The global SMB market for the major hosted services will be $95.7 billion by the end of 2015 – growing, on average 28 percent over the next three years – according to forecasts in the new set of “SMB Cloud Insights” reports from virtualization and automation software provider Parallels.
Parallels’ insights span 16 reports covering specific countries and regions as well as the “Parallels Global SMB Cloud Insights” report, which focuses on some common trends in the SMB hosting market.
According to Parallels, cloud service providers stand to benefit from “Cloud Leapers” (SMBs moving straight to cloud solutions as their first IT purchase), “Cloud Converters” (existing SMBs eager to replace in-house solutions), and “Cloud Expanders” (those who choose the cloud for more advanced services).
Each country provides a different mix of these customer segments and needs.
Drawing a cloud service provider’s map of the world
Generally, the world market is divided into areas where cloud services are mature, where they’re maturing, and where they’re only emerging.
Developed countries, such as Australia, Japan, and the majority of those in North America, Northern Europe, and Western Europe, are in a position where more than 75 percent of the population use the Internet and both in-house and hosted IT solutions are commonly used and easily available. SMBs in mature, high income markets are more likely to already use cloud services and need additional services – increasingly delivered as SaaS.
For instance, an SMB may start off purchasing web hosting, then add online backup and storage, hosted email and collaboration. Then they will incorporate more services like CRM, support/help desk, accounting, virtual desktop, online conferencing, and file sharing as their needs grow.
Countries in the “maturing” cloud services group are located in Latin America, Southern Europe, and Eastern Europe. Generally, fewer than 75 percent of these populations use the Internet and they are playing “catch-up” to the developed countries. Web hosting in maturing cloud markets, for instance, is growing at more than double the rate of mature cloud markets. The opportunities here, according to Parallels, are in IaaS and all cloud services.
Many of the micro and small SMBs in these markets don’t use in-house servers, meaning that hosted infrastructure is a way for them to leapfrog towards more robust solutions. And those that already have infrastructure will consider the benefits of hosted infrastructure when making upgrades.
Areas of “emerging” cloud services include the majority of countries in Africa and Asia Pacific, as well as some in Latin America and the Middle East. SMBs in these countries will be seeking basic web hosting and some SaaS solutions. IaaS demand has typically been low in these areas but is expected to grow as Cloud Leapers move directly to hosted servers. IaaS demand in Asia-Pacific, for instance, is expected to grow 36 percent CAGR over the next three years to be $7 billion in 2015.
Rapid worldwide growth in hosted communication and collaboration
One of the fastest growing services over the next three years is hosted communication and collaboration including premium hosted email and hosted PBX. The worldwide SMB market for these services is $4.8 billion, which Parallels expects to grow to $14.3 billion USD – representing a year-over-year growth rate of 44 percent. High growth is seen across all regions.
The primary opportunities for premium hosted email, which includes security, archiving, and mobility features, is in upselling small and medium SMBs currently using free email, and offering an alternative to in-house email servers. In a February presentation, Parallels senior manager of marketing operations and insights Emily Kruger, noted that 75 percent of SMBs say that security is the biggest reason to upgrade to premium email.
Hosted PBX represents a less complicated and more flexible option than in-house PBX systems. One of the major barriers is that SMBs aren’t aware of their hosted PBX options. Some of the “triggers” that Parallels identifies as reasons to switch from in-house to hosted PBX range from broken or unreliable equipment to the addition of new office locations to rapid business growth.
As cloud services become more mainstream, the Parallels reports show many opportunities for service providers who can offer solutions for businesses in various stages of development, in regions in various stages of development. And while developed countries will spend the most money overall on cloud services, emerging and developing economies are quickly adopting new cloud services that promise not only to profit cloud service providers, but help local markets grow and prosper.