Thursday, April 18, 2013

Why hasn't SMB moved to the public cloud faster?

Debate continues over the relative merits of private, public, and community clouds for enterprises. The debate (thankfully) has mostly shifted from dogma to deeper discussions around factors such as costs, bridging of legacy application types, data gravity, and service levels. And, in general, there's a widespread (if not quite universal) recognition that cloud and IT broadly will be hybrid in one or more respects.

By contrast, many of us who have been following and working in the cloud space for a number of years haven't ever expended a whole lot of cycles mulling if and how cloud computing (in the sense of public cloud services—mostly SaaS) would be adopted by smaller businesses, SMB.

The case seems compelling. For myself, I find it almost a ritual when writing about SMB to preface any comments with the observation that most SMB (with the caveat that there's no single definition and it covers a broad range) have relatively little in the way of dedicated, much less specialized, IT people and therefore they value simplicity and integration over functionality. Which is why SMB has been a traditional area of Microsoft strength, for example.

Public cloud services seem tailor-made for these types of organizations. We can debate the relative costs of a large bank operating its own servers versus letting Amazon Web Services do it. We can reasonably ask whether an organization with a five or six figure-sized sales force might not be better off running their own CRM system rather than using Salesforce. A 200 person services firm? Not so much.

Screen Shot 2013 04 18 at 9 52 49 AM

Therefore, it's a bit surprising that the data doesn't really back up these assumptions.

Consider first, a presentation by Chris Chute and Ray Boggs of IDC at this year's Directions 2013 conference. Entitled "The SMB Cloud Story: An Unexpected Journey" (yes, cute title), it showed off data from IDC's 2012 SMB study that was counterintuitive. Consider these three finding that grabbed my attention:

  • Smallest businesses still cautious about public clouds
  • Small business even more concerned about security than a year ago
  • Micro business, less than 5 employees, are most resisting to BYOD

To (over-)generalize, the smaller a business is—and therefore the less capable it typically is of putting in place systematic policies and procedures around backup, security, and so forth—the less likely it is let someone else take care of those things. One can reasonably argue about how the BYOD finding fits in, but there's no disputing the overall direction of the data. For me, the real money shot is the IDC slide I posted above.

Other data shows similar results. Just this morning, writing on the GigaOm Pro Blog, David Linthicum notes that: "According to Smart Company, an Australian-based publication, cloud computing gives small businesses a 106% productivity boost." So far so good. However, the same study notes that only 16 percent of the businesses surveyed said that they use cloud computing in business. While optimistic about cloud computing use by SMB going forward, Linthicum suggests that "the issues around cloud computing adoption by small businesses include a lack of understanding of cloud technology, and which cloud computing flavors (IaaS, PaaS, or SaaS) are right for them."

IDC's Boggs also noted that lack of knowledge was a problem. He also suggested that small business owners can also be control freaks in some cases and therefore unwilling to relinquish perceived control. From a less psychological perspective, he observed "their industry is where their identity is" and that vendors therefore need to embrace vertical thinking. As someone who worked with many VARs (value-added resellers) in the 1990s, the importance of approaching SMB from an industry perspective rings true to me. And it's not something that's happened systematically in the cloud space to date. Perhaps community clouds and SaaS offerings will shift things more in this direction. 

Ultimately, as I wrote in a 2004 research note I wrote about an IBM SMB initiative: "[T]hat market presents a challenge for large IT vendors because its needs are more diverse. It has far fewer financial resources and technical skills, and it proceeds at a less consistent pace in its IT projects than the Fortune 500." It's not a slam dunk to move SMB rapidly to cloud, even if it once seemed that way.

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