Parallels SMB Cloud Insights TM. Mexico
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1 Parallels SMB Cloud Insights TM Mexico
2 DEFINITIONS Cloud Services Categories This research is focused on the cloud services that matter most to SMBs: IaaS, web presence and web applications, unified communications, and a general category we refer to as business applications. Infrastructure as a service (IaaS): Dedicated servers, virtual private servers (VPS), managed hosting, as well as add-on applications and services for hosted infrastructure, such as control panels, development platforms, LAMP stack (Linux, Apache, MySQL, PHP), security, server backup, and database add-ons. Includes cloud servers as of, due to their increasing use among SMBs. The overall Mexican Cloud Market Reached 8.5B in 5.2B ($415M) B ($657M) Web presence and web applications: Third-party web hosting, domain registration, SSL and ecommerce add-ons, site-building tools, high-opportunity web applications web server backup, content delivery networks (CDN), content management, mobile optimization tools, search engine optimization (SEO), and web server security and health monitoring. Unified Communications: Business-class services, including security, archiving, along with mobility and hosted phone services, including hosted PBX. As of, includes communication and collaboration applications, such as web and phone conferencing, instant collaboration, and mobile device management (MDM). Business applications: The major types of software applications that can be accessed online file sharing, online accounting, online backup and storage, online CRM, payroll and HR, support and help desk, and virtual desktop (VDI). SMB Definition and Segmentation We define SMBs also known as small and medium enterprises (SMEs) - as companies with 1 to 250 employees. There are around 2M such SMB establishments in Mexico today. Segments include: micro (1-9 employees), small (10-49 employees) and medium ( employees) Cloud Opportunity Type Cloud leapers: This category consists of SMBs that currently are not using an in-house IT solution (no servers, no web server, or no PBX system) and are likely to move straight to the cloud, leaping over the intermediate in-house IT solutions. The cloud leaper category also includes startups that choose cloud services over traditional in-house IT as they start their business. Parallels SMB Cloud Insights has entered its fourth consecutive year of research into the cloud service consumption of SMBs. In, Parallels has updated its research by redefining some of the categories examined. Infrastructure-as-a-Service now includes the use of cloud servers by SMBs, which wasn t previously measured due to cloud servers being considered an enterprise level solution. But SMBs are also beginning to take advantage of them as a scalable and flexible solution. Unified Communications, previously called Communication and Collaboration, now includes collaboration applications. In, the Mexican SMB cloud market reached approximately 8.5B MXN ($658M USD). The current largest portion of the overall market, Infrastructure-as-a-Service, climbed to 2.8B MXN ($213M USD) in. Web presence and web applications reached 1.8B MXN ($135M USD). Unified communications slightly surpassed web presence, adding another 1.8B MXN ($137M USD). Business applications is the second largest category, making up the remaining 2.2B MXN ($173M USD). Cloud converters: These SMBs currently have in-house solutions but are either moving or planning to move to hosted services. For example, many SMBs that currently have in-house servers may switch to hosted servers when it comes time to upgrade their infrastructure. Cloud expanders: These SMBs, who are already using some form of cloud services, represent an opportunity for upselling to new and expanded cloud offerings. For example, an SMB who is using web hosting would be acting as a cloud expander when they purchase mobile optimization to complement their website. 1
3 INFRASTRUCTURE-AS-A-SERVICE (IaaS) IaaS Market Growth Hosted Servers are Mainly Used for Same Purposes as Last Year 1.6B ($125M) B ($213M) 520M ($42M) Cloud Servers % Database Applications 28% Web Server 24% Accounting laas Grew by 43% Usage Infrastructure-as-a-Service grew to 2.8B MXN in. This market mainly increased due to cloud leapers, or SMBs without servers jumping right to IaaS for infrastructure. Of note, 520M MXN ($41M USD), is attributed to the addition of cloud server use in this category. Though cloud servers were previously considered to be an enterprise level solution, Parallels has found that almost 20% of SMBs using IaaS in Mexico are using cloud servers. Security Replaces Price as the Top Concern for Switching to Hosted Servers 50% 40% 30% 20% 10% 0 SMBs Concerned About Switching Price Security In-House Apps IT Personnel Doesn t 2013 Recommend Security/privacy and price are still the main concerns for businesses with in-house servers when considering switching to IaaS. However, fewer SMBs reported these barriers to switching than in The proportion of SMBs worried about bandwidth/connectivity or certain apps not being supported through hosted server use increased slightly, but remained a barrier for less than 10% of potential converters. Service providers should keep these concerns top of mind when marketing to SMBs who are considering switching from in-house servers to hosted solutions. SMBs are Willing to Pay More for High Availability or Unlimited Storage 21% High Availabity 21% of SMBs would pay $20/mo more for high availability $10 23% of SMBs would pay $20/mo more for unlimited storage $20 Top Hosted Server Add-ons % 29% 32% Unlimited Storage 37% 31% 36% Security Security Control Panel Server Backup Database Add-Ons Database Add-Ons 84% 63% 62% Security to Remain Highest Priority for SMBs with Hosted Servers When Choosing Add-ons 2 3
4 WEB PRESENCE IaaS Opportunity Through 2017 Web Presence and Web Applications 32% 3 Year CAGR 1.3B ($107M) B CAGR 17% ($135M) 77% 68% 63% Cloud Leapers New Adoption Cloud Expanders Increase Spending With a projected 2017 market size of 6.3B MXN ($484M USD) and growing at 32% CAGR, IaaS will be the second largest part of the overall SMB cloud market in Mexico. By 2017, we predict IaaS could include up to 63% of cloud converters, 68% of cloud expanders wanting to spend more on their existing IaaS, and 77% of SMBs who don t yet have servers of any kind. Each of these three segments presents excellent opportunity in the coming years but will require unique marketing messages. Cloud Converters Switch From In-House 6.3B ($484M) Mexico has a developing cloud market, and web presence has been growing at higher rate than in more developed markets, as SMBs get internet access and add websites. In, the Mexican web presence market reached 1.8B MXN ($135M USD), up 31% from last year. Many SMBs added their first websites as third party hosted websites in 2013, particularly micro and small businesses, contributing to this market growth. 41% Of SMBs Buy Web Apps Bundled with Website Purchase Ecommerce and Mobile Optimization to Increase in Demand Through 2017 Top Web Apps Security SEO Content Management 2017 SEO Ecommerce Mobile Optimization 4 5
5 WEB PRESENCE Top Forms of Social Media Growth in 7% 4% 4% Mobile Optimized Websites are Growing in Popularity and Many SMBs Still Need One 28% No Optimization Needed 37% Mobile Optimized Facebook Twitter LinkedIn SMBs are Starting to Use More Third Parties to Design and Manage their Websites 26%* PC Only Optimzed *Best Opportunity Designed By 35% 55% Web Designer 42% 10% Web Hoster Managed By Sitebuilder 3rd Party Web Presence Opportunity in 2017 Cloud Leapers New Adoption Cloud Converters Switch From In-House 29% 3 Year CAGR 91% 64% 61% Cloud Expanders Increase Spending 22% Of Medium Businesses Manage Their Site Through Third Parties 35% of micro SMBs use a web designer or third party to design their websites, and between 55-65% of small and medium SMBs are using web designers. While more SMBs manage their websites and web apps by logging in at their web hoster, 10% of SMBs (22% of medium businesses) have a third party manage their websites for them. SMBs have begun trending toward more managed web hosting in developed markets, and it s catching on in developing markets like Mexico. While all SMB segments present ample opportunity for the Mexican web presence market over the next three years, cloud leapers will be the main drivers of growth. Of note, 91% of SMBs without websites indicate interest in adding them by Mexican web presence is projected to reach 3.8B MXN ($292M USD) by 2017, growing at 29% CAGR. 3.8B ($292M) 6 7
6 UNIFIED COMMUNICATIONS (UC) Unified Communications Market Growth 1.8B ($137M) 408M ($31M) Hosted 430M 939M ($33M) ($72M) Hosted PBX Collaboration Apps What Features are Most Useful to SMBs in Hosted PBX Systems? 1.1B ($82M) 2013 Unified Communication Unified communications, formerly communication and collaboration, now includes instant collaboration, web/phone conferencing, and mobile device management (MDM). This market grew significantly from 1.1B MXN ($82M USD) to 1.8B MXN ($137M USD). Hosted , instant collaboration and web conferencing have been the main drivers of this growth. For example, in 2013, we saw many cloud expanders switch from free to paid hosted while many SMBs without opted for hosted premium for their first solution. At What Point Would SMBs Choose to Switch From Free to Paid Business ? 1.8B ($137M) 46% Need Professional Look and Feel 30% Need Increased Security What Features Caused SMBs to Choose Paid Business Over a Free Provider? 13% 14% 48% 50% 71% Overall Concerns About Hosted PBX Have Increased 60% 50% 40% 30% 20% 10% 0 Ability to Track Billable Calls Price Security Seperate Phone Lines SMBs Concerned About Switching In House Apps 2013 Technical What are Major Purchase Triggers for Hosted PBX? Good Price One Mailbox for Messages Unaware of PBX 38% 33% Major Change to Business Shared Calendar Calendar Alerts Outlook Integration Archiving Security 8 9
7 BUSINESS APPLICATIONS As shown above, nearly all of the concerns SMBs have about switching from in-house PBX to a hosted option have increased dramatically. They have reservations about the price and security of hosted PBX. Additionally, many of them just don t know much about it. However, 38% of SMBs would be likely to switch to hosted PBX if they could afford it, or if there were a major change to business and switching away from in-house proved to be a better option. In developing regions like Mexico, many SMBs opt for mobile phones as an inexpensive option. Service providers will want to continue educating their customers about the security and convenience benefits of hosted PBX, and offer low cost options that will appeal to SMBs to capture those potential converters. Business Applications 1.2B ($95M) 2.2B ($173M) 38% Increase in Overall Business Application Use Unified Communications Through % 75% 73% Cloud Expanders Hosted 82% Cloud Converters 60% 71% Cloud Leapers Hosted PBX 15% 49% Web/Phone Conferencing New Users The Mexican UC market is poised for tremendous growth with a 54% CAGR through It is projected to become the largest part of the Mexican SMB cloud market reaching 6.7B MXN ($514M USD). Growth is being driven by all segments across all services. For example, over 60% of SMB leapers, converters, and expanders for hosted as well as hosted PBX express an interest in adoption or increasing spending. Additionally, 49% of existing web/phone conferencing users said they plan to increase spending over the next three years. 29% 19% 16% Instant Collaboration 54% 3 Year CAGR 15% Mobile Device Management Increased Spending 6.7B ($514M) In, the business applications market hit 2.2B MXN ($173M USD), up from 1.2B MXN ($95M USD) in Overall use of business applications increased from 29% to 40% among SMBs, along with increased adoption in different apps among different SMB size segments. Top applications in include file sharing and online backup and storage, but accounting has replaced payroll as the third most consumed app. File Sharing and Online Backup Consistently Important 2013 File Sharing Online Backup/Storage Where Do You Buy Online Applications? 52% Payroll Accounting 10% 9% 9% 6% Application Website Telco/Mobile Provider IT Consultant Web Hoster Online Retailer 10 11
8 BUYING CLOUD SERVICES Free Trial Important for Converting SMBs to Purchased Versions 21% Purchased without free trial 21% Purchased after free trial to access more features 44% Purchased after free trial expired To Bundle or Not to Bundle? Prefer Purchasing Bundles as 45% Opposed to a of SMBs la Carte of SMBs of SMBs Say Service Provider Choice is Their Main 45% 50% Concern About 33% Buying in Bundles of SMBs Say Ease of Billing is More Important than Discounts When Purchasing Bundles Quote Cost Transparency as Their Main Barrier to Bundle Purchases Business Applications Opportunity in 2017 Many SMBs prefer buying cloud services as bundles, but what about those who don t? This year Parallels asked SMBs about bundling preferences. We discovered that when SMBs choose not to bundle, it is because they want choice in the service provider or brand and are concerned about lack of transparency in bundle pricing. SMBs are willing to pay more to get the exact service or brand they want. Service providers can still attract these SMBs with bundles, so long as they offer a variety of best of breed bundled options. 43% 34% Increase in Spending New Adoption The business applications market is projected to more than double by Growing at a similar rate to the web presence market, it will likely expand to 4.8B MXN ($368M USD). Both new adoption and increased spending appear to be good areas of opportunity. For example, 34% of SMBs said they would like to add various business apps, and 43% want to increase their spending on apps they currently use. Parallels expects this market to continue going strong as SMBs grow and their needs mature. 29% 3 Year CAGR 4.8B ($368M) 47% of SMBs Use Only One Service Provider 50% 40% 30% 20% 10% 0% 74% of SMBs say Number of Service Providers Better Cost Value is Top Benefit of Using One Service Provider 49% of SMBs say Unified Support is Also Important 12 13
9 OPPORTUNITIES How do SMBs Contact Their Service Providers? 70% 64% 53% 33% Learn More This Parallels Market Outlook for report only covers a portion of the extensive data included in Parallels SMB Cloud Insights research. You can learn more by: Visiting Parallels PartnerNet. For Parallels Partners, register for Parallels PartnerNet and go to the SMB Knowledge Center for more SMB Cloud Insights data analysis and go-to-market materials. Find Parallels PartnerNet at Phone Calls Support Online Chat In-Person The Mexican Cloud Services Market is Projected for 36% Growth Over the Next 3 Years 8.5B ($658M) 21B ($1.7B) 36% 3 Year CAGR Attending an SMB Cloud Insights webinar. Register for our webinar series highlighting Parallels research and teaching SMB marketing strategy, tips, and best practices to help grow your hosting business. Go to to sign up for webinar notifications. Talking to Parallels Business Consulting team. Parallels Business Consulting delivers services designed to accelerate time-to-revenue by 20-35%, increase profits, and grow subscribers. We provide critical business thinking and best practices forged from hundreds of deployments, custom research by SMB Cloud Insights, and go-to-market workshops. Start a conversation with Parallels Business Consulting team. Get in touch at accelerate@parallels.com. Please contact SMB@parallels.com with any further questions. Parallels is committed to helping our partners understand the best opportunities in the SMB cloud market and profit from the cloud The Mexican SMB cloud services market is forecasted to grow at a 36% CAGR and to top 21B MXN ($1.7B USD) by Each cloud service category will play a major role in the overall growth, with unified communications taking the lead with the fastest growth and surpassing IaaS as the largest market size. IaaS will still be a close second, however. Web presence and business applications will also each continue to have strong growth, doubling in size within the next three years. With many areas of potential among the various SMB segments and across cloud categories, this developing hotspot has immense prospects for service providers. Parallels IP Holdings GmbH. All rights reserved. The Parallels logo and Parallels are registered trademarks of Parallels IP Holdings GmbH. No part of this publication may be reproduced, photocopied, stored on a retrieval system, or transmitted without the express written consent of Parallels
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