Techaisle Analyst Insights

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 SMB technology adoption study shows that 72 percent of SMBs find Virtualization to be one of the most relevant technologies for their business, 2^nd only to backup and disaster recovery. The actual adoption gets hindered because 56 percent of SMBs find Virtualization to also be one the most complex technologies to understand and adopt. (See infographic)

SMBs cite several reasons for adopting server virtualization; key among them are reducing operating cost, backup and disaster recovery and reducing cost of IT support. Improving existing server and hardware systems utilization is mentioned by 32 percent of SMBs.

In our survey of SMBs either currently using or planning to use Virtualization technologies we found that SMBs currently using Virtualization tended to have a mixed brand Virtualization environment, not relying on a single vendor for the solution, but mixing and matching as they saw appropriate based on their specific requirements.

For example, the above chart shows that within VMware Server Virtualization environments, 66 percent of SMBs also use VMware client Virtualization technology, with both Microsoft and Citrix making up the difference for the client side. Similarly, 78 percent of SMBs that use Microsoft server Virtualization also use Microsoft client Virtualization. Several other findings become apparent from the above chart:

• VMware and Citrix have the most relatively mixed virtualization environment as compared to Microsoft


• Citrix and Microsoft may have a slightly deeper partnership that enables SMBs using Citrix server Virtualization to be combined with Microsoft client Virtualization more easily and cost effectively

However, we cannot look at the above chart in isolation. SMBs have been using Virtualization technologies as the market developed.

In the words of one VP of IT for a mid-market business, “We use Citrix, VMware, Microsoft Hyper-V, and emulation from Ericom. There are ‘n’ numbers of products that are being used in the whole gamut of things”.

The Venn diagram below not only exposes the vulnerabilities faced by Virtualization vendors but also demonstrates that the market is big enough for solutions from all vendors to work in a heterogeneous IT environment.

For example, the above Venn diagram shows that only 12 percent of SMBs use only VMware Virtualization solution which is twice that of Citrix and almost one-fourth of Microsoft. And 9 percent of SMBs use Virtualization solutions from VMware, Citrix and Microsoft. Once we start to include solutions from Parallels, NComputing, Oracle and others the overlaps become very complicated to map.

Our research found that SMBs usually go through a round of server consolidation before moving to Virtualization.

“The very first step was actually to go for server consolidation. Once the servers were consolidated, then the desktop virtualization was performed. So, typically for VDI architecture or any other technology, the first thing is the server consolidation and after that the procurement of solution and licenses were done from VMware and Citrix for the VDI and after which the user terminals were changed”, this according to one IT Director, Mid-market business.

Not all Virtualization projects finish smoothly. SMBs have also had different experiences with each of the three major brands for server Virtualization projects as shown in the chart below:

The factors affecting each of the projects could be dependent upon:

• SMBs’ readiness


• Channel partners’ capabilities

However, the top 3 most common areas that need addressing are Compatibility Issues, Cost Overruns and Lack of Experience, which are perennial issues as all SMB users adopt new technologies.

“The major challenge was the cost, because the initial hardware investment was huge. Getting rid of the system and moving to the cloud and installing virtual servers required purchasing of physical storage and upgrading the system. Another challenge that we faced was the initial configuration which was addressed timely and efficiently by our partners”, Vice President, IT (500 employee size company).

But SMBs have gained tremendous advantages from using Virtualization. “It certainly has helped us to avail richer network services without increasing our capital investment and has increased our operational efficiency. Moreover computing and networking are much simplified now”.

For additional information on this and other topics from the blog, please feel free to contact us for a discussion and gratis consultation.

To purchase Techaisle’s SMB Virtualization Trends and Adoption study or engage Techaisle in a deep-dive custom research please send an email to This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Techaisle’s SMB Cloud Adoption survey shows that SMBs that are using Cloud applications are experiencing tremendous improvement in customer acquisition, retention and work satisfaction. In fact, 1 in 4 SMBs say that customer retention has improved, and nearly 1 in 3 says that customer acquisition has improved.

In general SMBs have experienced improved customer acquisition and retention after using cloud applications, however, SBs (1-99 employees) and MBs (100-999 employees) differ. Typically, SBs are more hard-pressed to acquire customers, a top business issue for them. With the adoption of cloud, 32 percent SBs say that they have seen improvement. MBs on the other hand, have better direct sales force for customer acquisition, but after equipping the sales force and marketing with cloud applications they have seen marked improvement in customer retention. Additionally, an important point to note is that 29 percent of SBs have reported improved group productivity and 34 percent improved employee satisfaction.

The survey also showed that B2C and B2B SMBs have had different experiences in customer acquisition and retention.  Specifically, B2B SMBs have reported nearly twice as high improved experiences as B2C SMBs. Many B2C SMBs are using social media platforms such as Facebook and twitter and marketing automation solutions to build a set of followers to improve their customer retention and acquisition. On the other hand, comparatively higher percentage of B2B SMBs are using LinkedIn, Twitter and specialized platforms such as Chatter, Yammer and GageIn to track news and conversations with their customersaction.

CRM has become the central application and the core around which other features and functionality are deployed as required by an SMB organization, department within an SMB or an individual user within the SMB. CRM is that core cloud business application. After the SMB CRM base has been built (or simultaneously), the order of implementation depends on the SMB’s focus but is likely to be business intelligence, marketing automation, Financials, HR/Payroll, customer service for service companies, ERP, fulfillment (SCM) and industry vertical applications.

There are four key areas of SMB cloud usage and deployment. Each has got many sub-sets of applications. These four areas are:

1. Infrastructure and Platforms (US$13.0 Billion SMB Opportunity by 2016)


2. Communications and Collaboration (US$7.9 Billion SMB Opportunity by 2016)


3. Business productivity & Applications (US$15.5 Billion SMB Opportunity by 2016)


4. Industry specific applications ((US$2.7 Billion SMB Opportunity by 2016)

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. As Cloud computing adoption among SMBs grows, the real issue of data integration continues to come into play and it will become imperative for each of the four areas to communicate with the other. And once that “integration enlightenment” happens SMBs will witness even higher improvements in productivity, satisfaction, acquisition and retention.

Anurag Agrawal
Techaisle

A new and restructured VMware took the stage at VMworld 2012 amid major changes driven by commoditization of “must-have” virtualization technology within enterprises and a cultural change where mobility is driving many technology decisions. Although the most important announcements included the vCloud Suite, the software-defined datacenter and the death of vRAM pricing, there were several other pronouncements that were especially relevant to SMBs, most significantly vSphere 5.1.

VMware has always offered solutions that were appropriate for the SMB market, but have not been considered a priority as the enterprise business segment, without real competition, kept VMware busy, growing and profitable. However, over the past two years SMBs have begun to grow in importance for VMware driven by several factors:

• The Enterprise segment has become increasingly virtualized (saturated) and starting to look more limited in growth prospects; the remaining high growth areas relegated  to emerging market countries and increasing penetration of workload yet to be virtualized within the mature economies


• SMBs have overcome their initial hesitation with cloud-based services and become increasingly comfortable with using emerging Cloud technologies and Cloud Computing in general


• Mobility and use of multiple devices anytime and from anywhere is becoming increasingly important within the SMB segment


• Consultants and channel partners serving the SMB segment have evangelized the advantages of virtualization that enable SMBs to reduce IT management costs, provide better security and disaster recovery and improve application accessibility


• After a slow start, Microsoft made a strong move into the virtualization space at low price points, expanding the awareness of virtualization within their SMB base


• Microsoft’s huge base of channel partners found it easy to market Microsoft’s virtualization solutions to their customers

As a result of the above factors, SMB market segment began to appear like a growing and untapped opportunity deserving serious consideration and potentially aggressive investment.

SMB Virtualization Opportunity

Our research shows that this consideration has plenty of merit: a recent Techaisle survey of 3,300 SMBs in US, UK, Germany clearly shows that virtualization is now among the top 3 relevant technologies for small and mid-market businesses (SMBs) and rapid growth is expected to continue. Typically, SMBs begin their virtualization journey with either desktop or server virtualization and based on that success, move to other virtualization technologies. This relatively newfound interest among SMBs bodes extremely well for VMware and its channel partners.

 There is no doubt that SMB Server Virtualization is a huge opportunity. Techaisle survey of 3,300 SMBs in US, UK, Germany clearly shows that opportunity is real. If VMware does not move aggressively, others will move in rapidly.

Important VMware SMB Announcements

vSphere 5.1 (there are two versions) with vSphere Essentials Kits for SMBs for up to 250 employees on a single site or vSphere 5.1 with vSphere Acceleration Kits for SMBs with 250+ employees across two or more sites were by far the most significant product announcements for small and mid-market businesses as they are targeted directly at the mid-market space in terms of functionality, price, ease of installation and deployment.

Pricing starts at US$495 for vSphere Essentials and goes up to US$4,495 for vSphere Essential Plus that includes  vMotion (for live migration of virtual machines, no shared storage), endpoint security, high availability and fault tolerance, data protection and replication features , vSphere Storage Appliance. With this new version, VMware has simplified the installation of storage appliance and a one-to-one relationship between vCenter and vSphere Storage Appliance is no longer a requirement.

vSphere Acceleration Kits includes everything that is available in vSphere Essentials plus IT operations management, application inventory and patching, powerful and efficient resource management, and policy-based automation. The pricing starts at US$6,995 per 6-CPU license.  And a new solution, vSphere Standard with Operations Management, includes all the enhanced features of vSphere Standard plus vCenter Operations Manager and vCenter Protect for operations management, application inventory and patching in one bundle for $10,000 per 6 CPU license.

For those SMBs that are tip-toeing into the virtualization arena, there is VMware Go Pro (first announced in January 2011) which is a web-based service to deploy, manage and maintain virtualized environments, and lowering barriers to entry. It offers the ability to convert physical servers to virtual servers through a browser. In fact cloud-based virtual machine capability is a new feature. Incidentally, 30 free endpoint licenses of VMware Go Pro is included in every new purchase for vSphere Essentials or Essentials Plus Kit purchases until December 15, 2012.

VMware View is VMware’s VDI solution and its upcoming Horizon Suite beta is the answer for centralized application and data management addressing the needs of SMBs that are using VDI as a fast-path to mobility.

Techaisle Takeaway

Right Direction by VMware in Addressing the Needs of SMBs

With these virtualization solutions VMware is potentially addressing important needs of SMBs considering virtualization including simplified management, backup and recovery, and security.  The solutions allow SMBs to take advantage of existing investments by relying on the same management interfaces used to secure physical environments. These are the types of characteristics that SMBs have embraced wholeheartedly in other areas of Cloud-based Services, which led to rapid adoption and overthrow of the expensive and overly-complex Client-Server approach to IT.

Included in the offering is a backup and recovery solution for complete data protection for virtual machines and virtual machine level replication. In addition the storage appliance (now included in vSphere Essentials Plus and all vSphere Acceleration Kits) allows SMBs to easily and cost-effectively deploy shared storage even in remote and branch offices. VMware vShield Endpoint helps in strengthening security for virtual machines while delegating antivirus and anti-malware agent processing to a dedicated secure virtual appliance.

There were other solutions that were announced by VMware, primarily targeted at the enterprise segment, but we believe, with some modifications are equally relevant for the SMBs. These are software-defined datacenters and Cloud Operations Services.

Enterprise Targeted Solutions Equally Relevant for SMBs

Software defined datacenters: While relatively unknown to SMBs at this stage, this future mainstay will become highly relevant within the next 3 – 5 years. It is therefore essential for VMware to keep in mind the specific design points and requirements of SMBs in addition to the larger accounts as it develops its product and strategy for software-defined-datacenters. SMBs continue to be concerned about the increasing complexity of IT and 77% have expressed the concern in a recent survey. While provisioning VMs (virtual machines) may only take a few minutes, when storage and networking components are added, the proposition begins to become more complex, requiring more time and resources.  Based on how SMBs are adopting cloud-based services and looking at some of the new, innovative services platform technologies that are gaining quick acceptance in the market, there seems to be some space in the market for a plug-and-play “base datacenter package” that would be appropriate for SMBs in this area.  In a nutshell, this base package should allow rapid provisioning of the key components of the environment (compute, storage, and network) as a virtual datacenter. As SMBs expand operations and grow regionally, the ability to quickly re-configure new and existing locations by shrinking, extending or moving virtual machines along with networking to meet elastic demand requirements would be a very valuable proposition.

Tools for the SMB Trusted Advisor

VMware Cloud Operations Services:  currently positioned as a trusted advisor for CIOs of enterprises on a cloud journey.  It also seems the market is in real need of a simplified and cost-effective version of the services that will be equally relevant for the SMB segment. Techaisle surveys have found that in the rush to implement Cloud Services, users especially among Small Businesses, are beginning to rely much more on independent IT Consultants as their new source of advice. Also, based on the ability of vendors to market, sell and deliver these services completely through a digital channel, SMBs are turning directly to vendors for their advice. As discussed in a previous post, the critical issue, now more than ever, is to be the trusted advisor early in the SMB’s lifecycle and establish the relationship. VMware will also have to empower its channel partners with new training modules, competencies and financial incentive to offer advisory services, and come in and get these new offers up and running fast and right on the first try - the sure fire way to start a long term relationship with the SMB customer.

vRAM Pricing Still Ruling for Service Providers

Finally, it is not out of place to say that although vRAM pricing is dead, it is still the licensing metric for the VSPP (channel program). vRAM pricing for service providers is a different model - whereas vRAM for perpetual was a limitation on the entitlement, in VSPP it is the metric. Although the model allows service providers to offer their customers the benefits of opex-based “pay-as-you-go” service it may leave some smaller-sized service providers wanting more.  These service providers should work closely with VMware to determine possibles solution for their SMB customer needs. For example, in cases where,

1. SMB customers on a perpetual license wanting to move from an on-premise to a hosted solution specially if they would be operating below the RAM caps


2. SMB customers electing to use a mixed virtualization environment in a hosted model

As SMBs continue to adopt cloud services and Infrastructure-as-a-Service (IaaS) becomes mainstream for SMBs, VMware needs to develop a strategy that encourages the hosting providers to address the SMB segment by having same consistent pricing, that is, per processor for both on-premise and hosted models. Until that happens, VMware is potentially opening the doors wider to competing products.

Concluding Remarks

It is quite apparent that VMware is committed to serving the needs of the SMB segment clearly demonstrated by its well thought out product enhancements, packaging and roadmap.  Centralized management and control, ability to “plug in” branch offices, keeping costs manageable and allowing existing IT staff to focus on measurable value are huge value propositions to SMBs. It is also a new service that SMB focused service providers can offer by leveraging these centralized management tools and better support their customers.  It is an excellent opportunity for the channel, which is being rapidly disintermediated by the rise of vendor direct online marketing, new consulting competitors and redeployed internal IT resources, which we have covered in depth in another post. A recent Techaisle study of over 1600 Channel Partners shows many of these partners are struggling for lack of serious value-added opportunities and could benefit from VMware’s new SMB offers.

Anurag Agrawal
Techaisle