Ingram Micro smb cloud opportunity (whitepaper)

Whitepaper

The SMB cloud opportunity is not if, but when!

Facts, figures and overcoming obstacles

Š IngramMicro 2016

|1

2|

Whitepaper | The SMB cloud opportunity is not if, but when!

Introduction The cloud is happening. It is not a matter of whether, but when your clients will move their applications, infrastructures and data to the cloud. By 2020 eight out of ten small businesses will have fully adopted cloud computing, according to Forrester research.

Certainly, not everyone is moving at the same pace. Some industries tend to lean more on legacy systems than others. Amongst SMBs there are innovators, early adopters, the (early and late) majority and laggards. Different stages of awareness call for different approaches. Even if your customer is a cloud laggard who still sticks to installations on location, there will be an opportunity to help their business move through a successful cloud transition when we provide these customers with the right insights.

Sure, with new models come new challenges. As a value added technology reseller (VAR) you might worry about thin profit margins on the short term, or the possibility of losing control when you are moving your customers to the cloud. But with challenges come opportunities, and there are plenty.

It does however take some additional efforts to win the hearts and minds of existing and new customers and to increase the frequency of customer purchases in the cloud era.

The cloud is redefining our business. The secret is to stop trying to resell cloud services and start to reimagine your success and the way you do business; this means new business models and different conversations with different audiences.

If you, as a reseller, are convinced of the opportunities that come with the cloud, you only need to take two steps to transform your business. The first one is about winning minds: understanding the benefits of the cloud and the opportunity for both you and your end-users. The second phase is about winning hearts; any transition requires a shift in mind set.

In this whitepaper we will help you to understand the market opportunity of the cloud and share insights and best practices to guide customers through this process. In a second whitepaper in this series we will help you to drive revenue through effective sales and marketing to create awareness amongst end-users of the benefits of the cloud.

Š IngramMicro 2016

|3

4|

Whitepaper | The SMB cloud opportunity is not if, but when!

Table of contents

Chapter 1

The current state of the market 6

Chapter 2

Opportunities and barriers 8

Chapter 3

How to overcome obstacles 12

Chapter 4 A business approach to cloud computing

14

Conclusion 15

Š2016 Ingram Micro Inc. All Rights Reserved.

|5

Chapter 1: The current state of the market

Each year, more than 4,000 small and medium businesses (SMBs) participate in detailed surveys for Odin SMB Cloud Insights™. By understanding cloud usage trends across different types of SMBs, analysts are able to pinpoint important opportunities that exist within the services industry.

2015 Cloud Market Size in Europe 2015 Cloud Market Size in Europe

€18.9B Overall market

€7.6B €3.2B €3.8B €4.3B Infrastructure-asa-service

6|

Web presence

Unified communications

Business applications

Whitepaper | The SMB cloud opportunity is not if, but when!

This research showed that the total market size of the cloud in Europe alone was worth nearly 19 billion Euros in 2015.

Between now and 2018, the market is expected to grow to 30.1 billion Euros. The biggest growth opportunity lies in business applications, which show an annual growth of 21% to 7.5 billion in 2018.

The research roughly divides between three types of cloud adopters in the SMB market. Identifying your potential cloud customer and understanding their cloud needs can help you target the right message to drive your sales.

1. Cloud leapers

Cloud leapers are SMBs that are not currently using an in-house IT solution (no servers, web servers, or PBX systems) and are likely to move straight to the cloud. In other words, they are “leaping” into the cloud.

2. Cloud converters

Cloud converters transform more gradually. These SMBs have in-house solutions but are moving or planning to move to hosted services. This might be a SMB with in-house servers who is planning to switch to hosted servers when they next upgrade their infrastructure.

3. Cloud expanders

The most cloud mature category is cloud expanders: SMBs who are already using some form of cloud services. They represent an opportunity for upselling to new and expanded cloud offerings. For example, this could be an SMB with cloud services who is purchasing mobile optimization to complement their website.

©2016 Ingram Micro Inc. All Rights Reserved.

|7

Chapter 2: Opportunities and barriers

There is no such thing as ‘cloud’. IaaS, web presence, unified communications and business applications all have their own adoption paths and specific opportunities.

IaaS In 2018 it is expected that 38% of the total cloud services market will come from IaaS. The most popular server workloads, according to the Odin research, are web servers (1), content management systems (2) and database tools (3).

The biggest barriers to cloud server adoption are price and security and privacy concerns.

Hosted and In-House Server Usage Hosted and In-House Server Usage 1%

23% Small 38% Medium 37% Micro

Hosted

8|

26% 8% 14% Hosted and In-house

30% 34% In-house

Whitepaper | The SMB cloud opportunity is not if, but when!

Web presence

For web presence, the share of the cloud market in 2018 is an estimated 16%. The research shows that the smaller the company, the more they will be inclined to host their website by a third-party vendor.

Currently SMBs purchase 62% of their website applications from their webhoster. The most popular web applications are: SEO, security, backup, ecommerce and SSL certificates. These will remain the top web applications over the next three years.

Unified communications

For unified communications, top purchase triggers are an increased need for security and the need for a professional look and feel.

The bigger the size, the more likely a company is to host email on an inhouse server.

28%

7%

47% 25%

48% 11%

40% 8%

Micro

Small

Medium

Paid

Free

Paid

Free

Hosted by a service provider

Š2016 Ingram Micro Inc. All Rights Reserved.

35%

Paid

Free

Hosted on an in-house server

|9

Top purchase triggers for cloud based Top purchase cloudPBX): based business voice triggers services for (hosted business voice services (hosted PBX):

49%

Major change to business or growth

24%

Good price point

16%

Office location

Business applications

Business applications account for 25% of the cloud market in 2018. End-users often start moving applications that are not business critical to the cloud, like productivity apps such as Microsoft Office 365. Next steps are often file sharing, online backup and storage, payroll and HR, accounting, support / help desk and CRM.

Industry specifics

Cloud adoption differs significantly across industries. The research showed that there are several differences, especially when it comes to the popularity of specific applications.

The biggest barriers to cloud server adoption are price and security and privacy concerns.

10 |

Whitepaper | The SMB cloud opportunity is not if, but when!

Top Business Applications by Top Industries

op Business Top Business Applications Applications

by Top Industries

by Top Industries

e Sharing File Sharing

32% 30% 28% 28% 28% 27%

fessional, tech,Professional, tech, and sciences and sciences

ospitality, travel, Hospitality, travel, and food and food Health care Retail trade

Health care Retail trade

e and insurance Finance and insurance Manufacturing

Manufacturing

Online Accounting Online Accounting

32% 30% 28% 28% 28% 27%

Hospitality, travel, Hospitality, travel, and food and food Health care Retail trade

22% 22% 26% 19% 31% 26%

spitality, travel, Hospitality, travel, and food and food Health care Retail trade

Health care Retail trade

and insurance Finance and insurance Manufacturing

Manufacturing

yroll and HR Payroll and HR

18% 29% 21% 23% 27% 26%

fessional, tech,Professional, tech, and sciences and sciences

spitality, travel, Hospitality, travel, and food and food Health care Retail trade

Health care Retail trade

and insurance Finance and insurance Manufacturing

Manufacturing

22% 22% 26% 19% 31% 26% 18% 29% 21% 23% 27% 26%

Health care Retail trade

Finance and insurance Finance and insurance Manufacturing

ine BackupOnline and Storage Backup and Storage

fessional, tech,Professional, tech, and sciences and sciences

16% 21% 19% 20% 26% 20%

Professional, tech,Professional, tech, and sciences and sciences

Manufacturing

16% 21% 19% 20% 26% 20%

Support/Help Support/Help Desk Desk

14% 14% 16% 14% 18% 15%

Professional, tech,Professional, tech, and sciences and sciences Hospitality, travel, Hospitality, travel, and food and food Health care Retail trade

Health care Retail trade

Finance and insurance Finance and insurance Manufacturing

Manufacturing

Online CRM Online CRM

13% 9% 11% 10% 11% 16%

Professional, tech,Professional, tech, and sciences and sciences Hospitality, travel, Hospitality, travel, and food and food Health care Retail trade

Health care Retail trade

Finance and insurance Finance and insurance Manufacturing

Manufacturing

14% 14% 16% 14% 18% 15% 13% 9% 11% 10% 11% 16%

Of all the business application sales, a staggering 62% are closed after a free trial offer.

Š IngramMicro 2016

| 11

Chapter 3: How to overcome obstacles

As with any transformation, moving to the cloud often starts with a mind shift. Your end-users might have been used to purchasing and managing licenses that are installed on a device or server for years or even decades. Moving resources to an unknown territory such as the cloud can evoke some form of resistance.

Here are some of the most frequently used objections to the cloud and arguments to overcome them.

1

“The cloud is not secure”

Cloud security consistently ranks as the top concern by IT when it comes to cloud computing. The irony is that data is, most often, much more secure in the cloud than on-premise – especially for SMBs that don’t have the resources to hire a team of security experts. Cloud service providers simply have to get security right, or they will be out of business.

According to the Microsoft whitepaper ‘Rethinking the business benefits of the cloud’ there are three reasons why cloud actually offers a more secure environment for hosting data and applications: 1. Uncertainty is increasing, whether from natural disasters such as hurricanes and earthquakes or human causes such as terrorist attacks and geopolitics. Cloud vendors are better able to mitigate those risks than most businesses can.

2. Demand forecasting has never been more challenging than today.

Without the cloud, unexpected customer demand can lead to poor user experiences due to insufficient capacity, yet excess capacity causes economic loss due to the opportunity cost of the deployed capital.

Due to the inherent elasticity of the cloud, however, sufficient pay-peruse resources are always available. In this way, cost is continuously aligned with revenue, minimizing risk.

3. On-demand resources also play a key role in support of business continuity and disaster recovery. Data can be continuously backed up in the cloud, and applications can be migrated from impacted data centers to the cloud.

12 |

Whitepaper | The SMB cloud opportunity is not if, but when!

2

“Once you move data to the cloud, you are locked-in”

Some businesses fear the risk of vendor lock-in; once they have moved data to the cloud, it is hard to get it back. However, data migration to and from the public cloud is becoming easier, with vendors like Microsoft offering easy data migration solutions. In fact, it is even easier to migrate data from cloud to cloud.

Still, data embedded in functionality and applications are locked into the application, but the same holds for on-premise.

3

“The Cloud will make us less productive”

Wrong again. With the rise of emerging technologies, Cloud only makes organizations more productive because of the opportunity to work from anywhere, anytime. Microsoft is developing great tools in the cloud which will allow employees to work, collaborate, and meet anywhere to get work done, any time of the day – like Office 365 for productivity and EMS for mobile worker security.

4

“No one uses the cloud, so why should we?”

are more likely to adopt a cloud-first IT strategy. For those Millennials that are not (yet) decision makers, it is fairly well-known that they have a tendency to bring their own cloud applications to work, also referred to as Shadow IT. So your client is probably using the cloud already, without even knowing it.

The best way to tackle this is to learn from employees’ behaviour and adapt the cloud strategy accordingly.

For example: instead of prohibiting the use of the extremely popular cloud-based messaging platform WhatsApp, companies can offer alternatives like Microsoft Send which allows a secure exchange of information and monitoring.

5

“There is no role for the channel in cloud computing”

If end-users are able to acquire cloud applications directly, what is the role of the reseller in the first place?

In the cloud era, the role of value-added resellers lies less on reselling and more in adding value through services, something vendors can’t do. Not surprisingly, IDC reports that the indirect cloud business is winning over the direct cloud business. This year, 55% of the cloud revenue will go through an indirect channel, and the gap continues to widen, as the indirect cloud business is growing faster than the direct cloud business.

More on that in the next chapter.

The cloud is often perceived as a buzz word by the general public. However, 94% of organizations are already running cloud applications according to a RightScale survey. The new generation of employees called Millennials regard cloud applications as the only way to go: according to a 2016 IDC research ‘How Do Millennial-Led Midmarket Firms Interpret Digital Transformation?’, Millennial-led companies

©2016 Ingram Micro Inc. All Rights Reserved.

| 13

Chapter 4: A business approach to cloud computing

The most common misperceptions about cloud computing stems from a misunderstanding of the very concept of the cloud itself.

If one believes that the cloud is just a distribution and storage model for software, this might raise expectations that the IT channel will be out of business in no-time. After all, who needs distributors and resellers when you can buy licenses directly at the vendors’ front door?

However, the cloud is much more than a relatively new way of distribution or storage. It is about reinventing the whole concept of IT, almost from scratch. As trusted adviser, you are in the perfect position to assist SMBs to successfully go through this transition. After all, no one is better capable of tailoring the opportunities of the cloud to the needs.

The cloud has not made the IT channel redundant, on the contrary. Due to the increasing complexity of the cloud, resellers and distributors have the opportunity to add more value than ever before, by simplifying access to the cloud and offering best-in-class cloud solutions at the doorstep of the end-user. The added value of resellers lies in removing complexity and adding consultancy, which will result in a larger customer base and an increase in customer purchases.

You need to approach the cloud as a business needs led discussion. Today, business leaders fund more than 60% of all IT projects. This means that the conversation is more about how businesses want to use applications and the impact it can have on their agility, innovation, customer service and competitiveness in the market, and less about the underlying infrastructure.

The decision power is rapidly shifting away from the IT department to the line of business leader, who is more focused on process improvement and business optimization.

If you want to be successful, you will need to connect to these new buyers, and will need to shift the dialogue from technical specifications, to business enablement and value creation.

14 |

Whitepaper | The SMB cloud opportunity is not if, but when!

Conclusion The cloud era is here. Whether your customers are cloud leapers, cloud converters or cloud expanders, there will be considerable cloud business opportunities in the years ahead.

At Ingram Micro we believe that in the cloud era, the success of our vendors, channel partners, resellers and end customers equals our own success. Efficiency through scalability is the biggest promise of the cloud, which is why we offer the Ingram Micro Ecosystem of Cloud.

The Ecosystem of Cloud operates under a simple concept: Ingram Micro will drive increasing connections linking leading cloud service providers with the various channels that solve business problems with cloud technology, for customers of all sizes. In this hyper connected world, the Ingram Micro Ecosystem of Cloud will support the needs of all members of the ecosystem, so you can do more with more.

The ecosystem represents an environment where we all benefit. A simplified starting point that gives you access to the right business tools for your customers plus training and education to become, for example, a professional Microsoft Cloud Solution Provider.

Ingram Micro offers you a fully automated cloud platform; Cloud Marketplace which allows you easy access to a wide range of cloud solutions to sell to your end users. If you want to offer your own branded store to the market, you can also choose to start with Cloud Store. As your needs in the cloud grow, we can also now offer ODIN Automation Premium and ODIN Automation Essentials platforms allowing you not only easy access to a wide range of our cloud solutions to sell to your end users, but also to integrate this with your own services and cloud solutions.

Ingram Micro additionally provides you with transformational channel enablement via our Cloud University Program and marketing services that will serve you into the future.

Feel free to get in touch with us to discuss your go-to-market strategy.

Our next whitepaper will go into detail on how to position yourself as a cloud-ready IT reseller, including practical tips, tricks and resources for sales, marketing and communications.

Ingram Micro BVBA Luchthavenlaan 25A 1800 Vilvoorde

www.ingrammicrocloud.be cloud@ingrammicro.be +32-2-254.94.44