Cloud providers should target 'granular' SMB needs

SINGAPORE--Asia-Pacific small and midsize businesses (SMBs) present a challenging but potentially lucrative market for cloud service providers, particularly smaller-scale players, which level of service must then meet the "granular" needs of these customers.

Birger Steen, CEO of virtualization and cloud computing software vendor Parallels, noted that while enterprises generally shared similar requirements across the board for cloud-based services, the same could not be said for the region's SMB community which could be deeply "granular".

For instance, Japan had always been averse to hosting their applications or data in data centers located out of the country, but this changed due to the tsunami and earthquake disasters it suffered earlier in the year, Steen said during a press briefing held here Friday. With energy constraints now faced by companies, he said more employees were given the opportunity to work from home and, as such, companies in Japan were slowly becoming more receptive to third-party hosted datacenter offerings.

Shifting to China, he said the market was "very particular" due to the tight regulatory controls there, although he did not elaborate. He did add that only 5 percent of Web sites were hosted outside the country, which was below the average of 65 percent in emerging markets. This, he noted, was indicative of the huge market potential in China for infrastructure-as-a-service (IaaS) vendors or data hosting companies.

Steen's observations were backed up by findings from a Parallels study released today. It showed that 28 percent of Chinese SMBs polled indicated they had plans to purchase IaaS services in the next three years, while another 24 percent had plans to adopt Web services--a category defined to include Web hosting, blogging services, domain registration, SSL (secure sockets layer) and e-commerce add-ons and site-building tools--during the same timeframe.

The study also stated that the Chinese SMB cloud service market size would reach US$640 million by year-end, although this figure only encompassed IaaS and Web presence services. Conducted by Parallels in early-2011, the study polled 400 SMBs in China across a broad cross-section of industries and sizes.

Top market opportunities
It also recommended three SMB audiences for cloud providers to target, namely, companies with no IT staff, those that hired IT consultants and those with a dedicated IT team.

Within China, companies with no IT staff, or "do-it-yourselfers", represented the largest segment of total SMBs in the country where 53 percent were "micro SMBs", between 1 and 4 employees, 31 percent were small SMBs with between 5 to 19 employees, and 13 percent were large SMBs with 20 to 250 employees.

Typically, the business owner or a senior company executive in an SMB would handle all IT purchasing decisions so cloud providers targeting this segment should focus on the business benefits of their services and minimize the technical complexity behind the product, Parallels stated.

In China, only 12 percent of small SMBs and 5 percent of large SMBs contracted IT consultants and these companies tended to be a more "technical audience" than the first group. "They want to know about the technical specifications of the cloud service, its configuration and management, best practices and other technical advice," the study noted.

Providers would do well to have a white-label, reseller offering in place that targeted IT consultants, who would in turn resell these cloud services to the SMB customer, Parallels suggested.

For the last group of SMBs, with a dedicated IT team, the internal IT staff would be the primary target audience. Clear, detailed documentation about technical specifications, strong support, and cutting-edge technical features would be the key selling points here, the report stated.

These findings were corroborated by cloud service providers which attended the press briefing.

David Loke, executive director of ReadySpace, a Singapore-based Web hosting company with strong presence in Singapore, Malaysia and Hong Kong, said the lack of internal IT expertise is the primary "pain point" for SMBs to get on the cloud.

"Asians don't tend to read help files so automation [in as much of the setup as possible] appeals to customers," Loke told ZDNet Asia at the sidelines of the briefing. "As long as their applications work, that is fine, and some are willing to pay more to eliminate complexities."

There is also more riding on successful implementation of cloud-based Web services, noted George Karidis, chief strategy officer of Softlayer. He noted that as more e-commerce and other money-making functionalities were now included on companies' Web sites, this meant that providers would need to provide adequate scalability and technical support to help SMBs grow their businesses.

AMI-Partners earlier stated that SMBs in the region, excluding Japan, would spend US$11.4 billion on cloud computing this year which would grow at more than twice the rate of traditional ICT uptake. With Asia continuing to embrace the new opportunities by cloud technologies, the region would present a strong, sustainable market for cloud vendors, the research firm said.