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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.

SMB Server virtualization penetration is increasing but challenges remain

Techaisle’s SMB Server Virtualization adoption market trends study shows that US SMB server virtualization penetration has reached 54 percent (un-weighted), up from 41 percent two years ago. Within midmarket businesses the penetration has reached 88 percent and another 7 percent are planning in the next one year.

Figure below uses data from multiple surveys to illustrate trends in virtualization penetration within SMB accounts that have adopted server virtualization. In 2013 the proportions of servers virtualized was very similar across all employee size categories, ranging from 61%-62% in microbusinesses (which sometimes only have one server, making virtualization an all-or-nothing proposition) to just over 50% in midmarket enterprises with 500-999 employees, which can be expected to have many servers. The statistics for 2014 show virtualization penetration rising in all employee-size segments: rapidly in microbusinesses and the 500-999 midmarket enterprises, and gradually in other SMB segments. The perspective on future intentions, drawn from the Techaisle SMB 2015 survey, indicates that these trends will continue and accelerate. Microbusinesses and larger SMBs (including both the 250-499 and the 500-999 segments) are expecting rapid further penetration of virtualized servers, and the other midmarket segments are expecting a further 6%-10% of servers to be virtualized.

percent-servers-virtualized-within-smbs-2015-techaisle

What does this trend mean to the market?

Clearly, there is increasing opportunity for hypervisor sales, and Techaisle would expect that VMware will find purchase within companies looking to connect virtualized servers to other infrastructure assets (especially, for example, hybrid cloud or software-defined networking or storage), while alternative suppliers, such as Microsoft, gain share in the core market as multi-hypervisor strategies become more common. Techaisle expects that this trend also indicates increased opportunity for converged infrastructure products as these systems can be used to capitalize on advanced virtualization capabilities.

Location of Virtualized servers

A comparison of 2013 and 2015 research results shows that within each employee size segment, SMB end-user organizations are becoming more likely to virtualize servers that are located outside of their business premises. Across the entire SMB community, there has been a 45% increase in off-premise virtualized servers in the past two years: an enormous shift that highlights the broader shift towards remote management of infrastructure resource.

location-of-virtualized-servers-smbs-2015-techaisle

If virtualizing servers is so popular – why isn’t it universal?

The Techaisle interview of 848 US SMB ITDMs uncovered a number of reasons why SMBs struggle with virtualization adoption. The top five challenges cited in the research illustrate the complexity that can accompany infrastructure changes.

The most prominent challenge, cited by 34% of SMB respondents, was the high cost of virtualization licenses, which may explain why the expansion of virtualization within current user accounts often includes investigation of (and in many cases, migration to) a multi-hypervisor strategy that adds “free” options such as Hyper-V and Xen.

top-5-server-virtualization-smb-challenges-2015-techaisle

The third most common challenge is that management of virtual servers proved to be more difficult than anticipated, which may reflect initial learning curve struggles and/or incremental complexities associated with environments relying on multiple hypervisors.

The second leading challenge, “projected cost/space/power savings not achieved,” highlights both the cost and complexity issues: it can be difficult to obtain projected densities/utilization rates during the adoption/migration period, and expenses can escalate in several ways: due to costs associated with virtualization solution licenses, and also because of the “high cost of ISV licenses for applications running in a virtualized environment” and generally higher-than-anticipated project costs. It is worth noting as well that in small businesses (1-99 employees), “lack of experience” is also seen as a major server virtualization challenge, cited by 22% of survey respondents.

On the positive side, the relatively high level of server virtualization experience found within the SMB channel partners (Techaisle SMB Channel Trends study) may help mitigate this issue – but it should act as a caution when evaluating market outlooks for VDI and DaaS, where experience levels within both the SMB buyer and SMB channel communities are much lower.

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SMB Collaboration advocacy - the coming changing of the guard

Staffs within IT suppliers often like to remind each other that “people sell to people.” Generally, this is said to remind IT suppliers that marketing programs alone won’t (generally) make a B2B solution successful, that sales staff are important as well. The other side of the equation is important too, though: who within the SMB should IT suppliers target for collaboration solutions?

In SMB Collaboration Adoption Tends survey, Techaisle asked ITDM and BDM respondents, “who is the primary advocate for your organization’s collaboration efforts?” Looking at collaboration today, executive leadership is the key driving force behind collaboration solution investments. In many ways, this makes sense: collaboration has been positioned as a platform, and as a result, represents a major investment; and collaboration platforms become a central, every-day resource touching all users within an organization, meaning that senior leadership’s influence may be needed to align all stakeholders behind a single course of action.

Current vs. Future SMB Collaboration buyers
When we compare current users vs. future SMB buyers, though, we get a different perspective on this issue. Executive leadership will continue to be the primary driver of collaboration solution initiatives, but new solution initiatives are increasingly being driven from other quarters.

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Channel challenges in selling cloud to SMBs – diminishing external barriers

What are the obstacles to channel members achieving scale for their cloud businesses? Techaisle’s SMB Channel Partner Trends research and accompanying research The State of the US SMB Cloud Channel shows that increasingly, Walt Kelly’s famous line (from the Pogo comic strip) “we have met the enemy, and he is us” describes the most pernicious challenges associated with development of a cloud business.

Techaisle’s research explored data on 10 cloud sales challenges faced by SMB channel partners in selling cloud to SMBs. Four of the top five – “lack of in-house expertise”, “do not have financial resources,” “lack of knowledge about cloud computing” and “do not know how to implement [cloud solutions]” refer to internal issues, and two others, “do not understand the [cloud] business model” and “offering cloud-based services will necessitate elimination of jobs at our company,” also reference internal issues or concerns.

Interestingly, external barriers to developing SMB cloud business practices seem to be diminishing in importance.

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Best Positioned Cloud Infrastructure Vendors - SMB & Channel View

Best positioned cloud infrastructure supplier
In Techaisle’s recent SMB Cloud Computing adoption survey, respondents were asked “which of the following do you think is best positioned to deliver cloud infrastructure solutions”. IBM was rated as being “best positioned to deliver cloud infrastructure solutions” by 24% of small businesses, and 23% of midmarket firms. Microsoft is similarly entrenched, seen as best-positioned by 21% of companies with 1-99 employees and 33% of midsized enterprises. Given that Cisco is stronger in larger accounts than in the small business market it is the third-ranked cloud infrastructure vendor in the small business segment, cited by 19% of small accounts, but just 11% of midmarket companies. Clearly, Cisco’s brand equity is helping to support its position in a market where it has sparse actual presence. AWS is viewed as best-positioned by 10% of both small and mid-sized firms, putting it slightly ahead of Dell in both markets. Perhaps as a consequence of its high-end cloud product line, HP is not viewed as a leading cloud infrastructure vendor in the small business segment but is still the third-most prominent brand in the midmarket.

Who is ‘top of mind’ for converged infrastructure?

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