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Cloud Storage in the SMB Shows Lots of Room for Growth

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As consumer acceptance of the cloud grows, small businesses are becoming more comfortable about adopting the cloud to handle major facets of their IT operations, particularly when it comes to storing their data. This growing comfort with cloud storage provides VARs and MSPs with major opportunities in the SMB market. The analysts at Clutch, a B2B rating and reviews firm, conducted a recent survey that asked five questions of respondents. The answers they received give us a look at several important factors affecting sales in today’s SMB Cloud market.

 

To Dive In, or Wait?

As cloud provider competition has increased and the technology matured, and (more importantly) as the cost has plummeted, the answer to the question of when to adopt the cloud seems to be “right now.” The majority of SMBs who adopted the cloud have done so within the last few years; nearly a quarter of them within the last 12 months.

The dam appears to have burst. At this point, holding out for better pricing or more ideal technology metrics reaches a point of diminishing returns. The advantages (and sheer necessity) of cloud data storage have surpassed any further cost savings or skeptical hesitation.

 

Why the Cloud?

The fundamental discussion that should be had when considering cloud storage solutions is: “What are the benefits to the organization?” For most businesses surveyed, the primary benefit they received was improved access to data. The ability to easily access data and applications from anywhere, without having to consume IT staff resources to do it, is driving much of the SMB’s cloud adoption.

Businesses—even small ones—are becoming more mobile in their operations, and are relying more and more on staff who can work remotely and on-the-go. The question of whether mobility prompted the cloud or the cloud enabled mobility might be a “chicken-and-egg” debate, but it’s easy to argue that, in this case, you can’t have one without the other.

Interestingly, while improved security and large-file migrations were tied as secondary benefits, the availability of storage and its cost were the least important factors for cloud adoption. In particular, the lack of concern about cost is evidence of the opportunity that now exists, as it shows a major shift in consumer sentiment about what was once a primary obstacle in cloud sales: the expense.

 

Is the Cloud Reliable?

More than a third of organizations surveyed reported no problems with their cloud service providers over the past year. That’s the good news. The bad news is that the primary issue experienced by the remaining two-thirds was downtime, which remains a persistent challenge in the technology world.

While it’s a valid criticism of the cloud, professional cloud storage providers have a strong track record of stable datacenter operations, and multiple layers of built-in redundancy means outages are rare. The reliability of the cloud is on par with any on-premise network, and perhaps more so in many circumstances. In addition, the ability to expand into disaster recovery solutions means that cloud storage possesses many unique qualities that can’t be easily replicated in an on-premise network.

 

Storage Provider or Storage Service?

Control and efficiency are two facets of business operations that often clash with each other. The same is true of cloud storage. Is the attention that must be paid to managing backups worth the trouble, or is a convenient automated service that automatically backs up data a better solution?

For most SMBs, the answer seems to lean heavily in favor of the storage provider solution vs. the automated service approach. This is more evidence of the opportunity that exists for VARs and MSPs to bring comprehensive solutions to their SMB customers, customized to address their desire to control at least some of the process. This may have the added effect of relieving some of the stress associated with making the switch to cloud-based storage (i.e., allowing the data to leave the premises).

 

What is the Spend?

More than half of survey respondents pay $250 or less per month on cloud storage backup. A quarter of them use free services so they pay nothing at all. Free services don’t have the security and capacity to meet the needs of most businesses, however, so those services are likely to become less favored as cloud adoption grows.

Interestingly, a quarter of respondents pay between $250 and $1,000 each month, which is a sweet spot for many service providers building recurring revenue. As cloud adoption continues to gain acceptance and become a business necessity, we can expect to see many free service users shifting to the lower cost tier, and many in the lower cost tier to shift to the middle.

 


 

This survey and its results are eye-opening in terms of what is still out there. If cloud storage is a building-block of your solutions business, then bringing your SMB customers into a cloud storage solution opens up the potential for further sales of security, virtual desktop, disaster recovery, and infrastructure solutions as well.

While selling to the enterprise makes for profitable business, VARs and MSPs are smart to keep an eye on small business moves to the cloud. If nothing else, the Clutch survey adds more evidence to the pile that shows how much opportunity exists in the SMB market.

Disaster Recovery Doesn’t Have to Be a Disaster

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Disasters come in many forms. Some are freak, random events that strike out of the blue. Others are completely-preventable lapses in human judgment, or even the result of a malicious act. For any organization, an interruption in operations can be, well, disastrous. But it doesn’t have to be.

Investing in a disaster recovery solution is an investment in safeguarding your business. Interruptions to your operation will happen, but how you proactively prepare and react to the event will help minimize the impact until operations can be fully restored. A rapid and successful disaster recovery depends entirely on what your company does before a disaster ever occurs.

3 Steps to Successful Disaster Recovery

STEP 1: Make a Plan

Various industry surveys report that roughly two-thirds to three-quarters of companies have no viable disaster readiness plan in place. In our modern, interconnected world where a failure in one facet of operations can cascade into a system-wide breakdown, the failure to plan is inexcusable, but something that is easily remedied. Responsible businesses prepare for the worst, and those that do are vastly more capable of weathering a disaster-related interruption.

Any good business continuity plan will identify the key players within the organization (management, IT, HR, etc.) and assign roles and responsibilities to them if and when disaster strikes. A careful risk assessment of the company’s vulnerabilities, a clearly-defined chain-of-command, and overlapping communication and contingency protocols are essential elements of any disaster recovery plan. The participation of your internal IT team and external IT service providers is also critical to a successful and workable plan. Make sure the various stakeholders provide input and air their concerns during planning because, in the midst of a crisis, you don’t want anyone arguing over what to do.

Be sure to plan for multiple causes of downtime as well. Most people think “disaster” means a natural event like storm, fire, or flood. In fact, natural disasters are the most infrequent causes of business interruption. Far more likely are events such as power outages, network and/or hardware failures, human error, or unauthorized access/cyberattacks. By planning for a wide range of potential events and investing in a multi-purpose approach to recovery, you can prepare your company for virtually any scenario. Finally, have a “Plan B” in place, in case Plan A doesn’t work out for some reason.

STEP 2: Protect Your Company Data and Applications

Data protection and recovery lies at the heart of any successful disaster recovery, but DR solutions are not a one-size-fits-all proposition. Every company should employ a regular data backup solution so that operations and data access can be rapidly brought back to a pre-disaster state. In addition, investing in virtual desktops enables an organization’s employees to continue working from any location, should the physical damage to the business be too severe.

Work with your disaster recovery solution provider to not only integrate data backup and virtual infrastructure into your plan, but also to develop a tiered approach to recovering your organization’s critical software applications. By organizing your applications into recovery tiers, you can ensure that applications are brought back online according to their level of operational urgency, and enable you to focus on recovery needs during an event.

STEP 3: Test, Test, Test

Once your DR plan is in place, be sure to schedule and run regular testing drills to make sure the plan actually works. The time to discover weaknesses or holes in your plan is not during an actual disaster event. Regular testing will expose any inefficiencies in the plan or confusion on the part of stakeholders, and gives your management the confidence that the solution in place was worth the investment. This will make it easier to justify updates and expansions of the DR system as technology evolves and new threats emerge later down the road.

The Fourth (and most important) Step

An additional step in successful disaster recovery—and a critical one at that—is to pick the right Disaster Recovery-as-a-Solution (DRaaS) provider. When selecting a provider, be sure to consider not only their recovery technology offerings, but also their business maturity and level of expertise. Look for a provider with the technology you require, and the levels of knowledge and professionalism that match your business objectives.

A good provider partner should be willing to help you plan and implement a disaster recovery program that meets your Recovery Time Objectives (RTO), as well as offer confidence-building resources such as third-party validations of their solutions, comprehensive Service Level Agreements (SLAs), signed certificates of testing, a dashboard to monitor and manage real-time analytics, etc.

Every minute counts in the event of a disaster and interruption in business continuity. To ensure a rapid recovery and resumption of operations—as well as to mitigate any loss of data, revenue, or customers—it is worth the time and investment to develop and implement a proper disaster recovery plan. The keys to success are a proactive approach that recognizes (and respects) the danger to your business, and selecting the right provider partner to meet your recovery goals.

 

The AWS Myth: What’s Good for the Enterprise Is Probably Not Good for SMBs

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As enterprises continue their move to the cloud, many of these large, well-funded organizations find mega-cloud providers like AWS to be a good fit for their needs. If you can afford them, AWS resources and services can deliver powerful computing capabilities without the capital expense of building your own data center. But what if you’re a medium-sized company with limited resources and a serious organizational need for cloud solutions? Or a small business looking to leverage the cloud’s ability to quickly scale and adapt to meet surging growth? Is a hyper-cloud provider like AWS their best bet?

 

Without a doubt, AWS is the market leader in high-performance cloud computing, a single source for hosted services that can now touch pretty much every aspect of IT. AWS is even pioneering completely unique and innovative computing methods that give their customers access to unparalleled capabilities. Is AWS’ model sufficient and cost-effective to meet smaller-scale needs, however, or is there a threshold at which using AWS becomes counter-productive and a less monolithic cloud provider becomes the better option?

 

Putting aside the question of whether it is a good idea to engage a large provider like AWS, which may very well compete with you for the same customers (as Dropbox recently discovered), there are fundamental deficiencies in the AWS model that are better addressed by a smaller, more local cloud provider. This is especially true of the SMB market, where AWS’ dizzying array of choices and high level of expertise required to source, implement, and manage their solutions can be a daunting (if not impossible) challenge.

 

The Dilemma of Many Choices

 

AWS offers a range of virtual machine (VM) families, from general-purpose VMs to machines optimized for computing, memory, storage, or GPU performance levels. Taking into account each VM family’s available models, price-points, and operating systems—not to mention prior generations that remain available—the menu of AWS options soars to a bewildering number of possible combinations (currently around 50,000 choices).

 

For SMBs, the sheer complexity of AWS’s offerings can be an impenetrable barrier. Without well-trained and knowledgeable IT resources to assist them, how is a mid-sized business owner supposed to figure out the optimal AWS build to meet their needs while staying within budget limits? AWS provides an online tool to help, but this assistance largely comes down to templated advice and a selection based more on hope and guesswork than a sound, informed decision-making process.

 

Performance Rules, but Value Matters

 

For most startups and SMBs, building a custom infrastructure is not a viable strategy, but neither is investing in the resources required to make an AWS cloud solution work. These businesses need performance and reliability, live technical support, a comprehensive but not overwhelming menu of options, and high levels of scalability and security—including disaster recovery—to ensure continued operations at all times. They also need to be assured of the value of their solution in relation to what they receive for the price.

 

Many SMBs are discovering that finding a reliable hosting partner with predictable costs and robust infrastructure is a better alternative than trusting a mega-cloud provider like AWS to keep their business concerns in mind. While AWS is competitive on some of the issues that matter to SMBs, professional hosting companies with a customer-centric approach and specialized focus on a limited number of solutions can outperform AWS. The level of direct customer contact and support an SMB requires is something AWS is simply not built to provide.

 

True Customization Requires a Personal Touch

 

Another area where smaller hosting partners surpass AWS is in customization of solutions, which ties back into the personal touch a smaller provider can give to its customers. Customization is a critical component of scalability, which is essential to the growth strategy of many SMBs. Custom solutions must also be reasonably priced with no extra costs and expensive add-ons hidden in the mix. Walking a client through their custom solution often relies on a serious hand-holding effort that can only be delivered by a provider working directly with the customer. Again, with the way AWS has commoditized their web service offerings, a high level of customization is not something they can do.

 

Bigger Can Be Too Much

Even though major cloud providers like AWS have tremendous scale, global reach, and diverse service offerings, their approach does not meet the needs of every business out there. In fact, smaller cloud providers continue to see high demand for a more personal level of cloud computing, largely because the average retail cloud consumer knows little about the technology beyond its marketing messages and value prop. They also rarely need the full breadth of services AWS offers, but instead want someone to sit with them and explain exactly what their business needs and why.

 

If you’re moving to the cloud but don’t know much about how it works or how much it costs, your best bet is to find a cloud provider partner with certified expertise, a solid track record, and proven, tested infrastructure. Your prospective hosting partner should also offer a healthy range of options, from simple cloud storage space to a full-fledged managed services portfolio. This is important because, as you transition to the cloud, you often need a variety of solutions to address your legacy systems and applications, and to ensure that your cloud solution properly fills in any gaps (such as security, redundancy, disaster recovery, etc.) created during the move.

 

Other elements to consider in selecting a smaller cloud partner over AWS include things like: their relationships with other MSPs; specific expertise in various vertical markets such as manufacturing, legal, or healthcare; the availability of “on-demand” resource provisioning; typical speed of deployment (which is often far faster than AWS); and even the option to employ consulting or staff augmentation services through the provider. All of these are things a cloud partner should be able to provide that AWS cannot.

 

Bottom Line

 

While the enterprise is still in a romance with AWS, the movement of SMBs away from hyper-cloud providers is rooted in deep-seated—and well-founded—concerns about cost/value, support, competition, and customizability. It’s also driven by a desire for the peace of mind that a competent partner stands with you to address any needs that may arise. For many business owners, aligning with an experienced hosting partner—like Green Cloud—who provides industry-leading solutions and excellent customer support has many obvious advantages over a hyper-cloud provider.

 

AWS has an unparalleled menu of services and options, but this huge portfolio undermines its practicality for the SMB market. The options are simply too many and too inscrutable for the average cloud consumer, who needs personal support and a sales approach focused on their specific needs. Small to mid-sized business owners simply don’t have the time or resources to spend figuring out their best AWS option and then attempting to implement it on their own. This simple fact ensures that smaller cloud providers still have a seat at the table, and that they can actually outperform AWS in the much more expansive SMB market.

Cloud Consolidations Propel the Industry Forward

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As providers move to scale up, acquisitions are the key to success.

With the cloud infrastructure market booming, cloud providers must develop winning strategies to compete for market share and presence. As new companies emerge, some succeed while others fail. Building successful distribution channels, whether through direct sales or a channel model, is expensive and time consuming. The current cycle of competition is like an enormous game of “musical chairs,” with providers jostling for a dwindling—yet still plentiful—number of seats. As smaller, less-financed companies fall out of the running, this constant churn puts small providers in a desirable or, in some cases, necessary position to sell their companies. In a market this big and still accelerating, the potential for consolidation creates tremendous investment opportunities for private equity investors and their cloud providers to source and acquire these numerous smaller players that want or need to exit.

In less than a decade, the cloud infrastructure market has generated staggering numbers. Since 2011, the IaaS market has grown more than 40 percent per year. While that figure has leveled off somewhat, the market size remains enormous and is still projected to grow more than 25 percent per year through the end of the decade. In 2017 alone, Gartner forecasts the global cloud market to exceed $125 billion. Other estimates have the market approaching (or passing) the $200 billion mark by 2020. Within the next five years, more computing power will be deployed by IaaS / PaaS cloud providers than by enterprise data centers, and cloud revenue is expected to match or exceed that of traditional servers. It is safe to say that within ten years, cloud infrastructure services will significantly replace traditional hardware for many, if not most, enterprises and SMBs.

With the cloud infrastructure market so ripe, conventional wisdom says that the big players will pluck the sweetest fruit and leave only the low-hanging morsels for smaller providers to fight over. This is not really the case, though. Super-scale cloud infrastructure providers such as AWS and Azure are primarily focused at the top of the food chain, and while they are, indeed, making huge inroads into the enterprise space, they do not dominate the entire market. Instead, their enterprise activities are actually spurring general interest in the cloud from small and medium-sized businesses, and as a result, stimulating a vast middle market of SMBs ready to receive the cloud’s value prop—a $25+ billion opportunity in which emerging, service-oriented cloud providers can flourish.

Viewed as a whole, the cloud services market for SMBs—where the vast majority of IT decisions are made—far outweighs the much smaller number of enterprise businesses looking for hosted infrastructure. And while size still matters to an SMB searching for a provider, mega-clouds are clearly not a practical option due largely to the lack of infrastructure engineering talent at companies with less than 200 employees. At its core, the SMB is still a value-oriented market, and their desire for robust yet cost-effective cloud solutions allows companies other than the big players to develop good, “high-level” cloud capabilities that address their needs. This middle market is where companies like Green Cloud reside.

With no geographic borders and few obstacles to startup, it is relatively “easy” for an experienced entrepreneurial team to build a successful cloud company with ~$5 million of capital outlay. Within a few years, smaller cloud providers can realize an impressive $5–8 million in business. As these granular-level companies grow, however, they must scale in order to compete, but scaling past revenues of $10 million takes substantial time, sales and marketing expertise, capital investment, and certainly some luck. Some companies have (or find) the resources to grow, and many of those will ultimately succeed; many others will fail or plateau. Eventually, companies who fail to scale will either go under, or a larger company will come along and buy them out.

So, what happens when a company reaches the ceiling of their capability? The most viable option is to look for a strategic partner to merge with, preferably a larger company with more capacity. Done properly, such consolidations provide the investors with a reward for their hard work and allows the larger cloud provider to expand operations via the acquisition. In the past year, our industry has experienced a tremendous number of such acquisitions—mostly through data centers and hosting companies—but the current wave of consolidation is just beginning.

At Green Cloud, we see a big wave of acquisitions ahead over the next 12–36 months. Our immediate growth strategy is to continue investing in our channel network of more than 400 partners across 46 states, while also leveraging the consolidation trend to scale up and broaden our national footprint. Our tactical goal over the next few years is to acquire smaller companies to rapidly add financial scale and data center provisioning, sales presence, and partner network expansion. We view such acquisitions as the most practical route to augment our rapid, organic growth in the near-term. For other providers looking to scale rather than exit, I suspect you’ll agree that Green Cloud’s strategy is a sound one to follow.

Regardless of what comes, we’re still in the market’s infancy at this point. We love what AWS and Azure are doing by educating the market and helping businesses learn about cloud, and they are leaving a massive opportunity for Green Cloud and our partners. And there is plenty of room for many more companies like Green Cloud, because cloud infrastructure remains a healthy, thriving industry tailor-made for entrepreneurs. If you’re not involved with cloud infrastructure in your business, then do it! If you’re already a cloud provider that needs to scale to stay competitive, now is a good time to consider either acquiring a smaller company, or selling your business and taking a pay-out. If you’re a mid-level provider with resources, or a venture-capital firm, this is a brilliant time to invest. If you’re an MSP or VAR, it’s critical that you incorporate cloud into your business model because recurring revenues can drive more value for your business than anything else.

The cloud is a great bet because the market is still growing, the technology is still evolving, and there is still a lot of healthy competition out there. Here’s to a prosperous 2017 in the cloud!