Techaisle Analyst Insights

The World is Flat (© Thomas L. Friedman) and so has become IT, especially for SMBs. With a Flat world, rises an opportunity for SMBs to employ workers who are globally distributed, travel and telecommute. With a Flat world comes Flat IT. And the IT vendors are missing the dialogue with their SMB customers- some vendors more than others. They are also missing a new understanding of SMB IT adoption cycle.

But we are getting ahead of ourselves. Let us first understand the world of Flat IT.

Waves have Evaporated to Form Clouds

Analyst firms typically use words such as IT waves or eras in describing SMB IT adoption - client/server wave, networking wave, Internet wave, etc. There is nothing wrong with this wave theory except now that there are no more waves left, all water is evaporating to form clouds. But some analysts still continue with that philosophy and call the coming wave as mobility wave. These do not do any good to either a vendor or the end-customer. Mobility started with notebooks & Wi-Fi. An SMB does not buy IT considering the wave, it does not even think whether the wave is waxing or waning. A typical SMB buys IT because it needs IT and the SMB with the help of channel partners becomes smart enough to understand what IT to buy to make itself more efficient, productive and profitable.

Waves were relevant more than a decade ago when technology products were evolving in piecemeal basis. Today all technologies are available at the same time and its adoption among SMBs is dependent upon the business plan.

Building Block IT

Enter the building blocks. SMBs started off their journey into IT by unknowingly using simple building block concepts. Their first purchase was always a PC which served as the foundational block. When they added employees and file sharing became important, they built a network and added a server – the next block stacked up on the foundational block. When they reached a certain size they added more servers, the third and subsequent blocks became applications such as CRM, ERP and Line of business. All of these blocks could not be added without the existence of the previous block. Very soon when an SMB reached a mid-market level of operation, the blocks were neatly stacked one on top of another. And when the blocks became vertically unstable, they brought in external experts such as consulting organizations to help manage these blocks and possibly break them into small chunks that could be easily maintained. SMBs looked for Enablement.

IT vendors thrived. Dell concentrated on the foundational block, Cisco connected the blocks, HP played with all block layers while IBM refocused to the top layers. Vendors like Microsoft, SAP and Oracle provided the layers that enabled the blocks.

The process of an SMB growth and its relative steps to absorb IT were steady and predictable. Some SMBs stacked the blocks faster than others but steps to get to the top of the block were always same. It was also dependent upon the financial capacity of an SMB to the extent that those with large dollars available for investment built the blocks faster not necessarily having the same end-results as SMBs with limited investment capabilities and which moved slower. Call it cutting edge versus laggards, but such nomenclature also never proved that the cutting edge SMBs were more efficient or profitable than the laggards. IT vendors and channels made money as they exploited the IT imbalance among various SMBs creating a race to reach the top of building blocks as fast as possible.

Flat IT

Enter Flat IT. Cloud, mobility, virtualization, and managed services have effectively toppled the blocks down in one fell sweep and have laid everything flat on the table. SMBs are now automatically empowered but they do not know it yet, because nobody has told them so directly. The concept of cutting edge and laggard has been torn apart because
it carries little meaning as SMBs now have a rich menu of solutions available that can be plugged into in a very short time. Now it is not a race to the top, but how can an SMB reach its full potential in the shortest period of time.

In a Flat world, with Flat IT, similar technology is now available across all countries and gap between developing and developed worlds is narrowing. In some of the emerging markets, IT is not only Flat but leapfrogging technologies as building blocks are not fully present. Where converged infrastructure is becoming a possibility, Cloud services will
be delivered via wireless.

Next week we will discuss how SMB IT has become Time & Size Agnostic and how the SMBs of today are transforming themselves.

Anurag Agrawal
Techaisle

Techaisle believes that in about 5 year’s time, SMB Cloud Computing will begin its steady route of complexity of client-server technology. Client-server technology (alternatively server-based computing) became increasingly complex to implement and maintain because of the following reasons:

• Lack of control


• Complexity in development and usage


• Muddled TCO


• Intricacies in Data Integration


• Expensive implementation


• Dependency on Consultants


• Too many Vendors providing niche solutions

Historically, these are the very reasons that  gave rise to thin-client computing which quickly transformed its nomenclature to Desktop Virtualization. Again the promise of lower TCO, “access anytime, anywhere”, centralized computing with de-centralized user capabilities, disaster recovery and standardization is still struggling to make a definitive statement for SMBs.

Similar signs are already becoming visible in the Cloud Computing arena. The beneficiaries of this complexity will be three different types of entities:

1. Those that provide consulting to SMBs prior to Cloud Computing Implementation


2. Those that provide consulting and data integration across clouds post cloud implementation for SMBs


3. Those that have a stack of offerings providing not only cloud solutions but also seamless data exchange capabilities for SMBs

Anurag Agrawal
Techaisle

It should come as no surprise that marketing to SMBs is hard – harder in many ways than marketing to enterprises. The diversity and vast size of the SMB market is the primary reason for why getting and supporting SMB customers is such a hard task. Most Cloud vendors design their products with larger enterprises in mind with SMBs being an afterthought. Even if there are any SMB specific requirements that become part of the solution they are typically overshadowed by other enterprise requirements. This is a particular problem with Cloud based services which are designed to scale and so selling those to SMBs becomes a matter of configuring a price that SMBs can digest.

Little if any thought is given to whether a Cloud service has direct business relevance to SMBs. But as the Techaisle SMB computing survey data shows, vendors must demonstrate direct business relevance if they are to succeed in gaining SMB customers. Despite all the marketing around productivity and line of business Cloud services, SMB Cloud adoption is led by industry specific services. This aspect provides valuable insight into SMB decision making where Cloud services are concerned. When evaluating packaged software SMBs are more concerned with issues surrounding application compatibility, maintenance, cost, integration, training and support. It would appear, however, that this criteria changes when applications are evaluated as Cloud services. The key question appears to be how quickly can a Cloud service impact their business. This makes justifying purchase of industry specific services rather an easy one.

It is clearly not the only criteria though. The same survey shows high levels of adoption of hosted email, Cloud storage and security services. While all these have indirect business relevance in that they are foundational IT services, they are essentially a cost line item in an SMB income statement. SMBs are migrating these services to the Cloud because it is also an easy decision. SMBs are familiar with using email in the Cloud for personal reasons (Gmail, Hotmail etc.) and are therefore comfortable migrating the business email and storage to the Cloud as well. Similarly, migrating to Cloud based storage and security also are easy decisions for the same reasons.

Other services however, have not enjoyed the same success (yet). One can argue that this is simply a matter of giving SMBs time to get comfy with Cloud services. The problem as we see it is that most of the other services are marketed using a “reduce cost” value proposition. We believe a different sales and marketing approach is warranted. If reducing cost continues to be the centerpiece then for vendors this becomes a race to the bottom – which is not good for the industry as a whole.

Abhijeet Rane
Techaisle

A recently finished survey of 2900 small businesses across four countries- US, UK, Brazil and Germany shows that 1 in 5 small businesses own an iPad and 2/3^rd of these iPad owning small businesses will likely continue investing in iPads.

iPad owning small businesses are also more prolific users of social media platforms for both personal and business use. Survey shows that 1/3^rd of iPad owning businesses actively use one or more forms of social media such as Facebook, LinkedIn and Twitter whereas only 1/5^th of non-iPad users use social media.  Besides higher social media usage, these iPad owning businesses also seem to be early adopters of Cloud Computing. Nearly three times as many iPad businesses vs. non-iPad businesses are actively investing in Cloud Computing technologies.

On the question of iPads vs notebooks, not surprisingly, 15% of iPad owners prefer iPads over notebooks. On the flip side, non-iPad owners seem to be die-hard notebook users. Given a choice, 52% of non-iPad owners prefer to use notebooks only. 21% of small businesses consider all three: Notebooks, Netbooks and iPads to be important.  Those that use iPads have very low preference for Netbooks. The research shows that currently there is a clear polarization between iPad and Notebook users.

Besides being a “cool device,” the number one stated reason to purchase an iPad was sales and marketing. When specifically asked the most regular uses of iPad, the survey showed that iPads are being used for internet searches/news, emails, vertical applications and social media interaction.

96% of all small businesses that have an iPad also have a smart phone. In addition to smart phones, it is inevitable that iPads will become the center of SMB Future Workplace.

Tavishi Agrawal
Market Analyst
Techaisle