Now Is the Time for Service Providers To Invest in Cloud Services for SMBs

By Scott Puopolo, Cisco IBSG Global Lead

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.