By now, you’ve seen the statistics, or you’ve seen it with your own eyes: Small and medium-sized
businesses (SMBs) have been the most aggressive segment to adopt cloud services. In fact, Gartner projects this sector’s revenues will exceed $150 billion by 2013.Adding
to this sunny prediction for cloud service providers, McKinsey says SMBs with fewer than 250 employees are more than twice
as likely as larger companies to adopt subscription or on-demand technology services.
The bigger story, of course, is that the cloud enables SMBs
to get on-demand access to the same enterprise-class communications applications that have previously beenexclusive to large
organizations.Cloud Computing recently sat down with Walter Scott, CEO of GFI Software, to discuss adoption trends
in the SMB market, how cloud is helping them level the playing field, and what concerns about cloud are justified or, more
important, not justified.Our full exchange follows:
CC: According to recent industry studies (including Gartner and Microsoft SMBs are adopting cloud at a much faster pace than enterprises. Do you see wider acceptance
among the mid-level space and why is this trend happening?
WS: I would say there are a number of reasons for this trend.
First, the fear factor is decreasing among small and medium
businesses, and this has, in part, been driven by the consumerization of cloud services – their personal email is hosted;
they save files in the cloud, their tablets and smart phones use cloud services, and so on.
Second, not all SMBs can afford an ever-increasing
infrastructure with good IT staff, security software or hardware, licensing and renewal costs, and other expenses that come
with on-premise solutions. For very small businesses, the capital outlay often exceeds the budget allocated for IT.
At the same time, they cannot do without the
technology. Cloud service providers address SMBs’ concerns and budget limitations by providing a full package at a very
reasonable price and they are capable of providing them with redundancy and continuity while removing the burden of managing
the technology on-premise.
Third, the market is starting to mature. Vendors and the services they offer are more robust than ever; they have
made massive investments in data centres, security and compliance and, now even price points are coming down. SMBs are keen
to adopt cloud services so long as they have guarantees that they services is reliable, their data is secure and they are
not ripped off. As each concern is knocked off the list, this trend will continue at a rapid pace.
Fourth is the fact that the SMB simply doesn’t have
the time required for the care and feeding of the system.Without a dedicated resource the "technical" guy in the
office ends up taking time away from their job to be the IT guy. With shrinking margins, and a sluggish economy, that person’s
time would be better spent selling, or accounting or whatever they are actually paid to do by the company, and not chasing
down user or operations issues.
as technology continues to advance with more access points, higher access speeds, faster computers and so on, systems are
now available that support a robust cloud environment.CC: How has cloud helped resolve IT challenges for SMBs in ways that traditional on-premise computing can't?
WS: Having access to greater computing
power than ever before without the need for massive capital investment and complex licensing is changing the way SMBs use
IT and do business. Cloud computing is giving SMBs the ability to act like, and appear to be, organizations that are much
larger and it is also impacting positively on their business by enabling growth with minimal investment. Because the cloud
takes away the need to install new hardware, configure software, maintain and update the software, deal with complex licensing,
the IT manager or administrator can dedicate more time to managing the network and ensuring the service provider is delivering
Cloud-based services also have a
higher velocity of change.
Program improvements can be rolled out on a daily basis to
improve the user experience.If a more efficient way to roll-out a patch was implemented in a cloud service tonight, tomorrow
when the user logged in they would be able to take advantage of that change immediately.This continued improvement-and-use
model allows many more development cycles to be introduced over a given period of time.
CC: Which cloud-based service is being adopted most readily
by SMBs and why?
don’t think there is a single cloud-based service that stands out; I would say, however, that SMBs are looking at a
mix of services that allow them to improve operations, reduce costs, increase productivity and, from an IT manager’s
perspective, secure and manage the corporate network.
SMBs are taking advantages of hosted email and storage, hosted email security, archiving, online payment, accounting
software, CRM, collaboration software and faxing. If the cloud service boosts efficiency, increases productivity and lowers
costs, then it is an attractive option for an SMB to consider.
Adoption increases when SMBs are able to source more than one solution from one interface
– a one-stop shop. GFI has used this approach with our traditional on-premise services and we are now doing the same
as we take our product portfolio to the cloud and to a wider audience.
CC: What is the biggest misnomer about cloud computing and small to medium-sized
WS: I think
the biggest misnomer is that you either have everything on premise or you have to take everything to the cloud. There are
situations when a company will not or cannot move to a cloud-based solution. If you work in a highly regulated industry and
manage confidential information, it may be against company policy to move data into a cloud environment managed by third parties.
So, hosted archiving, for example, is a no-go.
At the same time, their CRM and HR systems are provided by a cloud provider, freeing up resources, increasing efficiency
and reducing overheads: Same company, different needs and objectives.
CC: There is still a lot of concern in regard to security and the cloud. In what
ways are these concerns justified or not justified?
WS: The questions I would ask is "are these security concerns any different to those that businesses have been
facing for the past 30 years?"In some ways the issues are the same and in some ways there is a need for some concern.When
data is stored in the cloud we have less control over it.
We are depending on the vendor to take the appropriate steps to safeguard the data.And in
many cases the vendors have failed.My advice would be to make sure you ask your cloud provider what measures they have taken
to not only assure the availability of your information but the safeguarding of it against hackers or the introduction of
viruses and other malicious software.
It is in the interest of every vendor offering cloud-based services that the clients’ data is secure and protected.
In a country like the United States where a lawsuit could result in material punitive damages for a business, cloud-based
solution vendors do their utmost to protect the data they are managing.
They have to out-perform because they know that a single incidence, a single breach
could lead to litigation and significant risk and materially impact the corporate brand. Therefore, cloud-based solution vendors
not only have the latest technology, the latest firewalls, the best datacenters and the highest levels of redundancy possible
but they will apply multiple layers of defense in-depth that your average business (a Fortune 500 company may be an exception)
can never have.
if the cloud-based vendor can offer such a high level of security that is beyond what an SME can provide, isn’t this
argue that clients’ concerns should focus on how flexible the service provider is in meeting their requirements.
In choosing a vendor, the existing security
policies adopted must meet the needs of the business paying for the service. Moreover, if the client’s security requirements
change, these changes must also be reflected in the security policies implemented by the cloud-based solution vendors.
What has changed with the cloud is the
extent that security policies can change. For example, if an employee were made redundant, you would delete his account and
block all access to the network. When using a cloud-based service, you now also have to block any access rights to the data
that is stored in the cloud. The concern that an employee could take confidential data with him is the same in both cases.
The process to stop that requires additional policies.
This is why it is so important that a vendor’s security policies are flexible and can change as their clients’
I’d like to make is that security issues may have changed slightly with this delivery model but the approach to security
should be the same irrespective of where the data is kept – on-premise or hosted/managed in the cloud. The same best
practices apply. Good business judgement is still required.
CC: What do vendors need to be able to offer in order to deliver successful cloud implementations?
WS: With security no longer
a priority with our delivery model, it makes sense that SMBs are focusing on the business aspects of the model. How much is
it going to cost them? Will they be locked-in? How much will it cost to migrate their data if they choose to return to an
on-premise model? These are the real business concerns that have a direct impact on the bottom line.
Businesses are going to look beyond the simple provision
of the service that they signed up for and a major consideration is the quality, price and reliability of the service being
provided. To be successful, vendors need to be crystal clear on pricing, how the subscription works and what the terms are
for product support and customer service. Service level agreements should be written in a language that SMBs understand and
should the SMB wish to part ways at some point, the vendor should explain what will happen to the SMB’s data; how the
data will be returned, what happens to the vendor’s copy or logs and so on.
At the end of the day, what customers really want is freedom of choice and the
ability to pick and choose applications, software, licensing models, even payment terms that suits them and not the vendor.
That is the key to the successful delivery of cloud implementations.
CC:Cloud is still largely in its infancy; do you think in the next 12-18 months
will we see more SMBs gravitate toward hybrid models and not just a public cloud? What will drive such trends?
WS: The beautiful thing about technology
is that it brings about change and with change you get more choice. And with greater choice, SMBs can design and build their
IT infrastructure in a way that is efficient, cost-effective and allows them to do what they do best – grow the company.
GFI has been offering the hybrid model to our customers for over a year now; giving them the ability to create another line
of defense using a cloud-based solution while they continue to run our on-premise products. So long as SMBs see value in the
hybrid proposition, they will invest in it.
CC:Go out on a limb: What do you predict happening with cloud in the next 12 months, especially pertaining to SMBs?
WS: Adoption of cloud-based IT services
is, to an extent, correlated to the adoption of smartphones and tablets and over the next 12 to 18 months, we will see more
SMBs avail themselves of cloud-based services. There are certain markets, such as the financial sector, that will be more
cautious in their approach.
handling confidential client data may shy away from having third parties manage their data, but may look into services such
as CRM, HR and basic IT services for other non-data critical departments.
The sweet spot for vendors remains the SMB market. Managing expectations and keeping
prices within an acceptable range for SMBs are the key elements of success and what will drive adoption of cloud-based solutions.
Looking beyond 2013, I would say that within the next four to five years, the cloud-based delivery model for IT will be main
choice for many businesses.
thing that SMBs will begin to discover is that just because you are paying by month or year does not mean the solution is
any cheaper.In fact, it may be more expensive as the vendors have to incur the costs of storage and bandwidth to deliver their
services.SMBs should expect that over time, however, the price points of cloud services will go down as the cost to store
and deliver information is reduced.
CC:Cloud computing is often termed a "disruptive" force in technology. What would your compare this movement
to or is such a disruption unprecedented?
WS: Cloud computing has changed the way we do business and how we deliver our products and solutions. It has changed
the economics of IT, it has changed how businesses look at IT and adopt the technology. The technology in and of itself is
not disruptive; after all we are simply using established computing technologies but it is a disruptive model of IT delivery
which creates a much more efficient model for businesses.
I would argue that the foundation of the disruption is the Internet itself, and we are now
beginning to exploit its true value.There will be tremendous gains in the future in the areas of supply chain, distribution,
and even manufacturing that we are just beginning to realize.The value of Big Data is another area that we are just scratching
CC: As many
companies are still in the knowledge process of cloud, what perceptions about cloud do you wish to dispel?
WS: The cloud is not something adopted by large enterprise
There is nothing
holding back small and medium businesses from adopting cloud-based solutions except the misconception that it is not good
for them. Like any other tool in business, the value comes from the thoughtful use and complete understanding of how to exploit
it.Today with a more level playing field than ever, the companies that don’t simply react to market pressure but take
the time to take full advantage of these great new technologies will be the leaders of the future.
CSPs and SMBs in the Cloud
is not easy to be a cloud service provider (CSP) today.
Emerging web services and nimble competitors are exerting strong price pressures.
Their extra stress on network infrastructures
is combined to give CSPs growing competitive pressure to maintain average revenue per user (ARPU), increase margins and create
new sources of revenue. ARPU is trending down as existing markets become saturated with basic services.
CSPs that have focused primarily on Infrastructure as a Service
(IaaS) aspects of Cloud Services are now beginning to look for better ways to make use of their existing network infrastructure
and data centers.
are refocusing from infrastructure aspects to Software as a Service (SaaS) utility model where all of the applications and
associated technology are also in the "cloud". But today, SaaS providers are not their traditional competitors.
The value-added services are sold over the top, with possible revenue share for the CSPs.
As penetration increases, there is further price pressure
on ARPU from limited set of services. CSPs can combat that by further differentiating, creating attractive bundles, and adding
the positive side, CSPs increasingly play an important and vital role in the Internet-on-the-go that enables a mobile user
to connect to the Internet via Wi-Fi hotspots, from Internet Cafes, tethered to a cell phone as a modem, or with built in
3G or now 4G access.
can be leveraged by the CSPs.
is working for an CSP advantage, is the complexity of today's fast-paced technology innovation that is driving business users
towards cloud adoption. This is partly due to the proliferation of smart devices and the wireless ubiquity and mobility that
are creating a troubling environment in which businesses need to deal with increasingly sophisticated licensing, data synchronization,
content security, device management, rapid evolution of software, and support issues.
SaaS offers a lower-cost means for businesses to use software as needed rather
than license every application for every device. SaaS yields economies of scale and access to a vast wealth of experience.
SaaS providers already manage large data centers that service all of their customers.
As SaaS providers learn more and more about how to improve their businesses from
all their client experiences, those benefits are passed on to all their customers.
Cloud computing is a natural evolution of the widespread adoption of virtualization,
service-oriented architecture and utility computing. But, simply putting these items together, and calling it a cloud, isn't
Mobile cloud challenges
include enabling the rapid deployment of new services on multiple devices. Through open platforms and leveraging Web 2.0 technologies,
the ability to attract developers and retain them to build applications for the mobile increases the adoption of mobile SaaS,
as shown by the rapid growth of mobile app stores.
The mobility aspects of the cloud need the ability to work across multiple devices and quickly adapt to new ones.
Last but not least, a proven business model that enables developers and service providers to make money is paramount!
As CSPs adapt to these changes and look
for new revenue streams, they may find that the Small Medium Business (SMB) opportunity is one way to fill that bill. The
SMB market has been traditionally under-served in a unified way. This is mainly due to a fragmentation of the SMB markets
both geographically and vertically.
Even with segmentation issues, the SMB market presents significant opportunities. SMBs (approximately 5 to 250 employee
companies) require enterprise level reliability and security along with business level service and support.
to address this SMB opportunity, CSPs need to additionally be logically partitioned and provisioned with application delivery
platforms that are capable of rapid bundling and deployment of software on any device.
The largest telecom segments of SMB markets primarily include connectivity and
communications, which offer SMB users mobile devices with Voice, Data and Messaging Plans connected via mobile broadband.
Other services usually offered include Mobile E-mail, GPS and Mobile Applications. Billing options with individual billing
that includes company discounts.
But, this is simply not enough for today's rapidly moving SMB market! The fastest SMB growth segments are seen in
value-added services around SaaS solutions, which include Custom Enterprise Application Stores with a targeted selection of
office applications for smart devices.
As CSPs move from selling networks and access to IaaS to focusing on SaaS, the challenges increase dramatically.
One difficult challenge is the requirement that the SMB end user is not expected to be a technical expert; the solutions must
be user friendly and intuitive. Another is to include IP-PBX/IP-Centrex, office applications, conferencing (audio and video),
cloud servers, and cloud storage options. CSP billing provides for a single SMB bill but with options to charge by month,
scalable by number of employees, by one location or across multiple locations.
Once accomplished, greater opportunities become available to the CSPs. A one-stop
SMB solution, including bundled value-added software packages that are part of a thriving Eco-system can be successfully created.
Enterprise software applications typically include address books, calendars, communication software, collaboration applications,
business productivity tools, messaging, and web and voice conferencing hosted on cloud servers.
The main challenge here is for CSPs to create an effective
SaaS enabling platform that offers programmatic access to value-added services and facilitates innovation by third party developers
to host and deploy innovative mobile applications through branded stores (also offered by the CSPs).
The platform could then drive new technologies that enable
running as a utility computing cloud, should be per-SaaS configurable with bundled components such as VoIP (SIP Servlets/Media
Gateways), IPBX (voice messages, call forwarding), Universal Address Books(UAB), Universal Calendars and Digests(UCD), Persistent
Content Storage, Email, and other functionality needed for SMB market solutions.