Odin has released its fifth annual U.S. SMB Cloud Insights report. The new report forecasts that the small and medium business (SMB) cloud services market will grow at a compound annual growth rate (CAGR) of 11.4 percent in the next three years from $25.2B in 2015 to $34.9B by 2018.

The 2015 U.S. SMB Cloud Insights research shows the largest market opportunity for cloud services in 2015 is infrastructure-as-as-service (IaaS) at $9.4B. This market – which includes virtual private servers, dedicated servers and elastic computing – will grow at 8 percent CAGR and reach $11.8B by 2018.

The research also shows a key driver for cloud services growth will be in hosted business applications, software-as-a-service (SaaS) like file sharing, payroll and HR, and online backup and storage, which will all increase at a CAGR of 23.9 percent over the next three years, reaching a total market size of $12B.

“Over the five years that we have been conducting this study, we’ve seen a rapid and consistent growth in SMB consumption of cloud services,” said Birger Steen, chief executive officer, Odin. “Applications and capabilities that were previously reserved for enterprise-size organizations are now benefiting millions of smaller businesses. At the same time, SMBs are becoming more sophisticated in their IT and telecom choices, and developers are creating more services and applications specifically for this market segment.”

Some of this year’s notable Odin SMB Cloud Insights findings include:

• The current cloud services market represents more than 7 million SMBs that spend, on average, $3,181 on cloud services annually. Price and security are the two main barriers of entry into cloud services for SMBs across the board.
• 82 percent of SMBs do not use hosted business voice services (hosted PBX services). Price and lack of knowledge are the largest barriers to adopting this cloud service, but growth will primarily come from SMBs with in-house voice services that are switching to cloud solutions.
• The most popular cloud application used by SMBs is file sharing, but only 17 percent of those using file sharing pay for the service. In contrast, online customer relationship management (CRM) is only used by 6 percent of SMBs, but 83 percent of them pay for the service.
• Online CRM will be one of the fastest-growing business applications over the next three years, growing at a CAGR of 27 percent and adding 417,000 paid users by 2018.

Additional Odin SMB Cloud Insights research findings include:

• SMBs are evenly split between hosted and in-house servers. This is a shift from 2014, when in-house servers were more popular than hosted servers.
• The U.S. web presence market is valued at $3.2B, and represents 5.5 million SMBs with websites. Due to the relatively low cost of basic web hosting, 84 percent of these SMBs currently use a third-party hosting provider, which has encouraged them to be extremely price-sensitive when choosing a hosting provider.
• SMBs are looking for web-based communications that integrate seamlessly with mobile devices. This was ranked by respondents as the top feature that needed improvement.
• Currently 3 million SMBs use instant collaboration, and 1.7 million use web conferencing. By 2018, there will be 3.5 million and 2.5 million users of these applications, respectively.

All SMB Cloud Insights reports are available for download at http://www.odin.com/resources/smb-cloud-usage/smb-reports/.