Cloud, SaaS Adoption Grow Among Small Businesses: Microsoft

Past experience with support from a service provider appears to be a key driver of service provider selection among SMBs.

Cloud services and software as a service continue to penetrate the small and midsize business market, with 39 percent of SMBs saying they expect to be paying for one or more cloud services within three years, in contrast to the 29 percent currently paying for cloud services, according Microsoft€™s global "SMB Cloud Adoption Study 2011."

The report also found the number of cloud services SMBs pay for will nearly double in most countries over the next three years.

The report, which investigates how cloud computing will impact SMBs in the next three years, suggests an increasing opportunity for hosting service providers to profit in the cloud from offering services, such as collaboration, data storage and backup, and business-class email. Those SMBs paying for cloud services will be using 3.3 services, up from fewer than two services today, according to the report.

Past experience with support from a service provider appears to be a key driver of service provider selection among SMBs; 82 percent of SMBs say buying cloud services from a provider with a local presence is critical or important. The larger the business, the more likely it is to pay for cloud services. For example, 56 percent of companies with 51 to 250 employees will pay for an average of 3.7 services within three years. Within three years, 43 percent of workloads will become paid cloud services, but 28 percent will remain on-premises, and 29 percent will be free or bundled with other services.

"Cloud adoption will be gradual, and SMBs will continue to operate in a hybrid model with an increasing blend between off-premises and traditional on-premises infrastructure for the foreseeable future," said Marco Limena, vice president, business channels, worldwide communications sector at Microsoft. "As cloud computing becomes more ubiquitous and SMBs' existing IT becomes outdated, adoption will grow rapidly. Hosting service providers should consider the appropriate sales, delivery and support models to target larger SMB customers that are more likely to pay for cloud services."

The 2011 study indicates that in most countries, cloud service adoption is not limited to SMBs that see themselves as fast growers. The study showed little difference in adoption rates between SMBs that expect to grow in the next three years (42 percent) and those solely focused on profitability (40 percent).

€œGrowth companies want a scalable environment that can meet their expanding needs, with an affordable, pay-as-you-go pricing model that eliminates the need for over-investment in IT,€ the report noted. €œSMBs that want to maintain their size, but want to become more profitable, seek cost-effective, efficient solutions that match their needs for predictability and low overhead cost. Cloud services can serve both sets of criteria.€

The study also looked at adoption of software as a service (SaaS) and infrastructure as a service (IaaS) and found that SMBs that are adopting both SaaS and IaaS services are larger, more growth-oriented and more interested in additional services, such as unified communications and remote desktop support. €œThis provides an opportunity for hosting service providers to offer both SaaS and IaaS in order to acquire and retain high-value customers and maximize revenue per customer,€ the report said.

The research report was designed and conducted in conjunction with Edge Strategies in December 2010. The study was based on a poll of 3,258 SMBs that employ up to 250 employees across 16 countries, including Australia, Canada, China, France, Germany, India, Japan, Russia, Singapore, South Korea, the United Kingdom and the United States.