Techaisle forecasts that US SMB IT spend growth rate could very well remain flat at US$188 billion in 2016 as compared to 2015. However, the US midmarket spending growth will likely increase by 6% whereas the small business spending will fall by 2 percent in 2016 from 2015. In early 2015, Techaisle had forecast US SMB IT spending to be US$180B by end of 2015 – based on most recent Techaisle SMB surveys the actual spending for 2015 came in at US$188B. Techaisle survey data shows some very interesting patterns for planned SMB 2016 IT budgets across different employee size businesses. Small businesses show progressive fall in IT budgets until they reach a certain size whereas midmarket businesses show budget increases until they reach a certain size.
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For all the talk of a world predicated on software-defined resources, there is still need for capable, reliable, scalable physical infrastructure to support these software layers and the features and applications that sit atop them. The rise in virtualization has been driving an accompanying demand for converged infrastructure: products that combine processing, storage and networking into a robust and scalable unit that can support and respond to the options inherent in virtualization.
While the migration from separate server, storage and networking products to converged infrastructure is still in its early stages, the Techaisle SMB & midmarket converged infrastructure survey and corresponding Techaisle SMB & midmarket virtualization adoption trends survey shows that it is beginning to gain traction, especially within more sophisticated accounts. Data shows that 10% of small businesses and 27% of midmarket businesses (weighted data) are planning to adopt converged infrastructure. Current midmarket adoption rates for converged infrastructure are below findings for VDI but differences readily become apparent when analyzing the data from the lens of Techaisle’s segmentation by IT sophistication. Converged infrastructure adoption rises steadily with increased buyer sophistication in both the small and midmarket segments. As the market matures, we expect to see accelerated adoption of converged infrastructure across the SMB market.
What is driving converged infrastructure adoption?
While there are technical advantages that make converged infrastructure products more effective virtualization hosts than traditional servers, Techaisle’s research shows that SMB buyers adopt converged infrastructure for one or more of five primary reasons:
- to benefit from converged infrastructure’s integrated design and efficiency,
- to tap into its ability to enable centralization/management of resources,
- to capitalize on performance/time-to-benefit advantages,
- to improve IT agility and its ability to meet business needs, and
- in response to core requirements for cost savings and improved security.
Drilling down into the data Techaisle finds that core requirements inform many converged infrastructure strategies, and the benefits and efficiency of integrated solutions are also frequently cited as a driver of converged infrastructure adoption.
Hortonworks is a 100 percent open source company, in direct contrast to Cloudera, and every presentation and conversation during its first ever analyst day reinforced its unwavering commitment to open source. In a very short period of time it has come a long way as a software product company with a vision “to manage the world’s data” – data-at-rest, data-in-motion, modern data applications. It wants to enable next generation data architecture by innovating the core, to be used for any delivery model and for all data.
Hortonworks has made great strides in the last couple of years – has 800+ subscription customers and plans to add 100-150 customers per quarter; has 1600 partners which it is trying to educate, mentor and support; its community connection has 3000+ members with 11,000+ weekly visitors; and is a founding member of ODPi (open ecosystem of big data).
The trio – Cloudera, Hortonworks, MapR - are in premium because they are the pioneers in the space and businesses engage with them because of their technology leadership. But short-term advantages do not count any more. By being a public company Hortonworks has declared longevity and it can no longer be judged by having a first-mover advantage. At this stage of the company it is important to design a go-to-market business model architecture that meets the demands of modern businesses. Although Hortonworks heart and comfort zone is in technology product road map it is pivoting very well to “strike conversations with business executives” to deliver the business perspectives that they need.
Hortonwoks has grand plans for technological leadership which it hopes will increase its market share, and divert most big data purchase conversation to its transparent open source subscription model. However, it will be a long, tedious and arduous effort. Hortonworks has both awareness and reach issues. A large percentage of the midmarket and lower-enterprise businesses as well as partners that Techaisle interacts with begin their big data solution selection process with either large IT vendors or smaller consulting organizations. In Techaisle’s most recent US midmarket big data & analytics adoption survey, although 30 percent of businesses are currently either piloting or implementing a big data project and another 50 percent are planning to deploy, neither Hortonworks (nor Cloudera) are top of mind big data suppliers. The top of mind suppliers are IBM, HP, Microsoft, Dell, Oracle and Accenture – in that order. A typical door-to-door selling motion of Hortonworks may not help when the share of installed base and partner ecosystem is lower than its most dominant competitor. In its defense Hortonworks quickly points out that it has no competition because it is the only open-source company. It is certainly a difficult task and Hortonworks is building its partner program to alleviate and augment reach and sales.
The average spending on big data by midmarket customers is growing. As per Techaisle’s big data adoption trends study of last two years, the average spending has jumped from US$28,900 to US$56,600, a 96 percent increase. 53 percent of midmarket big data adopters are exploring Hadoop ecosystem including analytical database and less than 1/5th are working with NoSQL databases.
One of the top gripes of the midmarket and lower-enterprise businesses is that the sales personnel of big data companies “talk about features and who has more committers”. Instead these businesses want to know & learn how their offerings solve customer problems. To this Hortonworks has a perfect and differentiated response. It has developed a cheat sheet with two different tracks (Hortonworks calls them swim lanes) – one focused on customers that are at the cutting-edge of big data adoption and analytics and the other that are just beginning their journey and are focused on transforming their data into analytics projects. And to Hortonworks credit it has generated several powerful case studies for most business problem scenarios. These scenarios are clearly outlined in the “swim lanes” cheat sheet in a bee-hive like matrix which is easy to understand, manage and translate. This is definitely a step in the right direction for sales conversations.
There is no doubt about Hortonworks technical capability. At the analyst event Hortonworks launched its connected data platform that connects data-at-rest to data-in-motion - powered by Apache NiFi, the connected data platform acts as the bridge between Hortonworks Data Platform and Hortonworks Data Flow. It fast tracks getting data into Hadoop.
Spark is the new reality and Hortonworks understands the dynamics and the pressures. Hortonworks plans to bring enterprise Spark at scale and is rolling out Apache Spark 1.6 with faster Spark streaming, dataset APIs and automatic memory tuning. Its new Apache Ambari 2.2 provides a single pane of glass for all core services, enables express upgrades to update clusters and has new integrated SmartSense technology with nearly 250 recommendations to optimize cluster performance & availability.
But challenges are plenty. Viability of open source ecosystem is based on top talent working on hard problems and the talent is migrating to Spark rather than Hadoop. Given this vulnerability Hortonworks must find ways to remain on their good side. To address the potential issues, it has begun to curate, nurture and employ committers. But Hortonworks biggest challenge will be to show thought leadership that answers questions on the direction of open source and the dynamics of open source business model.
Hadoop is still an alien term within the business (as opposed to IT) world. It has a Unix problem. Unix was the next best thing in 1990s but developers and users did not have expertise to make it mainstream. It took Unix 9-10 years to establish itself, helped generously by education from HP, IBM, and Sun. In the same vein Hortonworks has three critical challenges – 1/ sales must educate and motivate business users to embrace Hadoop keeping Hortonworks brand front-and-center, 2/ marketing must explain its ecosystem dynamics to the end-customer, 3/ devops is at the core of an enterprise development, Hortonworks must provide thought leadership in this area.
Kudos to Hortonworks for creating a visible roadmap architecture consisting of open source components - NiFi for data ingestion, Spark for transformation, Hive for queries and Zeppelin for dashboards - that when tied together can deliver end-to-end big data solutions. However, it is a palette of moving parts, which creates a decision inertia within the end-customers, as they have to understand all vulnerabilities, trade-offs and compatibility issues. When there is a closed system, all components can be managed, but in an open system the effort is dependent upon the participation and loyalty of the community and the larger ecosystem. So far, Hortonworks engineering group’s management of the dynamics of the developer community is great, in fact, creating and maintaining an ecosystem has been an enlightened philanthropy.
Hortonworks’ product evolution direction looks similar to Oracle from 20 years back – database, applications, middleware - and Hortonworks agrees. In modern ecosystem, Hortonworks success will be dependent upon how it is able to sell its projects to the community and have them contribute their free time. Just like VHS and Betamax, which gets adopted is dependent upon talent.
It is time for Hortonworks to over-play, over-announce and over-market its ecosystem dynamics. In the meantime businesses in the market for evaluating big data solutions must check out Hortonworks sandbox – an easy way to get started.
Where is the SMB managed services channel today, as we enter 2016? Since 2013, managed services has taken deep root within the channel, and at the same time, some of the firms that were only casually involved with managed services have pulled back in order to focus in other areas. In the report, The SMB Channel & Managed Services: Success Metrics, Techaisle uses findings from 808 in-depth surveys with US-based channel firms to illuminate conditions within the US SMB managed services channel, and to develop perspectives that suppliers (and the channel itself) can use to construct successful managed services channel strategies. The survey identified a set of issues that is highly correlated with very successful managed services channel businesses, another that can be used to identify partners that are likely to be unsuccessful in managed services, and a third which lacks predictive value.
Results from three annual Techaisle channel surveys, shown in figure below, show that the trend towards specialization – in which channel members commit more strongly to managed services, or move away in order to focus on other areas – is well underway. 64 percent of the channel is ‘very successful’ in selling managed services, meaning that the population of very successful managed services channel members has increased by nearly 70 percent since 2013. A much smaller but growing proportion (currently 11 percent, more than double the 5 percent logged in 2013) acknowledges that it is not having success with managed services. MSPs and SPs report the highest level of success in selling managed services, while SIs, consultants and (especially) VARs are see less success.
A view of these findings organized by core business model provides additional insight into the partner communities where managed services are – and are not – gaining traction. As would be expected, managed service providers themselves are most likely to report success in managed services sales. Beyond this group, there are several interesting observations contained within the data:
- Nearly three-quarters of service providers state that they are “very successful” at selling managed services. This is an important issue within this community: SPs increasingly rely on managed services to differentiate their core hosting or connectivity services, which are (in many cases) relatively low-margin, and which offer limited prospects for future growth. Perhaps the most interesting finding for SPs is that 18 percent consider themselves to be unsuccessful in selling managed services. This group will be at risk as they compete with firms that augment core service presence with expanded, high-margin service portfolios that lock in an increased share of ‘customer wallet’.
- SIs are not especially aggressive in this space. At a high level, this data makes intuitive sense: SIs tend to have engagements that have a fixed duration and deliverable and managed services involve longer-term relationships tied to SLAs rather than functional specifications. However, it might be expected that SIs facing a shrinking product delivery market (due to increased use of cloud) might look to solidify customer relationships via managed services. The data shows that some SIs are following this path, they are either not committed to this strategy or are actively pursuing other options.
- Consultants and (especially) VARs are tepid in their pursuit of managed services business. Corresponding 2016 channel reports from Techaisle (see details below) show that VARs are finding great success in cloud, while consultants report that they are experiencing high levels of mobility sales success. Neither group seems particularly enthralled with managed services
It’s clear to all of us that today’s IT industry is comprised of many ‘moving pieces’. This is especially true in the SMB segment: with cloud, mobility and managed services, the buyer’s options have expanded; with the increased involvement of non-IT managers (in both ‘real’ and shadow IT), the buyer community has expanded; and with the channel’s struggle to understand and act on the new cloud-driven demands of a post-transactional IT market, the supply chain itself is undergoing tremendous change.
Techaisle is committed to working with the IT industry to ensure that these changes result in increased opportunity. Techaisle has recently completed two large-scale surveys – one of channel partners (VARs, SIs, MSPs, SPs and IT consultants) and another of SMBs (firms with 1-999 employees). We have also created a thought leadership piece, “Channel Imperatives for 2020: The Changing Channel for a Post-transactional IT market” which examines how 12 tenets of ‘conventional wisdom’ in the channel – mantras like the need to add value, or to increase service revenue, or to focus sales people on retiring quota, or to assemble and deliver best-of-breed solutions – are giving way to new management imperatives. We believe that this research is essential for suppliers looking to plot a channel-centric strategy for SMB market development by capitalizing on the insights contained in our analysis.
The series of three channel focused reports are The SMB Channel and Cloud: Success Metrics, The SMB Channel and Mobility: Success Metrics and The SMB Channel and Managed Services: Success Metrics. Each contains charts and analysis that can be used to identify high-value ‘very successful’ partners and avoid low-value ‘unsuccessful’ channel organizations. They are designed to connect with channel marketing, recruitment and management strategy.
