Telecom Service Providers Emerge as Key SMB Cloud Players

As telecom giants like AT&T and Verizon enter the SMB cloud space, competition for the sector is heating up, an AMI report said.

As many traditional small to midsize business channel partners make the transition to the cloud services model, telecommunication service providers (telecoms) are making a strong bid for the SMB cloud share, beyond their traditional voice and data service offerings, according to a report from SMB IT research firm AMI-Partners.
Facing the continuing prospect of declining average revenue per seat (ARPU) and increasing churn, telecoms see the SMB cloud space as an opportunity for sustained revenue growth and customer loyalty, the report concluded. At the same time, many SMBs are open to expanding their relationships with telecoms beyond traditional voice and data services. According to the firms' upcoming study, 38 percent of U.S. SMBs said they are willing to purchase IT products and services (including hardware and software) from telecommunications service providers.
The report found a key driver behind SMB interest in purchasing IT products and services from telecoms is the rapid growth of mobile applications. "SMBs with multiple branches and greater smartphone penetration are more likely to expand their relationship with telecoms," according to Yuki Uehara, AMI's senior cloud analyst. "This growing interest suggests significant opportunities for communication service providers to be one-stop ICT partners, and to reshape the ecosystem of ICT products and services in the global SMB space."
Uehara noted this development poses a significant challenge to traditional SMB channel partners, as telecoms bring greater scale, resources and price flexibility. According to AMI's study, SMBs are attracted to telecoms' abilities to offer superior customer service, flexible billing and "one neck to choke" for all IT and communications issues. "This 'one-stop-shopping' model, coupled with attractive bundling, pricing and services options, will put pressure on traditional resellers to evolve their business models," Uehara said.
The report said leading telecom players such as AT&T, Verizon and Qwest are increasing their cloud service portfolio from hosted VOIP (voice over IP), hosted e-mail and conferencing services to high-end business applications and managed services.

"Most SMBs already have an account with a communication service provider for communication services; adding cloud applications through the existing account significantly lowers the hurdle for SMBs to adopt new services than looking for a new service provider," the report noted. "Communication service providers may be the comprehensive ICT partners in the coming age of cloud computing."
AMI's 2010 Worldwide SMB Cloud Service study examines the SMB cloud opportunity in 30-plus countries, including SMB preferences for cloud-based application bundles, price sensitivity and purchase channel preferences. The study also provides comprehensive coverage of SMB adoption of cloud-based applications, managed services and supporting infrastructure, including platforms and devices.