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Now Is the Time for Service Providers To Invest in Cloud Services for Small and Medium Businesses

December 8, 2011 - 3 Comments

Small and medium-sized businesses (SMBs) are leading the way to cloud services. In fact, SMBs represent two-thirds of the public cloud market, outpacing the growth of enterprise cloud adoption by about 10 points, according to a recent McKinsey report (“Outlook—Overcast and Bright: How the Cloud Is Transforming IT for SMEs,” McKinsey & Company, July 2011). Yet, many service providers (SPs) are wondering whether the rate of SMB cloud adoption makes it worthwhile to invest in cloud and managed services for SMBs. They are asking:

  • Is now the time to invest in SMB-focused services?
  • What do SMB customers want?
  • How do SMBs want to consume cloud services?

SMB Cloud Watch is ongoing research from the Cisco Internet Business Solutions Group (IBSG) designed to answer these questions. Here are some highlights of our most recent findings:

  1. SMBs’ awareness of cloud services has dramatically increased, resulting in an audience that is more discerning and demanding.
  2. Nearly half of SMBs will spend more than one-third of their IT budgets on cloud and managed infrastructure services in 2013.
  3. There is high, pent-up demand for software as a service (SaaS) and managed infrastructure services (IaaS) over the next two years. SMBs’ investment plans include advanced options such as conferencing and collaboration, managed VoIP, storage, and hosted business apps, in addition to the more basic services they currently use.
  4. Security assurances and demonstrated business impact are the key buying factors. Service providers need to emphasize that security is an integral part of the offer to help SMBs make the leap to cloud and managed infrastructure services.
  5. “Services tailored for SMBs” are the single biggest driver of provider choice. SMBs want offers that reflect an understanding of their businesses, and don’t want to pay for features they don’t value.
  6. SMBs look for cloud-based and managed infrastructure solutions—not stand-alone, technology-led offers. They gravitate to integrated solutions that let them accomplish everyday tasks more efficiently and effectively, without investing time to manage the technology on which they rely.
  7. Service providers are well placed to take advantage of the SMB opportunity. They are preferred suppliers to SMBs, with the ability to offer the network-based features SMBs want (such as integrated security, end-to-end performance, and reliability guarantees).

Now is the time for SPs to invest in bringing integrated SMB offers to market. To be successful, SPs need an in-depth understanding of the specific needs and concerns of the SMB market and should consider partnerships to help them introduce cost-effective, integrated solutions. Perhaps most important, service providers must be able to credibly guide SMBs as they embark on cloud investments—helping them overcome barriers and realize the value of cloud and managed services.

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  1. Minimising time is one selling point for cloud computing services. The other is minimising cost of implementation and maintainence of the IT sector within SMBs. All Service Providers know this and they will focus on this. The information that 1/3 of SMBs IT budgets will be used on IT infrastructure is very valuable and i think its a good starting point for a sales plan and sales estimation for the following two years.
    I totaly agree with Jozek, the best way to sell is not to sell cloud computing, most of SMBs may not have too much info about it, but selling benefits and advantages of cloud computing.
    Thanks for the great post and info.

  2. Fully agree with all the points. However, I think SMBs don’t really care about cloud – what they want is solution for their business issues, so moving the value proposition from focus on technologies and tools (bundles etc. included) to focus real business value delivered through integrated offers (from infrastructure to applications and potentially business services). Some verticalization of offers will probably need to take place to increase relevance.

    More than trying to sell “cloud” to SMBs service providers should look at cloud as the vehicle that can help them deliver SMB services at scale and appropriate costs.

    • Good points. I think key for SMBs will be to minimize the time they spend on managing IT so the can focus on the core service and product areas of their business. Cloud services should work seamlessly for them. I think therein lies the service provider opportunity.