Techaisle Blog

Techaisle’s SMB Cloud Computing Adoption Trend research (US, Canada, Germany available now; upcoming Australia, China India, Brazil, Mexico) shows that cloud computing has moved beyond a niche approach to IT, and is now the center-point of IT operations for 15 percent of US SMBs that are currently using cloud, and for 25 percent of US mid-market (100-999 employees) businesses that are using one or more cloud-based system. However, SMBs in other countries do not yet exhibit the same acceptance of cloud’s role within their IT operations. For example, in Germany, only 6 percent of SMBs consider cloud to be the center-point of IT operations – but a whopping 56 percent use Cloud to supplement traditional IT resources.

Drilling down into the data gives a fascinating perspective of profile differences across businesses that view cloud either as center-point of their IT strategies or supplemental to strategies rooted in conventional on-premise technologies. The data also exposes the fact that businesses are still struggling to really define how best to use Cloud.

Within the small business (1-99 employees) segment, we find that small firms using cloud are most likely to add cloud into a physical device-based IT approach: the average small business reporting that cloud is used to supplement traditional IT resources has 10 employees and only one location. Small businesses that have achieved higher growth levels are more likely to position cloud as the center-point of an agile IT infrastructure; these companies are about two times larger (17 employees, two locations) than the “cloud is a supplement to traditional IT” small business average.

In mid-sized businesses that are currently using at least one cloud-based system, this trend is reversed. Mid-market businesses that position cloud as the center-point of IT operations average 227 employees working from four locations. The averages increase to 321 employees and six locations for mid-market businesses that use cloud as a supplement to traditional IT resources. However, the trend of averages is just the reverse for small businesses.

When this data is analyzed along with the use of public, private and hybrid Clouds and the planned changes in Cloud workloads it shows that there is no one strategy for all sizes – though we see growth in hybrid in all segments, the paths that different kinds of operations are taking to hybrid vary by size and by other factors

More detailed data is available in Techaisle’s report titled SMB Cloud Computing Adoption Trend which covers:

• Benefits & Inhibitors of Cloud Adoption: Why is Cloud Being Used? Why Not Cloud?
  • Drilling down into small business and mid-market perceptions of Cloud benefit
  • The intramural divide: ITDM vs. BDM perceptions
  • Inhibitors: Why not use Cloud?
  • ITDM and BDM inhibitors
• IT or Business: Who is driving SMB Cloud adoption?
• Private, Public or Hybrid: What is in use and planned to be used?
  • Adoption of hybrid
  • Aligning Cloud delivery with requirements
• Current & Planned Cloud Applications: Where is Cloud being deployed?
  • Understanding the gateway to new platform and/or business specific capabilities
  • Key Cloud applications and workloads by employee size
  • Vertical workloads becoming ubiquitous; Role of content publishing, CRM
  • Differences in small business and mid-market SaaS adoption patterns
  • Free vs. paid Cloud applications
• SMB Cloud Future: When will Cloud usage patterns change – and how?
  • Overcoming Cloud Adoption barriers                                                                     
  • Tracing the trajectory SMB Cloud usage: Where are we heading from here?
  •  Workload and application perspectives
• SMB Cloud Security Management
  • Roles and responsibilities in Cloud security management
  • Mid-market – management responsibility is increasing
• Key attributes of Successful SMB Cloud solutions
• • Assessing success: key Cloud solution elements
  • Difference in needs across small and mid-market businesses
  • BDM and ITDM perspectives

For more information on Techaisle’s SMB Cloud Computing Adoption Trend research, please contact This email address is being protected from spambots. You need JavaScript enabled to view it.

Techaisle’s recently completed US SMB Cloud Computing Adoption Trend research shows that Cloud computing – which IT suppliers often position as a means of reducing cost – is viewed by 80 percent of US SMBs as a solution that contributes to business growth. This is a huge departure from previous years when reducing cost used to be the overarching objective. It implies that cloud vendors and resellers should expand their marketing dialogue beyond the cost and CAPEX vs. OPEX motivations for cloud adoption and focus on ways in which cloud-based solutions enable SMBs to expand their reach to new markets and customers. In fact, over 40 percent of SMBs state that business agility and new capabilities are driving SMB cloud adoption.

This new trend of SMBs adopting cloud for business growth creates a “perfect storm” of opportunity for cloud computing. It satisfies the demand for new technology-enabled business capabilities such as mobility, social media, business intelligence/analytics and collaboration by providing a platform for supporting these initiatives. At the same time, as IT continues to struggle with cost control, cloud provides a clear means of reigning in CAPEX and reducing management costs.

Techaisle’s survey data shows that while there is broad recognition of the importance of business agility as a cloud benefit, a “mid-SMB” niche exists – stretching from 50-250 employees – in which IT productivity is the overarching cloud objective.

The key reasons for using cloud and benefits realized vary by size of business as well as issues that are of critical concern to SMB organizations. For example, small businesses (1-99 employees) focus tightly on business benefits: increased business agility is the most compelling cloud benefit, followed by obtaining capabilities that would have been cost/time prohibitive, reducing business process-related costs, and improving business staff productivity. Mid-market businesses (100-999 employees) also appreciate these outcomes – but the highest-ranked benefit of cloud is IT related, with “make our IT staff more productive” cited as a compelling cloud benefit by nearly 60 percent of mid-market businesses.

Drilling down into the different sizes of businesses the 1-9 micro-business group also places a high value on using cloud to reduce process costs, which makes a great deal of sense, since these tasks are likely not automated in any fashion today. Respondents in the 250-499 employee size segments prioritize use of cloud to increase business user productivity, while the 500-999 employee segments is focused on cloud delivery benefits such as capabilities/agility and IT productivity. Analyzing the data by BDMs and ITDMs, the study finds that these groups have different perspectives on how cloud delivers value to their companies.

Marketers can use this data to establish broad themes for the US SMB market, and then tailor their appeals to specific sub-segments based on demonstrated needs and expectations. For more details or to learn about Techaisle’s SMB Cloud Computing Adoption Trends report please contact This email address is being protected from spambots. You need JavaScript enabled to view it.

Techaisle Take

VMware won – handily – the battle for leadership in server virtualization. The company attained broad acceptance within companies looking to bridge the gap between growth in compute demand and contraction in CAPEX budgets, and then drove penetration within these accounts, to the point where virtualization is the default approach to servers, and VMware is the de facto standard for virtualization within the data center.

The issue for VMware now is – what next? There is still some opportunity for growth in server virtualization, but customers are starting to hedge their virtualization bets by moving to multi-hypervisor strategies, including Hyper-V, Xen, and/or KVM within their environments. While successfully competing in its core market is essential, the “next big thing” for VMware isn’t found in beating back smaller server competitors – it’s expanding into the two big adjacent markets, client virtualization and cloud infrastructure management.

The client virtualization space poses some interesting challenges and opportunities, especially in the SMB market. Mobility has become a “must have” capability in today’s IT portfolio, but there’s no single, well-established path to deploying it: the visible hardware vendors (Apple, Samsung) don’t provide enterprise-grade solutions, and there is no existing standard for the various software components required to seamlessly support corporate and BYOD devices in an enterprise network. At the virtualization layer, Citrix is the current and clear leader, but anticipated growth provides enough opportunity for multiple competitors and strategies.

With its Horizon portfolio, VMware is attempting to position itself as an enterprise-grade answer to mobility requirements. The approach is interesting – but will it resonate with the channel serving the millions of SMB customers that fueled VMware’s success in server virtualization?

End-user Computing

Last week’s VMworld was a showcase for messaging about execution. Bite-sized announcements centered around three key areas – end-user computing, hybrid cloud services and software-defined data centers.  End-user computing is perhaps the most exciting for small and mid-market businesses as it directly feeds into their voracious appetite for mobility.

Techaisle study shows that the worldwide SMB Mobile Workforce will grow to 298 million by 2016 at 6.3 percent CAGR from 2013. Nearly 150 million SMB employees will be telecommuting and 120 million will be traveling on business. We are in a mobility cycle now that is characterized by intense competition for hardware, system software and applications leadership. The wave is young enough to offer margins on hardware, software and services, but as de facto standards become more entrenched this market will consolidate, and reseller focus will move to recurring service revenue as the margins erode in the hardware space.

With rapid increase in number of mobile workers, there are five main concerns that are percolating to the top of SMB's concerns: Cost of solutions that support mobile workers, security from theft and data privacy, mobile data pricing, transaction security and mobile device pricing. Recognizing some of these issues, Sanjay Poonen, VMware EVP & General Manager, End-User Computing said, “Mobility is a management and security problem”.

To cover its bases, VMware is currently betting on its Horizon Suite consisting of three products:

1. Horizon View: VMware’s Desktop-as-a-Service (DaaS) offering powered by View
2. Horizon Mirage: VMware’s physical desktop management tool based on its Wanova acquisition
3. Horizon Workspace: VMware’s mobility management solution enabling mobile users to access corporate data, applications and virtual desktops from different endpoint devices

As Ben Goodman, Lead Evangelist, End-User Computing told Techaisle, “Workspace is a single space for getting your stuff”. It will include MDM (Mobile Device Management), MAM (Mobile Application Management) and plans are afoot to develop MIM (Mobile Information Management) and MCM (Mobile Content Management).

VMware is slightly late into the SMB mobility space as most SMB-focused channel partners are offering Citrix solutions and a plethora of niche MDM solutions for SMBs. But Sanjay Poonen’s aggressiveness was palpable. He plans to invest heavily to drive growth in VDI. VMware is bullish on the potential for its installed base of 500,000 customers, many of them SMBs, to become customers for its mobility solutions. It plans to focus on IT (not just end-users) who are open to centralized policy management and who agree with VMware’s vision that mobility is part of a larger platform. This strategy has its advantages and disadvantages. By VMware’s own admission, Horizon Suite lies in the chasm between Innovators and Early Adopters along the adoption curve. For VMware, Early Majority to Laggards is a big white space. But this highly fragmented, disjoined white space within the SMBs is getting filled with its competitors. To achieve success, VMware must:

1. Target its customers that have yet to adopt mobility management solutions
2. Target its customers who are willing to rip and replace
3. Target SMBs that are still investigating viable mobility management solutions

MDM and MAM are by far the most prominent top-of-mind issues for SMBs across different geographies. Surveys conducted by Techaisle reveal that SMBs worry about these issues a lot, but fail to protect themselves adequately. A Techaisle survey of 9,500 SMBs across different geographies found that accidental loss of device followed by imminent danger of mobile viruses are the top concerns of SMBs while using mobile applications. This clearly demonstrates the need for remote mobile device management, authentication, and remote erasure of data.

For a vendor like VMware, the route to these SMBs is through channel partners, who are themselves increasingly turning towards their vendor suppliers as their trusted advisors. Techaisle’s channel partner study shows that on the technology side of the business, 50 percent of channel partners want training on mobility solutions including VDI, DaaS and BYOD. Partners are also looking for help in marketing: to help position these solutions to customers, 42 percent of channel partners are looking for case studies that are relevant to their own client base. In addition, channels want to acquire capabilities to be able to customize mobility solutions for their SMB client base. Affordable maintenance and support, ease of use and features and functionalities suitable for SMB needs are top sales messaging that are being used by channel partners to sell end-user computing solutions.

Clearly, VMware has to use every trick it has in its arsenal to address these issues if it is to make end-user computing market segment the “next step” in its overall growth strategy.

For more information on Techaisle mobility and/or channel research, please email us at This email address is being protected from spambots. You need JavaScript enabled to view it..

In what we saw as an awesome display of moving the bar higher, Evan Goldberg, NetSuite’s CTO, demonstrated in his Keynote Thursday that NetSuite continues to deliver industrial-strength innovations and solutions using tools that are increasingly easy to use, intuitive and particularly well suited to fast-growing Mid-Market companies with global aspirations.

Picking up from a summary paragraph from a 2009 blog post I wrote on NetSuite in a previous life:

“After looking at this demo it will be a little clearer why IMHO this is what the future looks like – all applications will have built in BI and reporting capabilities much stronger than has previously (been available) – without third party BI and lots of integration services – a big differentiator for SaaS vendors that provide this type of visibility as a standard component of their value proposition.”
- Collaborative Innovation Blog post, April 4, 2009

Among others, there are two things that seem like very good strategic moves for NetSuite: Fishing where the Fish Are, and being in a unique position to leverage the new Enterprise Applications Platform for companies that are ready to expand into global markets.

Fishing where the Fish Are
NetSuite positioned itself from the beginning as an Enterprise Software company, starting with ERP and then building other complex, traditionally on-premises software applications into the platform as successive SaaS waves hit the market and customer acceptance increased; Customer Relationship Management, Supply Chain Integration, Customer Service, Professional Services Automation – all tightly coupled with Billing and Fulfillment for a truly integrated workflow that almost covers the gamut of the Traditional Multi-user Systems requirements (Integrated Front and Back Office). Now adding deeper focus to e-Commerce, Global Financial Reconciliation and Industry Vertical implementations, NetSuite can enable Mid-Market firms to be truly competitive in a global market; leveraging speed and agility to outperform larger slower companies.

We have seen a very steady increase in the willingness (and need) for SMBs to embrace Cloud Computing and SaaS Models that move them out of the annual cycles and cost-center mentality that used to define IS Departments. A good indicator of this is how eager the SMB Channel is to offer a wide range of products and services and here we have seen amazing growth; even from last year to now surveys show the laggards are rapidly jumping on board, as seen in this table:

Of the 615 US-based SMB Channel partners interviewed, 86% were now offering or planning to offer Cloud-Based Services, those Not Planning to Offer Cloud dropping from 38% to 14% of the channels. This data represents aggregate results for VARs, SIs, MSPs, SPs and ISVs. In addition to Cloud Services fast growing areas for the SMB Channel include Mobility Solutions, Managed Services and a wide variety of applications in all three of these categories.

SMBs are Hungry for Enterprise-Level Capabilities
Based on early success in SaaS and basic Cloud Services such as Email, Storage, Back Up and Recovery, and CRM/SFA, Small and Medium Businesses have seen the light at the end of the tunnel. Security, availability and usability objections have been overcome and the cost to implement with lower complexity and higher focus on the core business have resulted a very compelling value proposition in widespread adoption worldwide.

To survive in an increasingly globalized and optimized business environment, SMBs need to be growing faster than the market and their competitors, reflected by their Priorities:  #1 Increasing Revenue (56%), #3 – Increasing Productivity (34%), #4 – Penetrating New Markets and Customers (32%), and #6 – Speed to Market / Keeping Pace with Competition (28%). On the other hand, rapid growth without an increase in efficiency is unsustainable, so the rest of the priorities revolve around scaling the business efficiently; including #2 – Reducing OPEX (45%), #7 – Collaborating Efficiently (29%), and Reducing Cost of IT (27%).

 

Because Cloud Computing has been able to deliver these benefits much more effectively than the previous generation of Client/Server architecture did, SMB customers report between 75-80% satisfaction levels of “Satisfied” or “Very Satisfied” with their Cloud-based implementations.

All of this bodes well for NetSuite as the market matures and moves further into the cloud looking for Enterprise-Level capabilities. And timing is also very good as we can see from the additional results of the 2013 SMB Channel Partner Survey:

For Channel Partners Offering or Planning to Offer Cloud Services (85%), the left column shows the top 12 applications cited by Partners based on currently offered Cloud Applications, the middle column represents Cloud Applications that Partners plan to offer this year, while as the title suggests, the “No Plans” column shows the share who say they have no plans to offer the Application. It is pretty clear that the areas of focus and strength for NetSuite are lining up with the opportunity, or put in another way, the Mid-Market needs are maturing to a level that can benefit from NetSuite’s focus. And while there are many companies in the market who can provide these as point solutions, there are very few who can provide them in a unified suite of applications, with an integrated group of cross-department KPIs that can be used to get at a single version of the truth.

In terms of product coverage and timing, we feel the rapid adoption in the Mid-Market towards Cloud Infrastructure, successes in overcoming basic Security, Functionality and Availability concerns and the need for Mid-Market customers to grow rapidly and efficiently, all support NetSuite’s strategy and roadmap as presented at the conference, providing a lot of runway for the next few years.

Leveraging A New Enterprise Applications Platform
The second major point is that by building their platform from the very early days of the Internet as a transaction platform NetSuite has been able to been able to take advantage of both technology and market advances. In 1997, the critical weakness of the Internet was that while it was very good for moving brochureware around the world quickly, more mature applications that required a lot of integrity and accuracy – such as OLTP in Financial Reconciliation and Supply Chain Integration – were not reliable enough; the Databases, Middleware and Network Management needed to improve and there was a serious shortage in programmers who could do this kind of heavy lifting.

Fast forward five years and the dotcom bust had made commercial broadband access ubiquitous and the tools and skills had (almost) caught up to the hype. CRM, the Killer App was being brought online to the SMB community through SalesForce.com and the benefits of a SaaS model were becoming very clear, albeit with some remaining hiccups and most enterprises waiting on the sidelines for critical applications.

NetSuite started with one of the most difficult challenges back in 1998; ERP Applications with all the Enterprise-level OLTP and Database Management challenges that came with them. By doing this, the ability to grow an integrated set of applications using a single foundation, has paid off in terms of functional leadership. Others in the market, most notably SAP for Back Office and Oracle for Front Office, have taken an “Acquire and Integrate” approach, which is complicated and time consuming in comparison. The fact that NetSuite has survived and thrived in this environment is testament to vision, determination and execution.

Without getting too abstract, we see long term patterns in the software market that seem to ring true over time – the first is to win a narrow space, shore up the position, look left and right and take the adjacent space that is most lucrative and easy to assimilate (by hook or crook). Repeat. The second is that network effects rise in proportion to the number of users: Market Share is King. The third is to focus on the Scalable model and ensure to develop an ecosystem of partners who can add value profitably. Finally, at a very abstract level, the history of IT has been a steady, long march to Data Integration for Process Automation and Optimization. Whether you call Big Data, Distributed Database Management, Supply Chain Integration, Enterprise Performance Management or Google Search, it boils down to integrating disparate data and making it useful for decision making, with a relentless concentration on efficiency. As seen in the Business Intelligence segment, those who started with an Internet-based implementation approach rather than one of everything to every mapping, have ended up with an easier road to implementation; consider Siebel vs. SFDC, SAP vs. NetSuite, BoA Merchant Banking vs. PayPal, or Cognos vs. Domo. New, better tools and focus on specific data integration points rather than mapping every possible permutation of interaction between systems has resulted in faster time to value, less complexity for the channel and much less risk for customers. Breakthroughs such as scalability with Multi-Tenant Architecture have also resulted from solving the problem from a clean slate.

In our 2012 SMB 2020 Technology Report, we described our perspective of the IT Environment of the future, Client, Server and Network. This graphic shows a functional view of the Multi-user System, traditionally called the “Server” within a Client/Server Architecture. This view has CRM as the Hub component, surrounded by an increasingly integrated suite of Applications areas that eventually cover the complete information requirements of the Front and Back Office to run the business using a highly customized group of integrated KPIs. This type of integrated Nirvana has been an objective for a long time; however, it seems to be closer, clearer and much less complicated than it used to be when looking at the NetSuite Roadmap, i.e., we are not counting the dozens of modules that need to be installed, configured and integrated (and who is responsible to manage it). NetSuite’s rapid increase in large customers and decision by the traditional big Systems Integrators to jump on board seem to indicate that timing is good and the functionality is there.

Channel Implications
As the functionality and capabilities of the platform have changed with Cloud Computing, so have the dynamics of the Channel, especially in the Small and Medium Business space. Access to capabilities that were previously far out of the reach of SMBs has fueled the adoption of increasingly complex applications. Ironically, the benefits of the SaaS architecture have compressed and digitized the sales process, allowing companies to sell directly through an online channel, with demand generation, research, pre-sales, sales demonstrations, etc., conducted through inbound sales organizations rather than relying on channel partners to push products and services to the market. The proliferation of horizontal SaaS applications, such as email, webinars, Storage and Back Up has spawned a generation of self-configured apps that have made the customers question the need for third party involvement. It has also shorted the decision cycle substantially; many times cutting the channel out completely and giving rise to a “trusted advisor” role, especially in the lower Mid-Market.

Our research has shown that generally the more complex a solution, the more likely it is to have a partner involved in the implementation. Because NetSuite offers relatively complex solutions, it will have to play on both sides of the fence here – avoiding conflict with large partners for direct sales and providing profitable opportunities to the SMB channel partners, this was one area we felt might be a yellow flag in the distance.

Mobility is coming on Strong
With the installed base of Tablets and Smartphones exceeding that of PCs this year and annual sales of the former expected to number in the hundreds of millions higher by 2018, we see a fundamental shift in the way customers access and manipulate data. “Fundamental” meaning the difference between double-entry ledger accounting in physical books to a software application or the move from IBM Selectric Typewriter to PC-based Word Processing applications; nothing will ever be the same, and it is inevitable. There has already been a steady stream of casualties in the wake of Smartphone sales – single function GPS devices, midrange Digital Cameras and landline phone sets have all peaked in global consumption in the wake of accelerating handset sales. Just as the Internet itself essentially changed all business where value could be digitized (Financial Services, Travel, Shopping, and Advertising), so will ALL industries change as the primary mode of information consumption to the Internet is by mobile device.

This is the area that saw the greatest change in our 2013 SMB Channel Survey, from 56% of partners who said they were not planning to offer Mobility solutions in 2012, the number dropped to 8% this year, representing a doubling of Mobility Solution partners in the market as they implement the plans.

We did not hear that much about mobility from NetSuite during the conference, but given their strength in operational visibility through dashboards across departments, we think focus on this area could help both channels and end users.