Report: Global SMB Cloud Services Market to Hit $68B by 2014

By Pedro Hernandez | Posted February 15, 2012

Small- and medium-sized businesses are poised to adopt cloud services in a big way over the next few years. That's according to the SMB Cloud Insights report published today during the Parallels Summit in Orlando, Fla.

For evidence that cloud momentum is building among small enterprises, one has to look no further than the United States. The SMB cloud services market grew 25 percent in 2011 to reach $15.1 billion. Globally, that figure is set to hit $68 billion by 2014, representing a compound annual growth rate (CAGR) of 26 percent.

SMB Cloud Adoption Quickens

Tight budgets and deliberate spending are the hallmarks of SMB buying behavior, giving cloud providers the edge over traditional IT vendors, said John Zanni, the vice president of Service Provider Marketing and Alliances for Parallels.

The company is best known among IT circles for its Parallels Desktop software, which allows Mac users to run Windows on their hardware. In recent years, Parallels has expanded into desktop virtualization and cloud services. This sparked a multi-million dollar research effort that surveyed more than 6,000 companies to take the pulse of the SMB cloud market.

As Parallel's research shows, that pulse is quickening.

Over the next three years, "these businesses plan to double the number of paid cloud services,” he told Small Business Computing. The reasons are varied, but fundamentally, the market is witnessing a shift in how small businesses approach IT purchasing. SMBs are "very willing to not have on-premises IT," said Zanni. 

In fact, the smaller the business, the less likely it will ever set up its own servers. SMBs with fewer than 20 employees "are at least three times more likely to choose cloud services over on-premises services," according to the company's observations.

And that doesn't mean that they will sacrifice performance or the bells and whistles to maximize their technology budgets. "SMBs really want easy access to enterprise-level functionality with a low cost to entry," he said.

In for a Penny...

The report also reveals that in the United States, "SMBs are moving rapidly beyond Web presence," said Zanni. "There's a core willingness to adopt incremental services."

For cloud providers, that's an opportunity. In particular, those that offer collaboration, communications and social media management services stand to benefit. Forty-five percent of SMBs in the U.S. are managing Facebook pages to promote their businesses, he added.

But just as no two SMBs are exactly the alike, neither are their technology requirements. In what Zanni characterized as a "large diversity of needs," determining the services that a small business requires can come down to its size. For example, "micro" and "small" SMBs -- fewer than 100 employees by and large -- typically want services such as file sharing, online backup and accounting. Medium-sized companies, on the other hand, tend to pursue Web and phone conferencing.

And while integrating these services may seem like a slam-dunk for cloud services firms, delivering them can be a challenge. Put simply, SMBs can be tough customers.

"There's an expectation to offer multiple services and that they're integrated," said Zanni. "Whether they come from one data center or multiple data centers, they must work well together."

Pedro Hernandez is a contributor to the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the Internet.com network of IT-related websites and as the Green IT curator for GigaOM Pro. Follow him on Twitter @ecoINSITE

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