2012 Market Outlook for Managed Service Providers A guide to monetizing the coming demand for cloud services.

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1 2012 Market Outlook for Managed Service Providers A guide to monetizing the coming demand for cloud services. By Sheilin Herrick

2 2 CONTENTS Growth in cloud backup adoption Drivers of cloud backup adoption by SMBs....3 How to evolve with clients and IT departments.. 5 Marketing opportunities for managed service providers...7

3 3 Growth in Cloud Backup Adoption A vast segment of small to medium sized businesses and enterprises have moved away from on premise backup and are now benefitting from the reliability of offsite storage and backup available through the cloud. The majority of firms making this transition do not have their own data centers and benefit from the institutional knowledge and core competencies of secure cloud backup providers to serve their data backup and disaster recovery needs. A mere 16% of companies surveyed are using online backup today. However, 69% of companies are evaluating or planning to use online backup in the near future. 1 This suggests that online backup growth has yet to occur en masse. Massive adoption by businesses is underway and will likely peak between 2013 and There is additional evidence to support the idea that massive adoption of cloud backup by businesses is yet to occur and is imminent is the patterns predicted by experts. Industry analysts expect organizations to double their budget allocation to cloud services between 2010 and There is a great deal of room in IT budgets for this increase. In 2010, a mere 1.6% of IT spending was dedicated to cloud services, however, IDC expects that by 2014, this figure will grow to 3%. - While still seeming small, this prediction shows the spending dedicated to 1 (IDC) Adoption and Spending intentions on Public Cloud Backup Services cloud services actually doubling in just four years. Moving backup and disaster recovery to the cloud presents a variety of advantages to organizations. Primarily, it allows a shift in efforts and labor from maintenance to new initiatives. This allows a firm to focus on its core competencies, explore new opportunities, become more competitive, and increase business revenue. Drivers of Cloud Backup Adoption by SMBs Multiple factors have created the perfect storm for cloud backup to grow and become established in the SMB market. These factors have decreased cost, cloud adoption, and simultaneously increased demand. Expansion of internet bandwidth Penetration of broadband internet connections has increased rapidly, particularly among developed nations and businesses, across the world. At the end of 1989, there were 1.1 million internet users worldwide and approximately 86% of them were in the United States. However, in 2010, there were over 2 billion internet users, and it is estimated that by 2015, this will increase to 2.89 billion users. This change represents an anticipated growth rate of a remarkable 29.8%. 2 2

4 4 Decrease of hosted storage costs The cost of computing and internet connectivity has declined rapidly in the last several years. Not only have overall costs decreased, but demand for IT services has grown exponentially,, further decreasing the overall cost of cloud backup. This newfound affordability of cloud backup services is just one barrier to these services that has fallen over the past ten years. Cloud Backup Today believed cloud service security to be superior to their own. 3 Significant increase in the size and value of digital data The adoption of personal computing in recent years has driven individuals to create valuable personal data on a regular basis. However, while individual consumers have engaged in this trend to a certain extent, businesses have done so on a much larger scale. Due to the nature of business, digital data is valued by many stakeholders from the CEO to the accounting department. Additionally, business data is heavily scrutinized and often subject to government regulations, making cloud backup all the more important. Increases in the vulnerability of digital data IDC confirms that massive adoption by the business community is near term: 16% of companies surveyed by IDC are using online backup today 69% are evaluating and/or planning to use it Technical sophistication of the general population According to a recent survey, corporate IT staff now favor the cloud over their own internal systems. Out of those surveryed 50% of IT managers currently using cloud services stated that they believe cloud computer/saas solutions providers can offer better security than my own organization s IT security team can provide. In the same survey, 38% of IT managers not currently using cloud services In the past data loss incidents were limited to freak accidents involving damage to document storage facilities, theft, or other events. However, digital data is now stored in more locations and on more devices than ever before. For businesses that equip their employees with computing devices, commonly a laptop and a mobile phone, they depend on their employees to be mobile and work in many locations. As data becomes more mobile, it also becomes more vulnerable. Because of this it is of great value to businesses to have their data backed up to the cloud and recoverable in the case of a disaster. 3 (IDC) Worldwide Cloud Security Forecast: A Comprehensive Look at the Cloud/Security Ecosystem

5 5 How to Evolve with Clients and IT Departments Corporate online backup needs vary widely. These variations are dependent on the type of company, size of company, security needs, and the capabilities of the internal IT department. Managed service providers are expected to meet as many of these needs as possible. They can, and will, create opportunity by doing so. Provide backup for laptop fleets Laptops contain massive amounts of personalized data and security information used by employees. They are highly mobile, making them more vulnerable to theft, disaster, and accidental deletion all of which are leading causes of data loss. According to the 2008 Computer Security Institute report, 42% of information loss was due to laptop theft. While the hardware may not be recoverable, the data from laptops can be very easily restored if basic online backups were scheduled regularly, prior to the data loss. Managed service providers can meet laptop fleet protection needs by partnering with an online backup vendor that offers Continuous Data Protection, flexible scheduling, and encrypted data storage. Understand regulatory compliance MSPs can benefit from understanding regulatory compliance issues associated with online backup. Many government regulations require online backup as a part of business IT infrastructure. One such example is HIPAA. IT managers and their organizations may not understand the security and compliance issues associated with moving to cloud services. 48% of organizations that have deployed cloud services do understand the regulatory compliance and security issues associated with online backup. However, this leaves a large group of52% who do not understand such implications. Likewise, organizations planning to backup to the cloud, but have not yet done so, are less likely to understand regulatory compliance issues associated with moving to cloud services. In fact, a recent study revealed that only 38% of IT managers surveyed, believe they grasp the implications. 4 Cloud backup for servers Generally speaking, as small to medium sized businesses grow, they will find their data protection needs changing. Businesses will continually adjust the number, size, and type of servers used by their organization. They may or may not have internal IT staff to maintain these servers. It is likely that they do not have their own data centers to back them up, nor do they have software to make data recovery efforts simple. Providing cloud backup for servers is an important opportunity for MSPs to grow with the client and generate recurring revenue while doing so. Most small to medium sized businesses utilize an MS Exchange server and SQL database for transactional revenue. To get the most out of a partnership with an online backup provider, it is advisable to ensure that the vendor does not place restrictions or requirements on hardware purchases or types of servers that can be backed up within the program. 4 (IDC) Worldwide Cloud Security Forecast: A Comprehensive Look at the Cloud/Security Ecosystem

6 6 Move clients to the cloud by providing a secure online backup solution Managed service providers can capitalize on an organization s desire for substantial security in cloud backup. Businesses want more security features and capabilities from cloud service providers and, in order to offer this to clients, MSPs can partner with a vendor that provides mobile access to cloud backups and has a strong security record. Cloud backup offered by MSPs should have simple recovery features, multi-tiered encryption, and multiple data centers across the globe. Additionally, many organizations view unlimited file archiving, unlimited versioning, and geographic redundancy as must haves when considering an online backup solution. Marketing Opportunities for Managed Service Providers Managed service providers sometimes find marketing to be a difficult and daunting task. However, MSPs can benefit from partnering with SOS Online Backup, who not only offers high quality, secure software, but an arsenal of marketing products and sales tools. As a managed service provider, proper and consistent marketing is valuable in obtaining clients and keeping them. Create an ecommerce website Creating an ecommerce website can be extremely expensive, but there are other inexpensive alternatives such as finding an online backup partner that wraps marketing, sales, and a website into their partnership program. Websites with ecommerce integration can often cost thousands of dollars. Customized website packages should offer complete rebranding, search engine optimization flexibility and marketing templates. marketing When executed properly, marketing can be helpful to clients. By offering helpful information, rather than pushing a quick sale, marketing is a powerful way to remind clients that their trusted and knowledgeable managed service provider is there to help at a moment s notice. Create value in being a MSP Organizations with internal IT managers may have difficulty justifying the use of an outside managed service provider or value added reseller. However, creating value in a managed service offering is possible and is key to optimizing the online backup industry s growth spurt through Creating a disaster recovery plan, easy web access to additional services, mobile access to files, and support ticketing are just a few methods of creating value. The disaster recovery plan Vendors of online backup should provide disaster recovery plan templates for managed service providers to customize and deliver to clients. Often, the disaster recovery plan itself is a product that can be sold to the client. Creating it establishes value, credibility and trust in the managed service provider.

7 7 Mobile access to files Mobile access to files is necessary and reassures the client that their files are securely backed up and readily recoverable. A managed service provider should be able to act quickly by recovering a client s files from his mobile phone. Support ticketing Managed service providers must make themselves available and ready to assist in an emergency. In non-emergency situations, especially for high volume businesses, a support ticketing system is an ideal complement to an online backup provider s program, and can be added into the MSP s ecommerce website. Summary Managed service providers are poised to capitalize on a business environment incentivized by market forces and government regulation to move to cloud backup. This opportunity can be expertly monetized in 2012 by partnering with the proper online backup partner. This partner must offer quality SaaS products, secure data centers, marketing and sales assistance, and general business management tools. This high value partnership will help the MSP create and maintain its value to clients. To learn more about the SOS Online Backup Partner Program, visit us online.

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