Techaisle Blog

In the early days, the key question wasn’t “when?” but “what?” Looking back at 2011.

Four years ago, Techaisle’s 2011 SMB Cloud Adoption report began with a discussion of cloud awareness within the SMB community. Results showed that while SMBs were reasonably familiar with the terms “private cloud” and “public cloud” (recognized by 84% and 74%, respectively, of SMB respondents), “XaaS” had not yet entered the SMBs’ lexicon: less than 25%  were familiar with the term “hybrid cloud”, and IaaS and PaaS were also not commonly understood.

Discussions of reasons for adoption and barriers to cloud adoption also illustrate how much the cloud market has evolved over the past four years. In 2011, SMBs cited “simplified access through a browser from any location” as the second-most important reason to adopt cloud; in today’s multi-screen, mobile world, requirements have progressed much further, with an application interface layer capable of responding to different displays, a practical necessity for many business systems. Similarly, features like “eliminating the need to upgrade individual users” and “getting new features automatically” have become expected attributes of cloud, as attention progresses to issues like building agility and obtaining new capabilities. The data did highlight one issue that has remained constant from 2011 to 2014 though: as was the case with Techaisle’s most recent 2014 SMB cloud survey, the 2011 results emphasized a desire to increase IT staff’s efficiency as a key reason to embrace cloud.

In 2011, when asked, “What vendor actions would compel you to use cloud services?” 46% of small businesses and 38% of medium businesses replied that they would “never consider using hosted applications.” Today, of course, refusal to consider SaaS is still an option; but increasingly, it is an expensive, non-mainstream option – helping to remind us that “never” is not a good planning horizon for new technology.

Overcoming Cloud Adoption barriers of 2011

In many ways, a review of the list of barriers to cloud adoption cited by our 2011 respondents is even more helpful in illuminating increased SMB focus on cloud. In the 2011 research, respondents not using cloud were asked to specify the conditions that would prompt them to consider use of cloud services. The list of top responses is intriguing. The most frequent answer cited by 2011 respondents was “if the cost of owning the applications is significantly higher than renting them”. It can be argued that this condition has been met – that for many applications, ranging from office suites (where pricing for Office 365 is more compelling than for boxed versions of the software), to niche-specific applications where on-demand fees provide far superior economics than a combination of new hardware and licensed software, to the “fail fast” mantra used to apply cloud to emerging business opportunities (one which relies on the freedom to spin up and spin down applications quickly, without reference to the depreciation cycle associated with the underlying hardware), the economics of cloud are compelling for at least some applications.

Similarly, the second most frequently-cited condition that would prompt 2011 non-users of cloud to consider adoption – “if the application we need meets our needs completely” – is also often frequently met today, thanks to the explosion of niche-specific applications available from an ever-expanding universe of cloud application sources. Viewed in hindsight, we can see that cloud provides an ideal delivery platform (and associated business model) for addressing these conditions, which has in turn helped fuel cloud’s advance in the SMB market.

Where are we heading from here? Tracing the trajectory of SMB cloud usage

Through its relatively brief history, cloud projections have been hampered by the “hockey stick” phenomenon. Cloud is growing in multiple ways simultaneously: the number of firms using cloud is increasing, the number of individuals using cloud within these firms is increasing (e.g., as business users in different areas and IT workers find discrete uses for cloud-based systems), and the number of platforms and applications in use within each organization is increasing. These compounding growth curves drive extreme growth expectations that are difficult to digest.

Based on our most recent 2014 SMB cloud study we have constructed a “current and projected” perspective. The data serves to reinforce the belief that hybrid is emerging as the dominant cloud delivery model. Some of the hybrid growth numbers are extraordinary: use of “hybrid-only” is increasing by 87%, while the proportion of SMBs using a combination of private and hybrid is expected to grow by 122%, and use of all three of public/private/hybrid cloud is expected to increase by 130%.

However, even the figures that are less exceptional still relay an impressive underlying story. Take, for example, the “public only” group. Data shows that businesses using only public cloud will shrink by 20% within US-based SMBs. However, public cloud itself will be a growing part of SMB cloud delivery strategies and is actually poised to increase by 75% through the forecast period.

Using the same survey data based projection methodology we have created workload scenarios across sixteen different applications areas. The “full market adoption” scenario assumes that all SMBs reporting plans to adopt cloud do so whereas the “gradual adoption scenario” takes a different approach: it assumes that current cloud users will adopt each technology according to current plans, while new cloud users will adopt each technology only at current usage rates.

Data clearly shows the coming dominance of hybrid as a delivery model – which drives increased demand for both public and private cloud as well – and provides high-growth forecasts for cloud storage, data backup and cloud security at a workload level, and for vertical applications, content publishing, CRM and BI/analytics in SaaS. It can be difficult to parse through the many, extraordinary growth projections for cloud. By connecting user intentions for growth in overall cloud adoption with adoption patterns for delivery, workloads and applications, Techaisle provides its clients with the data needed to calibrate the growth needed to keep pace with or exceed the overall SMB cloud opportunity.

Related research report: SMB & Mid-Market Cloud Computing Adoption Trends

Techaisle’s latest Cloud Computing Adoption study, a survey of 2,675 SMBs shows that CRM and ERP are approaching somewhat similar levels of adoption but are facing very different growth trajectories. Further analysis of the data from the survey shows an intriguing connection between the two applications.

Techaisle analyzed the extent to which use/intended use of each of these applications is connected with other applications captured in the survey. We found that SMBs using/planning to use both CRM and ERP have some common characteristics: in each case, buyers are looking to deploy vertical applications, Business Intelligence, project management – and the other solution (i.e., those using/planning use of CRM are also likely to be adopting ERP, and those using/planning use of ERP are also likely adopters of CRM).

This helps illustrate the importance of the types of suites that leading vendors like SAP, Oracle, Microsoft and NetSuite have assembled: buyers are consistently looking for a combination of capabilities, and will likely look as well for integration across these applications. The CRM side of this equation shows that marketing automation is an important attached application for CRM, which highlights the importance of recent investments in this area from Salesforce.com, Oracle, Microsoft and IBM, and the probable need for competitors to invest to match this offering.

Techaisle believes that the figure above (from the survey) helps illustrate the go-to-market challenge faced by SaaS suppliers. Buyers will certainly shop for individual applications, but will also look to cluster these applications into broader systems that integrate multiple requirements. We expect to see suppliers address these issues in one of three ways:

1. Through acquisitions, enabling core solution providers to bolt on needed extensions

1. Through alliances linking providers of complementary applications

1. Through adherence to standards allowing for integration between individual applications.

At present, Salesforce.com’s Force.com is a clear leader in the third category (and we are seeing acquisitions within the Force.com community – such as FinancialForce.com’s purchase of Vana Workforce – indicating expansion across functions within the standards-led community). It will be interesting to see if other development platforms emerge to challenge Force.com in this area.

NetSuite Changing the Conversation to management of Customer Relationship

We all know that NetSuite is a clear leader in Cloud ERP solutions category. However, not many (beyond some of the users and customers of NetSuite) know that it also has an integrated CRM solution. Zach Nelson, CEO, NetSuite took the opportunity in his keynote address at SuiteWorld 2014 to emphasize that NetSuite’s solution enables any business to manage the entire customer-lifetime-value-cycle from lead generation to order fulfilment. His keynote certainly succeeded in shifting the conversation in two different but converging directions.

First shift in conversation: introducing NetSuite’s Suite Commerce Advanced for the omni-channel world, Zach Nelson emphasized that NetSuite (with its integrated ERP/CRM) helps a business manage complete customer relationship irrespective of the customer’s point-of-entry: online, in-store and/or catalog/call center. NetSuite is therefore putting equal importance to both being a Cloud ERP and CRM supplier. This is definitely the most vocal shift in conversation yet from yester-years. Granted that there are several important pieces missing such as marketing automation but current popular solutions such as Marketo, SilverPop (now IBM) and Act-On have already built integrations with NetSuite. And in all fairness, marketing automation in its present form will most likely go through a transformation as evidenced in Techaisle’s SMB Marketing Automation Adoption Trends study.

Second shift in conversation: NetSuite raised the question on the traditional definition and usage of CRM as we all know it, making the definition narrower rather than more-encompassing. CRM in NetSuite’s view is akin to SFA (Sales Force Automation). There is nothing wrong with this view except that this is not how most SMBs view their customer facing applications. CRM is the core application for SMBs and we have already seen that Sales Force Automation and Marketing Automation functions have been quickly incorporated along with Business Intelligence. All of these provide a 360 degree view of the sales and marketing process. After the SMB CRM base has been built (or simultaneously), the order of implementation depends on the SMB’s focus but survey data shows that it is usually Financials, HR/Payroll, customer service, ERP, fulfillment (SCM), industry vertical applications such as retail, communication, manufacturing, etc. The SMB buyer for applications is also moving increasingly toward the department that is responsible for delivering business results and Cloud CRM usually gets placed in middle of the SMB cloud application stack as sales revenue becomes the focus rather than tight cost control enabling rapid growth and agility.

NetSuite may have the Last Laugh

Irrespective from where the cycle starts, from CRM to ERP or vice-versa if there is a single unified database (with little requirement for data integration) that powers different application blocks: front-office driven by a single view of the customer (leads, sales, and service), tying these to accounts, billing and fulfillment, along with resource planning, materials and supply-chain management will make for a compelling value proposition for NetSuite. But NetSuite has a long way to go to convince a new customer base to be the Cloud CRM vendor of choice.

Most SMBs that have used CRM, SFA and ERP systems within the past few years are familiar with the dashboards that are available with many of these applications, either embedded or purchased separately. Dashboards continue to evolve and be dynamic in several ways; the way they use data from subsystems like ecommerce and other real time feed sources, the way users can personalize the layout of their dashboards and the ability to build KPIs “on-the-fly”. While several SaaS vendors allow this kind of metric building and start the user at a dashboard, we have yet to see anything targeted to the mid-market or SMBs that connects front office, production, fulfillment and customer service the way that NetSuite does almost out of the box. NetSuite is on the right but a long winding path.

The Fear

With NetSuite’s growing market share its applications have also become complex to support the requirements of multi-country global businesses. NetSuite started from a base of SMB customers but over the years has moved upstream making inroads into enterprises. The implementation timelines, although not in years, is still counted in several months not exactly suitable and palatable to a large majority of SMBs that are planning to adopt cloud ERP and CRM. Even the channel partners that are currently offering and planning to offer ERP/CRM solutions do not have the necessary skill-sets and the manpower to provide support. The SMB ERP market is still open and available. Question is how NetSuite will address this market segment. Fear is if this is even a priority for NetSuite.

It is stunning to see how much corporate IT realities have changed in the last five years. Today, an increasing proportion of infrastructure is rented rather than purchased, sourced with OPEX funds from remote suppliers. Agility has become the watchword for new automation projects, and acceptable timeframes are no longer calibrated in months. End-users can source applications, infrastructure and other needed services from a wide variety of online resources. And workers are tethered to the corporate infrastructure by their smartphones and tablets, not by the cables attached to their desks.

Most of these changes are attributable in part or in whole to cloud computing. Cloud infrastructure provides the basis for OPEX-based, flexible-timeframe infrastructure rentals. SaaS providers are able to deploy new automation in hours rather than months. Mobility is not really a discrete initiative so much as it is a key attribute of ubiquitous infrastructure. And IT now competes for corporate IT influence and budgets – it is no longer the “final word” on IT/business solution strategies.

Spurred by these changes, Techaisle conducted a unique survey of SMBs. To better reflect the reality of distributed IT influence and authority, we surveyed roughly equal numbers of business decision makers (BDMs) and IT decision makers (ITDMs), asking both groups to provide a “360° perspective” on the critical IT/business trends within their organizations. Key findings from the cloud adoption research included:

1. Why is cloud being used by SMBs: In many organizations, cloud may have first been introduced as a means of reducing CAPEX and/or overall IT costs, but today, it is viewed by SMBs as a means of increasing business agility and of introducing capabilities that would have been cost or time-prohibitive to deploy on traditional technology. Companies in the “middle” of the SMB market – those with 50-250 employees – emphasize the ability of cloud to make IT staff more productive, while smaller and larger organizations are primarily interested in enabling business staff.
2. Who is driving cloud adoption: Techaisle’s research shows that ITDMs are primarily responsible for cloud’s platform technologies – IaaS, and virtualization and mobile device management – and that they share authority for SaaS with BDMs. However, the capabilities based on these foundational technologies – mobility, Big Data, BI/analytics, collaboration and social media – are largely directed by BDMs. BDMs also have taken a leadership role in the solution process steps  (need identification, strategic and operational planning, even evaluation) that lead to a sale. ITDMs retain responsibility for deployment and training, but optimization is now also primarily the responsibility of BDMs.
3. What kinds of cloud are in use: Our research shows that SMBs use a mix of public, private and hybrid clouds – and that organizations often use two or three of these approaches simultaneously. The data suggests that the cloud deployment process starts with the business requirement, and moves back to the deployment model – rather than starting with a platform, and expanding across incremental workloads. If cloud selection is not a “religious issue”, then accounts are not won or lost at a single platform decision – they are won or lost on a workload-by-workload basis.
4. When will cloud usage patterns change and how: Our analysis demonstrates the coming dominance of hybrid as a delivery model – which drives increased demand for both public and private cloud as well – and projects high-growth forecasts for cloud storage, data backup and cloud security at a workload level, and for vertical applications, content publishing, CRM and BI/analytics in SaaS.
5. Roles and responsibilities through the cloud security process: A troublingly-substantial proportion of small businesses either does not know who is responsible for specific security activities or believe that the requirements do not apply to their businesses, and both small and medium businesses demonstrate an over-reliance on cloud suppliers.
6. Attributes of successful cloud solutions: Techaisle's survey results clearly demonstrate that small and medium businesses view support for mobility (and information access generally) as a key attribute of cloud success. Small businesses are also focused on the inherent cloud capability to deliver backup, continuity and disaster recovery, while mid-market firms view access to scalable compute and storage resources as a key cloud success attribute.  BDMs view continuity/backup/DR (and security) as key cloud deliverables – likely, as a result of a need to bridge the gap between setting policy and managing security processes while ITDMs demonstrate relatively acute interest in whether their cloud providers can deliver integration with physical systems and support for managed IT environments.
7. Key inhibitor in using cloud: Security and control over data are two key inhibitors for accelerating the use of cloud, but the data indicates that BDMs can be persuaded that cloud contributes to better security.

Techaisle’s recently completed US SMB Cloud Computing Adoption Trend research shows that Cloud computing – which IT suppliers often position as a means of reducing cost – is viewed by 80 percent of US SMBs as a solution that contributes to business growth. This is a huge departure from previous years when reducing cost used to be the overarching objective. It implies that cloud vendors and resellers should expand their marketing dialogue beyond the cost and CAPEX vs. OPEX motivations for cloud adoption and focus on ways in which cloud-based solutions enable SMBs to expand their reach to new markets and customers. In fact, over 40 percent of SMBs state that business agility and new capabilities are driving SMB cloud adoption.

This new trend of SMBs adopting cloud for business growth creates a “perfect storm” of opportunity for cloud computing. It satisfies the demand for new technology-enabled business capabilities such as mobility, social media, business intelligence/analytics and collaboration by providing a platform for supporting these initiatives. At the same time, as IT continues to struggle with cost control, cloud provides a clear means of reigning in CAPEX and reducing management costs.

Techaisle’s survey data shows that while there is broad recognition of the importance of business agility as a cloud benefit, a “mid-SMB” niche exists – stretching from 50-250 employees – in which IT productivity is the overarching cloud objective.

The key reasons for using cloud and benefits realized vary by size of business as well as issues that are of critical concern to SMB organizations. For example, small businesses (1-99 employees) focus tightly on business benefits: increased business agility is the most compelling cloud benefit, followed by obtaining capabilities that would have been cost/time prohibitive, reducing business process-related costs, and improving business staff productivity. Mid-market businesses (100-999 employees) also appreciate these outcomes – but the highest-ranked benefit of cloud is IT related, with “make our IT staff more productive” cited as a compelling cloud benefit by nearly 60 percent of mid-market businesses.

Drilling down into the different sizes of businesses the 1-9 micro-business group also places a high value on using cloud to reduce process costs, which makes a great deal of sense, since these tasks are likely not automated in any fashion today. Respondents in the 250-499 employee size segments prioritize use of cloud to increase business user productivity, while the 500-999 employee segments is focused on cloud delivery benefits such as capabilities/agility and IT productivity. Analyzing the data by BDMs and ITDMs, the study finds that these groups have different perspectives on how cloud delivers value to their companies.

Marketers can use this data to establish broad themes for the US SMB market, and then tailor their appeals to specific sub-segments based on demonstrated needs and expectations. For more details or to learn about Techaisle’s SMB Cloud Computing Adoption Trends report please contact This email address is being protected from spambots. You need JavaScript enabled to view it.