US SMBs are rapidly increasing their use of cloud services, which is beginning to reduce their need for on-premise ICT equipment and is also allowing them more flexibility in the types of mobile devices they use. This, in turn, is beginning to affect the demand patterns for on-premise ICT hardware like servers, storage & networking as well client devices like notebooks, smartphones, netbooks and tablets, according to New York-based AMI-Partners, based on its just concluded research on the adoption of cloud services by SMBs in a dozen countries.
SMBs’ cloud adoption patterns vary greatly in terms of types of applications and services reflecting their varying levels of comfort with the new paradigm. “While a majority of SMBs are using cloud services in conjunction with their existing applications and services, a small but growing number are using them to replace their on-premise infrastructure. This is especially true for cloud services like CRM, hosted email, hosted SharePoint and others. This has started to affect demand for ICT infrastructure required to run these applications,” says Anil Miglani, SVP of IT Infrastructure and Managed Services Research at AMI-Partners.
Broadly, AMI’s analysis shows demand shifts in three areas. While the overall SMB server shipments are still growing, these are driven significantly by first-time server buyers, who need it for improving their productivity as well as replacements and upgrades by SMBs who had delayed their purchases due to the economic environment over the last couple of years. However, with the growth of hosted cloud services, SMBs no longer need on-premise servers for many applications. This combined with consolidation and the growing use of virtualization, especially among the larger MBs, is reducing the growth rate of server shipments. “The full impact of this shift will be seen much more visibly over the next couple of years, once the replacements/upgrades are completed and also more SMBs start moving their on-premise applications to the cloud,” said Miglani.
Secondly, the demand for storage products will also follow the server demand. In addition, the increasing use of the cloud for backup and storage is reducing the need for on-premise storage hardware and software.
While part of the SMB server and storage demand will shift toward the cloud service providers, their multi-tenancy models would prevent them from fully offsetting the decline in total SMB server shipments. Thus, the SMB server market will be pulled in two different directions: toward smaller, less powerful and less expensive servers driven by first-time server buyers and toward more powerful servers by the larger SMBs as they consolidate their servers and use virtualization on a broader scale.
The third shift taking place relates to mobile devices. With applications hosted in the cloud, some SMB employees no longer need the full functionality of the bulky notebook PCs as they can meet their needs using lighter devices like netbooks, smartphones and tablets. These lighter mobile devices have shown significant increase in penetration and ownership among SMBs. Notebook shipments, which have been growing a brisk pace for the last few years as businesses replaced their desktops with notebooks, are likely to see lower growth rates, followed by a long-term decline in the coming years.
These changes in demand for hardware will also be accompanied by similar changes in demand for other on-premise products (e.g. security, networking, software, etc.) over the next several years. Going forward, vendors and channel partners need to understand these shifts in demand patterns and start reflecting them in their own future strategic initiatives.
“ AMI’s “2010 Global SMB Global Market Sizing and Forecast Model” reflects the impact of cloud services on ICT hardware among SMBs and presents detailed market sizing and forecast for different products and services, as well as shipments and installed base for key IT products sold to SMBs in over thirty countries and six regions worldwide. This research draws on AMI-Partners’ comprehensive quarterly and annual surveys of small (1-99 employees) and medium (100-99 employees) businesses and channel partners as well as detailed discussions held with several IT vendors, channel partners and other key players in this market.
AMI’s 2010 Worldwide SMB Cloud Service study examines the SMB Cloud opportunity in 30+ countries, including SMB preferences for Cloud-based application bundle, price sensitivity and purchase channel preferences. This study also provides comprehensive coverage of SMB adoption of Cloud-based applications, managed services, and supporting infrastructure, including platforms and devices. These studies will provide a roadmap for successful Cloud go-to-market strategies and tactics.