision makers and technology decision makers are reasonably well aligned in some areas, there is a wide expectation gap in others, which may explain (at least to some extent) the continued proliferation of non-sanctioned, “shadow” IT.

techaisle-midmarket-linking-it-with-business-success-resized

The figure above provides a simplified view of differences between BDMs and ITDMs across several different factors. Although there is a tacit agreement that both business and IT management should understand business related success imperatives and should be able to associate IT solutions to achieving those objectives, closer examination of the data shows some important differences between the two groups:

  • 53 percent of upper midmarket BDMs say that it is very critical for business success that ITDMs are able to identify and associate IT solutions with business efficiency, productivity & profitability. On the on the flip side, only 30% of IT executives in these upper midmarket businesses say that business executives should be able to associate IT solutions with business efficiency, productivity and profitability. Responsibility for delivery clearly rests with IT, and BDMs have very high expectations from ITDMs.
  • Data also clearly shows that BDMs again have high expectations for support in using technology to build customer connections. Over 40 percent of BDMs believe that it is critical that IT has a grasp of solutions that enable beneficial customer & supplier interactions. In contrast, only 1/4th of ITDMs say that BDMs should have a grasp of such solutions.
  • Employee productivity is an important aspect of business and in most cases businesses are expecting IT to understand and deploy core technology solutions to make employees more productive.
  • Business process automation is an area where there is better alignment between IT and business. However, automation is a dominant need within the 100-499 employee size segment; nearly 40 percent of BDMs in the segment say that it is critical that IT can identify requirements for automation and associate IT solutions with these needs.
  • Cross-organizational integration is recognized as being important by both BDMs and ITDMs in mid-size businesses: over 50 percent of both groups agree that it is critical for both business and IT to associate technology solutions with business demands. This is an area where both BDMs and ITDMs are fully aligned.

The trend towards increased BDM involvement in IT decisions is likely to accelerate further. BDMs are already active in shaping demand in core IT markets, and they are the dominant force in high-growth areas like collaboration, social media and business intelligence/analytics. ITDM and BDM divergence will continue and although there is cross-pollination they may as well continue to operate from different pods. Although it may be tempting to try to bring the various parties together, IT suppliers cannot successfully act as intra-corporate matchmakers: they have to come to grasp with the reality of selling to two different constituencies which have different expectations.

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Addressing SMB and Midmarket buyers cloud & mobility journey

In the course of Techaisle’s SMB & Midmarket IT Decision Making Authority: IT vs LoB, BDMs (business decision maker) and ITDMs (technology decision maker) were asked to identify the “greatest benefits” and “key attributes” of both cloud and mobility solutions.

There is an interesting pattern apparent in the survey research findings. When adopting mobility solutions small business BDMs are focused on addressing near-term pain points: attracting new customers, improving accuracy, addressing work/life balance. The ITDMs appear to be taking a longer view, focused on applying automation to bring structure to business processes – improving the quality of interaction through application of mobility solutions, improving the quantity of those interactions, increasing process efficiency.

Midmarket BDMs are looking to mobility to help increase business process efficiency and customer interaction quality. Midmarket ITDMs, on the other hand are focused on increasing the quantity of customer interactions, which would logically impact other core areas (such as business user productivity and process efficiency) as well.

When discussing the mobility solution attributes that BDMs and ITDMs consider important to delivering on mobility benefits BDM and ITDM buyers have similar and common perceptions across all business sizes. “The ability for the mobile solution to be integrated seamlessly with existing corporate systems” – ensuring consistency across devices – is ranked as the most important mobility solution attribute by small business BDMs, and the second-most important attribute by midmarket BDMs. The ability to create and sustain secure connections for remote workers and the ability to deliver seamlessly across the “three screens” of PCs, tablets and smartphones are also priorities for BDMs in both small and midmarket businesses. ITDMs also have some key common areas of focus: the ability to integrate multiple media types into outbound communications and the ability to read or write data from/to corporate systems are the two top-ranked attributes in both employee size categories.

It is clear that each IT and business professional’s perspective on the mobility journey is shaped by their context – by their business objectives, and by the requirements imposed by the size of their organization. In the figure below we have taken the results from the Techaisle survey and plotted them in three dimensions.

techaisle-itdm-bdm-smb-mobility-attributes-resized

A look at the findings from parallel questions on cloud also reveals differences between ITDMs and BDMs, but similarities between small and midmarket firms. Looking at cloud benefits, BDMs, especially in small businesses, view cloud as a means of introducing capabilities that would have been cost or time prohibitive, and of reducing business process costs. ITDMs, on the other hand, view cloud primarily as a means of reducing IT costs. ITDMs in both small and midmarket businesses recognize that cloud can enable their organizations to be more agile, which connects well with a theme expressed by BDMs.

When analyzing the key attributes leading to realization of the above cloud benefits, data shows some differences in emphasis between small and midmarket firms. The most important difference between BDMs and ITDMs is the BDMs’ emphasis on collaboration: BDMs in both small and midmarket businesses are more likely than their ITDM counterparts to view support for collaboration as a key cloud solution attribute. BDMs are also more likely than ITDMs to look to the cloud for detailed reporting and for support of features – disaster recovery, on-demand data access, and mobility support – that may be lacking in their current environments. ITDMs, on the other hand, are focused on technical attributes (scalability, integration, IT management capabilities) that are difficult and/or expensive to develop without third party support.

Understanding the requirements, preferences, success metrics and areas of focus of BDMs and ITDMs within both small and mid-sized businesses is critical to structuring an effective SMB sales and marketing strategy. The findings open the door to an important issue: the requirements in structuring and communicating messages to ITDMs and BDMs within small and midmarket businesses. To effectively engage with and manage the increasingly-diverse decision making unit, IT suppliers will need to structure messages that address the "care-abouts" of BDMs and ITDMs, and deploy those messages through the channels that are most effective at reaching each community.

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IBM – motivating midmarket firms to think strategically about cloud security

A blog “Big Data in the Cloud - an ideal solution for SMB banks” that we wrote touched a nerve, in a good way. Post blog, in our several discussions with both large and community banks we find that cloud objection is largely based on the size of the bank. In addition, regulatory compliance concerns are huge as most midmarket businesses and banks in particular spend a lot of money being compliant. With the move to cloud they want to make sure that the investment extends to the cloud without being exposed to security breaches and from a regulatory point of view.

What is clear is that migration to cloud is forcing businesses to think differently about security, in very standardized ways because the delivery of cloud service is standardized. It is also pushing them to automate security because utilization of cloud is dynamic, elastic, automated and fluid thus making manual or even semi-automated security processes unmanageable. However, this approach creates multiple vulnerabilities. The bad guys themselves are taking advantage of all the cloud technologies and are becoming a lot faster and more automated than the businesses. Security therefore becomes a moving target and cloud security is a perfect opportunity for businesses to improve defenses and reduce risks.

While most midmarket businesses are reactive, hunting after point solutions when something goes wrong, others are taking a proactive approach to risk and threat so that they have more fluidity in the way they respond when a threat occurs.

IBM security is on a path to help businesses think differently about cloud security. It is moving the businesses along a maturity curve from reactive to proactive to optimized. Optimization refers to the difference between being able to weather an attack and continue with business and how much time could one can shave off and how much cost could be optimized for being able to respond to that event in reducing risk.

As Sharon Hagi, Global Strategist and Senior Offering Manager, IBM Security, said in an interview “the state that IBM is advocating goes beyond reactive or proactive. We call it the optimized state where organizations use automation coupled with predictive security analytics to drive towards a higher level of efficiency. By mixing the elements of proactive approach, automation and security intelligence businesses can actually get to the point where they are a lot more efficient and they actually reduce time and cost to respond to risk.”

IBM is differentiating and trying to distance itself from others in a number of different ways. IBM has a managed security services practice with ten plus security operation centers around the world servicing 133 different countries with 6,000 security professionals and its research lab X-Force provides actionable threat intelligence and insights for business and IT leaders. IBM monitors 10,000 security customers globally, 70 million end-points with 20 billion events per day, has made enormous investments in security intelligence analytics platform that allows it to distill information, identify threats and respond quickly.

But for banks and businesses that come under deep regulatory scrutiny, security goes beyond managed services and is a major psychological barrier to cloud adoption triggering a high level of fear-factor. Recently, we posed a fundamental question of “Why do you want security” to banks and midmarket businesses in general. The responses received could easily be bucketed into five categories:

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