Cloud Apps the Way of the Future for SMBs: Studies

"No, of course I'm using my office-issued smartphone for work apps. What's this 'Angry Birds' you speak of?"

Cloud computing has made headlines for years now, but how is that buzz translating into adoption? Research and consulting firms regularly attempt to answer that question with marketplace data. McKinsey & Company, for example, recently estimated that the combined global public and private cloud services market will grow from $11 billion in 2010 to somewhere between $65 billion and $85 billion by 2015.

But what types of organizations are fueling cloud computing’s ongoing adoption? It’s not just large enterprises.

Cloud Growth Driven by SMBs

Small- and medium-size businesses (SMBs) are eyeing cloud services as a way to handle their computing needs. A recent Parallels study puts the current size of the SMB market for cloud services in the United States at $15.1 billion (with an additional $1.6 billion for non-employer businesses). By 2014, that will grow to $24.3 billion.

A recent study by Microsoft and Edge Strategies also indicated that the use of cloud services by SMBs could double over the next five years. Those smaller companies have gravitated to public cloud solutions instead of the private ones preferred by a subset of their larger enterprise cousins. According to the aforementioned McKinsey report, which predicts the public cloud market will grow from $9 billion in 2010 to as much as $50 billion by 2015, “SMBs will make up around 80 percent of public cloud spending in 2010 and 65 percent in 2015.”

Spending on public cloud will likewise grow from about 2 percent of IT spending in 2010 to more than 6 percent by 2015, the report added, on its way to 10 percent by 2020.

Why Go Cloud?

Why does cloud computing have so much appeal among SMBs? Cost is a big factor. From an expenditure perspective, the cloud’s scalable, pay-as-you-go model appeals to SMBs, which simply don’t have the financial muscle of their enterprise counterparts. Indeed, the savings can be significant. The McKinsey report notes that an SMB could save about 20-25 percent with a Software-as-a-Service (SaaS)-based CRM solution versus an on-premises application, and over 50 percent by moving infrastructure to the cloud.

Cloud services can be quickly and efficiently deployed, a positive for SMBs with generally fewer IT experts on staff. An SMB spending less time setting up and maintaining sophisticated and complex IT infrastructure is an SMB that can focus on growth and profitability.

Moreover, cloud services can give SMBs the ability to compete not only with companies roughly the same size, but also larger competitors. Cloud-based analytics, CRM, and productivity tools can act as a great leveler, providing features to tiny shops that were once the sole providence of massive firms.

Most Popular Applications

So which types of cloud applications are SMBs presently using most? The Parallels study suggests the leading apps include online accounting (used by 41 percent), online backup and storage sharing (30 percent), payroll and HR applications (25 percent), file sharing (24 percent), web conferencing (21 percent), phone conferencing (19 percent), email archiving (17 percent), content management (9 percent), and online CRM (6 percent).

A recent Webtorials survey of 200 SMBs also found that cloud-based unified communications (UC) services remained a leading area of interest for 2012. “SaaS cloud offerings for UC, for example, help SMBs enhance communications with local, traveling, and home-based employees,” read a note accompanying that data, “as well as with customers and partners, without having to buy, manage, and update server equipment, operating, systems, application packages, and per-user licenses.”

The Road Ahead

The Parallels study predicts that the U.S. market for business applications will reach $7.4 billion in 2014, a 20 percent annual growth rate, and that the most popular applications for SMBs will include online back-up and storage, online accounting, and file sharing. Other studies posit that, within the next two to three years, nearly 50 percent of SMBs will be using cloud-based voice communications, online backup and databases, and instant messaging. Add that up, and it seems pretty clear—at least from a numbers perspective—that SMBs are embracing the cloud as much as the enterprise.

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