Techaisle Blog

Techaisle’s recent SMB Cloud computing adoption survey of 1455 US SMBs shows that hybrid cloud is gaining momentum in small businesses and is becoming entrenched in the mid-market businesses. According to the survey, hybrid cloud is currently being used by 18 percent of cloud-using SMBs and will be the approach of choice for 28 percent in 2015, an increase of 56 percent. Similarly, Hybrid Cloud accounts for 32 percent of cloud using mid-market businesses today, and is expected to capture a similar proportion of new spending in 2015.

The survey data also reveals that use of “hybrid-only” cloud is expected to increase by 87 percent, the proportion of SMBs using a combination of private and hybrid is expected to grow by over 100 percent and use of all three of public/private/hybrid cloud is expected to increase by an even higher percent.

Even SMBs that are pursuing Public or Private Clouds are ripe for Hybrid cloud in the future. In small businesses, survey shows that 50 percent of those planning new cloud initiatives in 2015 are looking to implement private cloud – in effect, using internal infrastructure to deliver on-demand services. However, these small businesses will most likely hit the limit of their internal resources and bridge to external cloud when they do so.

Techaisle survey data further shows that trust in public cloud is leaping within mid-market businesses with 44 percent anticipating use of public cloud in 2015 - up from 27 percent currently – typically for workloads including customer service, hosted VoIP, collaboration, marketing automation and business intelligence. These mid-market businesses are also looking to improve integration and manageability by connecting Public cloud workloads with internal systems creating an inevitable move to Hybrid cloud.

Small businesses (1-99 employees)

42 percent of small businesses are currently using only private cloud, less than 20 percent are using only public cloud and a small percent of small businesses are using only a hybrid approach connecting public and private clouds. This means that their cloud usage journey to date has consisted of using internal resources to deliver on-demand services.

Survey data also reveals that many small businesses are using more than one cloud approach. 15 percent are using both public and private cloud for discrete purposes and not configured as part of a single delivery infrastructure. Relatively small proportions of small businesses are using private and hybrid or public and hybrid. Segmentation of survey data reveals that small businesses using all three of public, private and hybrid clouds have an average of 43 employees and four locations making them noticeably larger than other small businesses.

Mid-market businesses (100-999 employees)

Techaisle SMB cloud survey also shows that less than 40 percent of cloud-using mid-market businesses rely on a single delivery approach for cloud. 25 percent use only private cloud and one-third use two different delivery approaches, with the most common being a combination of private and hybrid cloud or private/public cloud. 30 percent of cloud-using mid-market firms surveyed report that they have currently deployed all three of public, private and hybrid cloud. Unlike small businesses, these mid-market businesses are smaller is size than those using a single delivery method but they tend to have a higher number of locations.

Final Techaisle Take

Survey data suggests that selection of a Public vs. Private vs. Hybrid Cloud strategy is not a “religious issue” and that SMBs are selecting the best approach for their requirements and they change approaches in response to changing business needs. The decision to use one two or three cloud delivery models is also a result of IT finding that the best way to use cloud across a wider range of business requirements is to deploy a wider range of clouds. Although Hybrid Cloud is gaining momentum within SMBs, cloud suppliers should carefully consider the use cases for whichever of public, private and/or hybrid they are promoting, and to stress the ways in which the approach is optimal for the business requirement. SMBs are committing to workloads first before Public or Private or Hybrid.

Detailed data and analysis is available in report: 360 on SMB & Mid-Market Cloud Computing Adoption Trends

In the early days, the key question wasn’t “when?” but “what?” Looking back at 2011.

Four years ago, Techaisle’s 2011 SMB Cloud Adoption report began with a discussion of cloud awareness within the SMB community. Results showed that while SMBs were reasonably familiar with the terms “private cloud” and “public cloud” (recognized by 84% and 74%, respectively, of SMB respondents), “XaaS” had not yet entered the SMBs’ lexicon: less than 25%  were familiar with the term “hybrid cloud”, and IaaS and PaaS were also not commonly understood.

Discussions of reasons for adoption and barriers to cloud adoption also illustrate how much the cloud market has evolved over the past four years. In 2011, SMBs cited “simplified access through a browser from any location” as the second-most important reason to adopt cloud; in today’s multi-screen, mobile world, requirements have progressed much further, with an application interface layer capable of responding to different displays, a practical necessity for many business systems. Similarly, features like “eliminating the need to upgrade individual users” and “getting new features automatically” have become expected attributes of cloud, as attention progresses to issues like building agility and obtaining new capabilities. The data did highlight one issue that has remained constant from 2011 to 2014 though: as was the case with Techaisle’s most recent 2014 SMB cloud survey, the 2011 results emphasized a desire to increase IT staff’s efficiency as a key reason to embrace cloud.

In 2011, when asked, “What vendor actions would compel you to use cloud services?” 46% of small businesses and 38% of medium businesses replied that they would “never consider using hosted applications.” Today, of course, refusal to consider SaaS is still an option; but increasingly, it is an expensive, non-mainstream option – helping to remind us that “never” is not a good planning horizon for new technology.

Overcoming Cloud Adoption barriers of 2011

In many ways, a review of the list of barriers to cloud adoption cited by our 2011 respondents is even more helpful in illuminating increased SMB focus on cloud. In the 2011 research, respondents not using cloud were asked to specify the conditions that would prompt them to consider use of cloud services. The list of top responses is intriguing. The most frequent answer cited by 2011 respondents was “if the cost of owning the applications is significantly higher than renting them”. It can be argued that this condition has been met – that for many applications, ranging from office suites (where pricing for Office 365 is more compelling than for boxed versions of the software), to niche-specific applications where on-demand fees provide far superior economics than a combination of new hardware and licensed software, to the “fail fast” mantra used to apply cloud to emerging business opportunities (one which relies on the freedom to spin up and spin down applications quickly, without reference to the depreciation cycle associated with the underlying hardware), the economics of cloud are compelling for at least some applications.

Similarly, the second most frequently-cited condition that would prompt 2011 non-users of cloud to consider adoption – “if the application we need meets our needs completely” – is also often frequently met today, thanks to the explosion of niche-specific applications available from an ever-expanding universe of cloud application sources. Viewed in hindsight, we can see that cloud provides an ideal delivery platform (and associated business model) for addressing these conditions, which has in turn helped fuel cloud’s advance in the SMB market.

Where are we heading from here? Tracing the trajectory of SMB cloud usage

Through its relatively brief history, cloud projections have been hampered by the “hockey stick” phenomenon. Cloud is growing in multiple ways simultaneously: the number of firms using cloud is increasing, the number of individuals using cloud within these firms is increasing (e.g., as business users in different areas and IT workers find discrete uses for cloud-based systems), and the number of platforms and applications in use within each organization is increasing. These compounding growth curves drive extreme growth expectations that are difficult to digest.

Based on our most recent 2014 SMB cloud study we have constructed a “current and projected” perspective. The data serves to reinforce the belief that hybrid is emerging as the dominant cloud delivery model. Some of the hybrid growth numbers are extraordinary: use of “hybrid-only” is increasing by 87%, while the proportion of SMBs using a combination of private and hybrid is expected to grow by 122%, and use of all three of public/private/hybrid cloud is expected to increase by 130%.

However, even the figures that are less exceptional still relay an impressive underlying story. Take, for example, the “public only” group. Data shows that businesses using only public cloud will shrink by 20% within US-based SMBs. However, public cloud itself will be a growing part of SMB cloud delivery strategies and is actually poised to increase by 75% through the forecast period.

Using the same survey data based projection methodology we have created workload scenarios across sixteen different applications areas. The “full market adoption” scenario assumes that all SMBs reporting plans to adopt cloud do so whereas the “gradual adoption scenario” takes a different approach: it assumes that current cloud users will adopt each technology according to current plans, while new cloud users will adopt each technology only at current usage rates.

Data clearly shows the coming dominance of hybrid as a delivery model – which drives increased demand for both public and private cloud as well – and provides high-growth forecasts for cloud storage, data backup and cloud security at a workload level, and for vertical applications, content publishing, CRM and BI/analytics in SaaS. It can be difficult to parse through the many, extraordinary growth projections for cloud. By connecting user intentions for growth in overall cloud adoption with adoption patterns for delivery, workloads and applications, Techaisle provides its clients with the data needed to calibrate the growth needed to keep pace with or exceed the overall SMB cloud opportunity.

Related research report: SMB & Mid-Market Cloud Computing Adoption Trends

The arguments for cloud are clear, and well-aligned with the specific interests of small and mid-market businesses, and ITDMs and BDMs. However, despite what appears to be a 24x7 stream of cloud information available to everyone with an internet connection, cloud is not ubiquitous – meaning that there are objections that prevent cloud from being introduced in some SMB environments.

To better understand cloud objections, Techaisle’s SMB Cloud Computing Adoption survey asked respondents “What are the key inhibitors to embracing cloud – what factors might prevent you from adopting new cloud solutions, and/or accelerating the use of current cloud solutions?”

Responses show that the traditional cloud bugbears of security and control continue to furnish obstacles to increased cloud penetration/acceleration. As the figure illustrates, SMBs are most worried about security of applications and corporate data, and about control over data, users and applications. 

Mid-market businesses also register a high rate of concern regarding the difficulty of integrating operational systems across hybrid traditional/cloud-based systems – and objection which, in Techaisle’s opinion, has real merit and will require attention (and solutions) from the cloud supplier community. This issue is of particular concern to firms with 100-249 employees – large enough to have diverse systems requiring integration, but not large enough to have deep IT resources capable of addressing the problem. We expect that this concern will spread both to larger firms as they move more workloads from on-premise to cloud or hybrid platforms, and to smaller firms as they adopt more SaaS systems (requiring cloud-to-cloud integration).

A drill down into inhibitors by employee size segment shows that the smallest organizations in both the small and mid-markets – the 1-9 employee micro-businesses, and the 100-249 medium businesses – have some unique issues. Micro-businesses worry about vendor lock-in – a reasonable concern, as these firms have neither the technical expertise nor the purchasing power to extricate themselves from supplier relationships if they experience difficulties. The 100-249 employee size groups, as detailed above, are worried about integration. Consistently, though, SMBs are concerned with questions of security and data/user/application control. Suppliers able to address these issues will benefit from expanded market opportunity.

Looking at this issue through the ITDM/BDM lens, we see that the principal objections – with one important exception – are defined by the roles that each group plays within their organizations. BDMs, as might be expected, are very concerned with control over business data (can we access and manage data in the cloud as well as we can on premise?), with connectivity (can we get to information and applications when we are on the road?), and with vendor lock-in (which can be seen as an extension of the data control issue). ITDMs, on the other hand, are more concerned with technical issues than their BDM peers: they are more likely to cite limitations in service access and integration issues as cloud impediments.

The one area where the pattern does not correspond to expectations is in security, where BDMs express higher levels of concern than ITDMs. Given that ITDMs are responsible for most aspects of cloud security, we would have anticipated more security-related concern from ITDMs, if not necessarily lower rates of security-related worry on the part of the BDM respondents.

In our recent SMB survey in North America, Europe and Asia/Pacific we explored 14 potential sources of information on technology solutions. Some of these, such as TV or newspaper/magazine advertising, are clearly ‘top of the funnel’ options, intended to build awareness. Some options, including brochures and fact sheets, help to build consideration for specific solutions amongst prospective customers who are considering a specific type of solution. A third set of information sources, including product reviews on websites, case studies and whitepapers are primarily intended to build preference. And a fourth set, including seminars and face-to-face sales calls are used to convert prospects into closed business. Complicating these categorizations is the presence of options, such as the manufacturer’s website, that address multiple points in this process spectrum.

Which of these sources is most important to reaching a potential SMB buyer? Unsurprisingly (given the increasing complexity of the DMU [Decision Making Unit]), the answer is “it depends”.  Our research, as shown in the figure below, demonstrates that manufacturer website is an important source of information for small and medium businesses, and for ITDMs and BDMs [ITDM and BDM data not shown in the figure]. We also see that recommendations, IT news and analysis sites and personal sales calls help drive behavior.

What is really interesting, though, is the extent to which the data indicates use of multiple sources. Except in the mid-market, each of the top five information sources is used by more than one-third of the target audience; except in small business, each of the top 10 sources is used by at least 19% of the target. As the statistics regarding pre-contact information gathering above suggests, buyers are doing extensive research before connecting with potential suppliers – and potential suppliers need to be present in the media that the buyers are using, to make it past awareness to the consideration and preference stages that often occur beyond the purview of the IT vendor.

If we look again at the information sources listed in the figure above, we can appreciate the ways in which the channel can support the overall sales process. For example, small businesses like to get personal calls from suppliers – but calls like these to small businesses are far more likely to originate from a local channel representative than from a manufacturer. Similarly, BDMs are looking for personalized service and recommendations – but many IT suppliers, OEMs and channel partners alike, lack the understanding needed to communicate meaningfully with this audience. Who needs to be involved to help direct these discussions?

Vendors need to engage with SMB customers while the solution is being defined – not when the only decisions remaining are “whose components, and at what cost”? SMB buyers are using high-value content to define their IT buying approaches. Vendors need to build messages around/within high-value content to ensure that they can influence solution design and preferences.

Asia/Pacific version of above Infographic is here.