Techaisle Blog

Techaisle SMB surveys in multiple countries are showing that SMB cloud computing non-users will increasingly get comfortable with the idea of Cloud based services once there are enough proof points in the market. The question remains though whether there are actions that vendors can take that would not only overcome the barriers for cloud adoption but compel SMBs to switch to or adopt Cloud services? Of those SMBs that are currently not using Cloud services, 43% state they will never consider Cloud services under any circumstance. For the remainder, 24X7 customer support (34%) is the key requirement that would compel them to adopt  and if the cloud services were provided by a trusted vendor (26%). And if the trusted vendor is a single vendor that has a broad catalog of services and takes responsibility for service then it is even better.

Techaisle conducted a quantitative survey with over 8300 SMBs and spoke with ITDMs in US, UK, Germany, Australia, Brazil, Singapore, Malaysia and India to understand small
and medium business Cloud Computing market opportunity along with issues,
concerns, problems and challenges.

One of the questions that we asked to current non-users was: What vendor actions would compel you to use Cloud services?

Top reasons ranked in order of % of respondents for the US is given below.



There are obvious differences between SBs (1-99 employees) and MBs (100-999 employees).



There exists a strong correlation across all the points raised by SMBs. While most cloud computing vendors may like to pick up one or two issues and address them in their marketing messages but it may not have the most impact.  Vendors like Dell that have embarked on the journey to help SMBs adopt cloud solutions have the most to gain by addressing all of the above issues.

Other large IT vendors may soon follow, but at least if Dell executes on its plan it may take the lead. The last time we spoke with Dell, they had already implemented most of the points and had developed a roadmap to roll out the remaining.

Needless to say, vendors should take specific actions to overcome SMB Cloud Computing adoption barriers.

Anurag Agrawal
Techaisle

 

Pilgrimage
Salesforce.com held its annual customer and partner pilgrimage last week called the Dreamforce 2011. This mega event had a whopping 45,000 registered attendees and at least 15,000 were present for the opening keynote by Marc Benioff. The much anticipated keynote was given by Marc Benioff who no doubt he is a master marketer.  He
successfully drilled home the message of Social Enterprise and how Chatter fits
neatly into the vision of new type of collaboration, interaction and customer
acquisition.

In fact not only the keynote but the entire event had widespread case studies from large enterprises that were using Chatter as their hub for all internal conversation. Heavyweights from Coca Cola, Burberry, NBC Universal, Verizon and others were there to lend support and show how Salesforce.com was helping them transform their sales organizations. Even the billboard cut outs had quotes from CEOs of prominent enterprises touting the benefitsof Chatter  on multiple devices such as iPads, Tablets and mobile phones.

Key Announcements
The event was very significant in more ways than one. On the one hand it had four key announcements while on the other it did not talk a lot about SMBs. But contrary to popular sentiments many of the announcements may actually be very relevant for SMBs.

Four Key Announcements were:

1. Chatter: ability to create and maintain a private social network for business and soon to be available (Chatter Now, Chatter Customer Groups, Chatter Connect, Chatter Inline Filters, Chatter Approvals)

 

1. Data.com: ability to create targeted lists from 30+ million business leads from Jigsaw as well as 200+ million in-depth company profiles from D&B and connect them into the CRM process

 

1. Database.com: a database for the business built and used in the cloud

 

1. Touch.salesforce.com: built in HTML5 with the capability of rendering any app built on Force.com platform to any mobile device without modification

SMB Suitability?
While all of the above technologies are great for Enterprises some are better suited for SMBs than others, especially for the less than 100 employees’ businesses. Last year Salesforce.com had revenues of $1.6 Billion with over 100,000 customers (Salesforce.com Annual Report). This suggests an average of $16,000 per customer and much fewer than 100 users per customer. And this leads us to believe that most of Salesforce.com’s customers are upper-mid-market businesses. The above announcements fall firmly within the realm and sweet spot of the 100-999 employee size businesses.

Chatter as an SMB Collaborative Platform
As per Techaisle’s continuous Global SMB research, a small business (1-99) has an average of 8 employees in the US and 20 percent, that is, 1.2 employees per small business are on the Cloud. With this low number of employees will Chatter be a viable option for small businesses? These small businesses are already overburdened and hamstrung with using Facebook, Twitter and other external facing social networking channels? The answer is yes with some modifications. Recent Techaisle study shows that 81 percent of SMBs are adopting mobility solutions, 66 percent of small business employees and 48 percent of mid-market employees either work from home or travel for work at least once a week. For these employees and business owners collaboration is a top of mind issue. To that extent Chatter is a great collaboration tool. Chatter makes the work from anywhere and anytime easier for SMBs. It makes it all the more important for mid-market businesses to adopt Chatter as they have an average of 125 employees per business and 30 percent of them are on cloud.

Database.com & Data.com
This is where the divergence begins. Are database.com and data.com relevant for SMBs? Yes, but the pricing and unpredictable monthly expenditure may limit SMBs’ use and deployment. Database.com is being offered free for up to 3 standard users, 3 admin users, 100,000 records and 50,000 transactions per month. Both a B2C SMB and B2B SMB will have more than 100,000 records but necessarily not 50,000 transactions. It also depends upon the size and vertical of the business. Therefore, it will take time for proper used cases to accumulate before SMBs and their channel partners can begin to recommend such a
solution.

Data.com is quite a powerful tool priced at $99 per user per month. This allows up to 300 records per month to be imported with additional records at $0.50 per record. This is quite an attractive pricing for SMBs.  However, it would be up to their channel partners to show them the value along with some price comparisons. Most SMBs may require more than 300 records per month while others may require less depending upon their coverage areas. More mid-market businesses would be able to use it rather than small businesses.

Jigsaw (genesis behind data.com) suffers from its crowd sourcing practice [in that it is populated by people in exchange of credits to see other people] - often data is not up to date and the proportion of businesses contacts tend to be of large enterprises, so not a lot for SMBs to get records and lists of neighborhood businesses, non-profits and other organizations. This may create a dilemma for an SMB paying customer if they cannot find relevant contacts.

Next Steps for Salesforce.com's SMB Strategy
As the adoption of salesforce.com continues within large enterprises it begins to look like ERP implementations of yesteryears. The cost to switch is tremendous. With a great messaging from Salesforce.com enterprises are willing and able to deepen their relationship with Salesforce.com.

Techaisle’s Cloud Computing research and market sizing shows that Cloud CRM spend by small businesses (1-99 employees) in the US alone is expected to be US$679 million in 2012. While Salesforce.com seems to have done well in the midmarket (100-999 employees) segment, 6 million small businesses (1-99 employees) in the US alone represent a huge opportunity.

Salesforce.com derives over two-thirds of its revenues from the US even though US accounts for just one-fourth of the world’s GDP and even other large tech companies derive a much greater share of their revenues from overseas than Salesforce.com. Techaisle's research shows a significant increase in awareness of and willingness to adopt SaaS solutions in several countries both among SMBs and Enterprises.  In fact only 35 percent of SMB Cloud CRM spends in 2012 is expected to come from the US.

Salesforce.com has yet to show its commitment and plan for a global SMB reach.

Salesfore.com has grown rapidly and the guidance for this year is also for continuation of that trend. However, the market conditions will begin to change with the the dramatic increase in awareness as well as potential supply of SaaS providers especially targeting the SMBs. Techaisle’s global research also finds that SMBs in selected markets also show a significant willingness to adopt various other SaaS solutions. Given the SMBs’ proclivity to purchase multiple solutions from a single provider, Salesforce.com should plan to broaden its offerings beyond CRM and also allow for easy and efficient integration with its
CRM offerings.

Salesforce.com has been a pioneer in the PaaS space with its Force.com offering. The platform is being used primarily by enterprises or channel partners (e.g. ISVs, VARs and systems integrators). To continue its reach within the SMB segments Salesforce.com has to develop a stronger channel ecosystem which could contribute to growth in its subscription base.

Anurag Agrawal
Techaisle

Announcement
Dell just announced its full intention to assist SMBs with their Cloud Computing adoption by launching Dell Cloud Business Applications, a family of integrated SaaS applications with cross-application cloud analytics supported by end-to-end Dell services specifically for SMBs.

Key benefits include easy and affordable integration with existing software; integrated best-of-breed cloud applications selected, tested and backed by Dell; and real-time online analytics and reporting across multiple business functions. Dell Cloud Business applications can solve the top pain points cited by SMB customers contemplating a move to the cloud:
- Integrating applications is expensive
- Out of the box reports are insufficient
- Moving to cloud is harder than it seems.

The total solution announced by Dell includes:

• Access to Leading SaaS Applications (initially starting with Salesforce.com)


• Integration with Existing Software (through  Dell Boomi)


• Real-time Business Visibility and Analytics


• Comprehensive Services

In addition, Dell’s Cloud Business Applications will be delivered through a Dell-branded cloud service complete with business grade single sign-on and security.

First such SaaS application being made available by Dell is Salesforce.com. By re-selling Salesforce's CRM offerings to its existing base of SMB customers, Dell would increase its revenues while Salesforce.com could potentially expand its available market at a lower cost
than it would on its own.

Significance of the Announcement
The announcement is significant in more than one respect. Besides taking the guesswork out for SMBs on what applications to use in the cloud, the ability to integrate across applications both in-house and SaaS as well as real-time business analytics across the
entire business is really important.

Cloud Computing has become an all pervasive terminology promising the holy grail of quick start up and low costs allowing small businesses to focus on their core competencies. We have to pause and think about the reality and outcome in five years. As SMBs increasingly adopt cloud computing and reach a new level of complexity, the very technology that had a low start-up cost for them may become too complex and expensive.
While there are many different reasons for such complexity but the two that stand out are the Complexities in Application Usage and Intricacies in
Data Integration.

Dell’s Cloud Business Applications addresses Complexity Issue Head-on
A recent Techaisle survey showed that while the average number of fee-based applications/services being used has largely remained the same over the last three years, the maximum number of applications being used has shown steady growth.

For example, for US SMBs, that number now stands at 11 applications. This increases the complexity of usage of applications in terms of: different vendors, different billing, different sign-ons and above all inability to exchange data easily.



Dell aims to provide best of breed applications to the SMBs, largely helping them to make decisions on their behalf. Cloud Business Solutions directly speaks to typical SMB questions:

• What can I move to the cloud?


• What solutions are best for my business?


• How will I transfer my data to the cloud?


• Who will train my employees?


• What will be my cost?


• If I move from a Capex to an expense situation as far as my IT investments are concerned, what will be the impact on my financial health?


• How does it affect my cash flow, profitability, etc.?

Dell offerings also provide complete transparency to its SMB customers with regards to all associated costs and monthly single billing.

Dell Boomi – SMB SaaS Data Integration Made easy
As Cloud computing adoption among SMBs grows, the real issue of data integration will come into play. As we see it, there are clearly four stacks of Cloud offerings and it will become imperative for each stack to communicate with the other stack. And with increasing usage of number of SaaS applications following questions become relevant with no easy answers:

• How do I move my data and information across applications?


• How do I have a single sign-on?


• How do I change vendors?


• Will I be able to change vendors?


• How do I migrate my data?


• I like applications from two different providers and I want to run them both but will they interact?

Dell Boomi addresses above questions at an affordable price point for SMBs.

While there are many niche vendors addressing each niche area, the complexity grows manifold as businesses move from one application to another, from one device to multiple devices.



One of the last things that SMBs need is a high-cost of application data integration, a cost that may become higher than the applications they are using. SMBs do not have the time or the budget for such integrations. It is a given that SMBs will continue to work in a hybrid environment with both desktop software and cloud based applications in simultaneous use.

In order to achieve data integration, ensure security and compliance and guarantee multiple device access, Dell’s integration and analytics capabilities built into its Cloud Business Application solutions will provide multiple specializations to an SMB. These very well thought out specializations and roles are:

- Consultants/Business Process analysts, advising on which cloud computing solutions to use
- Developers and Integrators, helping businesses achieve data integration
- Cloud Governance marshals, advising and auditing security and governance issues
- Data Aggregators, specializing in aggregating both internal and external data and making it actionable to businesses through the use of business intelligence applications

A good day for Dell and a good announcement for SMBs. Dell has to get the word out and not only make it a success in the US but also begin its gradual roll-out across geographies. And it cannot leave its channel partners behind. Dell cannot underestimate the usefulness of channels, more so in the emerging markets than the mature markets.

Anurag Agrawal
Techaisle

The entire IT industry is on an unmistakable path to virtualization with certain segments adopting it faster than others (e.g. financial sector, hosting companies, etc.) Server virtualization is still the primary driver of virtualization although, in the last couple of years, VDI (virtual desktop infrastructure), which helps virtualize all client devices like desktops, laptops, tablets and smartphones has also shown remarkable growth. Storage virtualization is limited to the larger companies with vast amounts of storage although it will be an integral part of cloud delivery centers as well as integrated/converged data centers. These trends will make virtualization a growth market for several years.

While large companies are adopting virtualization on their in-house infrastructure, only certain SMBs are likely to adopt in-house virtualization. Most will be delivered virtualized solutions (especially VDI) via virtual infrastructures by hosters.

The largest share of Virtualization adoption by SMBs comes from North America, however, Asia/Pacific is the place to be. Asia/Pacific right now shows two distinct trends. On one hand, we see a number of smaller companies adopting in-house IT infrastructures. On the other hand, businesses with somewhat larger IT needs have started to adopt virtualization and the trend is expected to gain momentum in the near future. Armed with latest information about latest technologies and driven by rapid business growth (and corresponding growth of their IT infrastructures), Asia/Pacific businesses have shown a high openness towards, and willingness to adopt virtualization. In many cases, virtualization is an integral part of the discussions while designing and implementing new IT infrastructures among Asia/Pacific businesses.

The growth rate of Virtualization in Asia/Pacific is a little over 28 percent from 2010.

Virtualization reaching the Consumer Market
Virtualization is already being used by consumers and small businesses widely. The most common example of this is Parallels, which allows consumers to run Windows operating systems on their Apple machines. (Other vendors also have comparable products to help consumers run multiple OS’ on their machines.

Microsoft has also made virtual machines integral to its Windows 7 OS that allows users to run their Windows XP applications on their new Windows 7 operating systems.

In the near term, this trend of using multiple OS’ on a single machine will accelerate. Further down the road, it is entirely possible that increasing reliance on cloud-delivered services may reduce the users' need for on-site virtualization. But that is still further down the road and the exact trend is still an open question.

Market Leader in Virtualization
VMware is still the dominant leader with over two-thirds to three-fourths of the market for server virtualization. What contributed to its leadership position is that it has the benefit of an early start, a broad range of supporting products for managing virtual environments, a strong channel and partnerships with most leading vendors for the resale of its products.

Challenging VMware's Market Dominance
VMware has three major advantages: its portfolio of products, ecosystem to implement and support VMware's environments and brand recognition. Any competitor who hopes to compete with VMware head on will need to at least match VMware's strengths in these areas. Citrix is gaining traction, especially with its VDI initiatives. Microsoft has the potential to compete with VMware but will need to focus more. Other competitors are still in early phases and unlikely to pose a major threat to VMware in the short term.
Various attempts at open source solutions that would reduce or potentially eliminate the reliance on the underlying virtualization platform are still in very initial stages. Theoretically, adoption of open solutions will avoid a vendor lock-in by customers as they would be able to move applications easily. Even if the efforts take off, it'll take a few years to have any material impact on VMware's dominance. A greater source of threat for VMware is competition from other vendors like Citrix, Microsoft and other smaller vendors (including potentially Oracle).

VCE's vision of integrated data centers needs to be supplemented by tangible products for its eventual success. It might take some time before such integrated data centers are designed and developed and gain customer acceptance. However, short-term ups and downs aside, the industry will move towards such integrated products coming from various vendors (e.g. HP's converged infrastructure). These integrated modular data centers will make it much easier for companies to install them and reduce their costs for designing, installing and maintaining these data centers.

Tavishi Agrawal
Techaisle