2015 SMB Cloud InsightsTM JAPAN RUSSIA
DEFINITIONS Cloud Services Defined This research focuses on the cloud services that matter most to SMBs: IaaS, web presence and web applications, unified communications, and other general business applications. Infrastructure-as-a-service (IaaS): Cloud servers (previously not researched in our last study of Russia) Dedicated servers Virtual private servers (VPS) Managed hosting Add-on applications and services for hosted infrastructure: Control panels Development platforms LAMP stack Security Server backup Unified communications: Communication and collaboration applications: Web and phone conferencing Instant collaboration Mobile device management (MDM) Business-class email services: Email security and archiving Business voice services: Mobility and hosted phone services such as hosted PBX Web presence and web applications: Third-party web hosting Domain registration Web applications: Content delivery networks (CDN) Content management systems (CMS) E-commerce Health monitoring Mobile optimization tools Search engine optimization (SEO) Site-building tools SSL Web server backup Web server security General business applications: Major software applications accessible online: File sharing Online accounting Online backup and storage Online customer relationship management (CRM) Payroll and HR Support and help desk Virtual desktop (VDI) SMBs Defined We define SMBs also known as small and medium enterprises (SMEs) as companies with one to 250 employees. There are over three million SMBs in Russia today. SMB categories include micro (1-9 employees), small (10-49 employees), and medium (50-250 employees). Cloud Opportunities Cloud leapers: 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, i.e., leaping over intermediate in-house IT solutions. Cloud converters: SMBs with in-house solutions but moving or planning to move to hosted services. For example, an SMB with in-house servers who is planning to switch to hosted servers when they next upgrade their infrastructure. d1
Overall SMB Cloud Services Market in Russia 88B RUB ($1.6B USD) 2015 Odin SMB Cloud Insights has entered its fifth year of research into the consumption of cloud services by small and medium businesses (SMBs). In order to develop a clear picture of the Russian cloud market, we interviewed more than 400 IT decision makers at Russian SMBs. Globally and locally, SMBs from a variety of sectors are moving business functions into the cloud. Tools and solutions previously reserved for enterprise-level organizations are being implemented in smaller firms as developers create services specifically for the SMB market. Our research is intended to help cloud service providers take advantage of the trends outlined in this report in order to meet the evolving needs of their SMB customers. New to this year s research is an exploration of the SMB s journey of researching, purchasing, and using cloud services. This data will help service providers build successful relationships with their customers. 33B RUB 11B RUB 19B RUB 25B RUB Infrastructure-asa-service Web presence Unified communications Business applications Note: This report uses a RUB-USD exchange rate of 53.63. This value is calculated using a one-year exponentially weighted rolling average. 2
INFRASTRUCTURE-AS-A-SERVICE (IaaS) Infrastructure-as-a-service is the largest segment of the Russian cloud market and is valued at 33B RUB ($603M USD). Since we last researched Russia in 2013, in-house server usage has declined while hosted server usage has more than doubled. We expect this trend to continue as long as service providers can answer key security and price concerns from SMBs. Server Usage 25% 20% 22% 44% 2013 2015 In-house Hosted Buying IaaS Top Barriers to Hosted Infrastructure 1 2 3 42% 27% 24% Security or privacy concerns Price Legacy systems and other tech concerns 3
Top IaaS Research Methods Online Discuss with a trusted advisor Business industry news Discuss with local IT resource (VAR) 68% 21% 17% 12% From existing service providers 11% Note: 41% of SMBs use multiple research methods. Top IaaS Purchase Locations 48% 46% 31% 21% 20% 24% 14% 19% 26% 6% 11% 14% 1% 0% 0% Web hoster Local IT resource (VAR) Telco or cable co Pure cloud infrastructure/ service provider Retail computer store Micro Small Medium 4
Top Factors in Choosing a Service Provider 38% Price 25% Ease of management 20% 11% 10% Security or privacy concerns Existing relationship Ability to expand or contract quickly Using IaaS Top Workloads in Production 48% 42% Database applications 45% Data mining/ analytics 65% 40% 28% Content management system 22% 28% Customer relationship management (CRM) 20% 29% Payroll, HR, and benefit management 20% Accounting/ financials 41% Micro/small Medium 5
Top Hosted Server Add-ons 30% 54% 29% 40% 28% 54% 17% 21% 7% 21% Server backup Control panel Security LAMP stack Development platform 2015 2018 Customer Experience 76% of SMBs have a positive opinion of their hosted service provider Areas for Improvement 1 2 3 43% 16% 15% Performance (speed, availability) Support experience Security vulnerabilities 4 5 12% 12% Usability Self-service administration 6
61% of SMBs would pay an additional 1,000 RUB per month for high availability 52% of Total Server RUB Add-ons per month for by unlimited Industry storage SMBs would pay an additional 1,000 How SMBs are Resolving Issues Escalating with the vendor Exploring alternative options Moving in-house 48% 34% 16% IaaS Opportunities through 2018 Likelihood of Entering the Cloud Market 54% 45% Cloud leapers (New adoption) Cloud adopters (Switch from in-house) 7
IaaS Opportunities through 2018 20% CAGR 487M 706M 33B RUB $605M USD 56B RUB $1,047M USD 2015 2018 The Russian IaaS market is set for strong growth in coming years and will reach 56B RUB ($1,047M USD) by 2018. The strong growth will come from both SMBs without servers who move directly to the cloud and SMBs with in-house servers who move their servers to the cloud. As noted earlier, price and security are major concerns for the SMB and must be addressed by the service provider. Add-ons and targeted server workloads offer additional opportunities to IaaS sellers in the form of bundles and pre-configuration. The market will see healthy growth as SMBs move additional IaaS in to the cloud. 8
WEB PRESENCE The web presence market reached 11B RUB ($206M USD) in 2015. This represents the one million Russian SMBs with a website. Similar to IaaS, SMBs are concerned with the price of their web hosting. Even though the market for basic web hosting is becoming increasingly mature, opportunities still exist in add-ons, site-building tools, managed services, and mobile optimization. Double-digit growth is expected to be steady through 2018. SMBs with a Company Website 47% 73% 82% Micro Small Medium Website Hosting Location 12% 12% of websites are hosted in-house. 19% Of those SMBs with inhouse websites, 19% plan to add a third-party hosted website in three years. 88% 88% of websites are hosted by a third-party. 9
Buying a Website Key Factors in Choosing a Web Hoster 69% Price 37% 23% 19% 18% 7% Customer experience/ support Ability to scale resources Security Existing relationship Brand recognition Website Service Provider 72% 78% 43% 9% 7% 31% 11% 13% 16% 8% 2% 10% Web hoster Telco Local IT resource (VAR) Pure cloud provider Micro Small Medium 10
85% of websites are purchased online Total Server Add-ons by Industry Website Design 67% of websites are designed in-house 24% of those designed inhouse used a site builder 33% of websites are designed by a thirdparty web designer Website Add-ons and Management Mobile Optimized Website 34% Mobile optimized 41% 25% Displays on mobile without optimization Only displays properly on a computer 11
Purchase Location of Add-on Web hoster: bundles with website purchase Web hoster: returned after website purchase Directly from the application developer Third-party provider 48% 18% 28% 6% 66% Note: In total, 66% of add-ons are purchased from the web hoster. Top Website Add-ons 39% 62% 37% 52% 31% 46% 21% 24% 19% 40% 15% 34% SEO Content management Backup Site-building tools E-commerce capabilities Security and health monitoring 13% 30% 12% 36% 5% 16% SSL Mobile optimization Content delivery network 2015 2018 12
76% of SMBs have a positive opinion of their web provider Top Areas for Improvement Performance (speed, availability) Support experience Usability Security vulnerabilities Self-service administration 49% 27% 27% 17% 17% How SMBs are Resolving Issues Escalating with the vendor Exploring alternative options Moving in-house 44% 37% 17% 13
Web Presence Opportunities through 2018 Likelihood of Entering the Cloud Market 24% 19% Cloud leapers (New adoption) Cloud converters (Switch from in-house) Web Presence Opportunities through 2018 14% CAGR 11B RUB $206M USD 16B RUB $301M USD 2015 2018 The steadily growing web presence market will reach 16B RUB ($301M USD) by 2018 at a CAGR of 14%. There are a number of opportunities for service providers in this market, and a clear area for growth is mobile optimization. Only 34% of websites are truly mobile optimized even though a recent emarketer* report found that 55% of Russian mobile phones are smartphones. This report estimates that smartphone penetration will increase to 71% by 2018. To take advantage of this trend, service providers must bring mobile capabilities to SMBs at a competitive price point. *Czech Republic Just Tops Russia for Mobile Penetration emarketer, Dec. 2014 14
UNIFIED COMMUNICATIONS Unified communications services which include hosted email, hosted business voice services, and hosted collaboration applications are becoming increasingly important for SMBs. Customers, employees, and vendors are often geographically dispersed and quality communications are critical for successful businesses. The security of these communications is also a top priority concern for Russian SMBs and must be addressed by the service provider. In order to expand this market, education about hosted business voice services will be necessary. Email Types of Email Used by SMBs 37% 39% 8% Hosted by a service provider Free service Hosted on an in-house server Note: 16% of SMBs do not use email. Top Purchase Triggers for Hosted Email 43% 21% 21% Increased need for security Good price point Need for professional look and feel 15
Key Features of Premium Hosted Email Security Archiving Shared Calendar 49% of SMBs have a positive opinion of their hosted email service provider Top Areas for Improvement Performance (speed, availability) Usability Support experience Security vulnerabilities 55% 23% 15% 7% 16
How SMBs are Resolving Issues Escalating with the vendor Exploring alternative options Moving in-house Cancelling the service 59% 30% 6% 5% Hosted Business Voice Services 22% of SMBs have in-house business voice services 6% Hosted of SMBs have hosted business voice ervices 72% of SMBs do not have business voice services Main Barriers to Hosted Business Voice Services 17 39% 32% 24% 17% Price Lack of knowledge about hosted business voice services Technical concerns Security and privacy concerns
Top Purchase Triggers for Hosted Business Voice Service 30% Good price point 25% Business has explosive growth 20% Major change to business Top Features that Improve Customer Satisfaction 1 Integration with employee s mobile devices 2 Instant messaging Top Features that Improve Productivity 1 2 Voice over WiFi Single number reach 71% of SMBs have a positive opinion of their hosted business voice services service provider Total Server Add-ons by Industry 18
Top Areas for Improvement Performance (speed, availability) Support experience How SMBs are Resolving Issues Escalating with the vendor Exploring alternative options Cancelling the service Moving in-house 49% 39% 8% 4% Collaboration Applications 38% 58% 9% Instant collaboration Web conferencing 3% 26% 22% Mobile device management 2015 2018 19
Unified Communications Opportunities through 2018 Likelihood of Entering the Cloud Market 46% 31% 35% 69% Cloud leapers (New adoptions) Cloud converters (Switch from in-house) Email Hosted PBX 14% CAGR 487M 706M 19B RUB $359M USD 28B RUB $531M USD 2015 2018 Looking toward 2018, the unified communications market will grow at a CAGR of 14% and reach 28B RUB ($531M USD). Instant collaboration tools, such as Skype, will be a top application in coming years. Growth will also come from business voice service users switching from in-house to hosted systems and from new adoption of hosted email. Marketing and education efforts directed toward SMBs who are lacking these services will help expand the overall market and increase the customer base of service providers. 20
BUSINESS APPLICATIONS Business applications are an important part of the overall cloud services market. They fill the varied and specific needs of SMBs with better flexibility, scalability, and time-to-market than in-house solutions. File sharing and online backup are currently the most popular applications and will continue to maintain importance through 2018. When SMBs purchase business applications, price is a less significant factor than features and capabilities. This indicates that service providers must offer best-in-breed applications rather than lower cost solutions. Business Application Research Methods 58% 41% 35% Online research 30% 37% 24% Industry news 26% 41% 35% Trusted advisor 6% 9% 14% Local IT resource 4% 12% 22% Existing service provider Micro Small Medium Most Important Factors in Choosing Business Applications 45% 25% 23% 6% Features and capabilities Business need Price Customer experience 21
Purchasing Trial Software 14% Purchased without a free trial 86% Purchased with a free trial Bundling 22% With bundle 78% Separate from bundle Bundled with 1 Other online applications 2 With bundle Hosted server 22 24
Top Business Applications through 2018 43% File sharing 17% 34% Online backup 24% 23% 14% 29% Online accounting 8% 23% Payroll and HR 6% Online CRM 5% 19% 5% 23% VDI Support and help desk 2015 2018 Business Application Opportunity through 2018 26% CAGR 25B RUB $572M USD 51B RUB $945M USD 2015 2018 23
Over the next three years, the business applications market will grow at a CAGR of 26% and reach 51B RUB ($945M USD). Free trials are clearly an important part of any go-to-market strategy while bundling is not as important. Service providers who offer application bundles should ensure price transparency and high-quality offerings. Overall, this category will see the strongest growth in the next three years and will almost reach the size of the IaaS category. Overall Cloud Services Opportunity through 2018 56B RUB 51B RUB 20% CAGR 26% CAGR 28B RUB 14% CAGR 33B RUB 16B RUB 14% CAGR 11B RUB 19B RUB 25B RUB IaaS Web presence Unified communications Business applications 2015 2018 24 26
151B RUB ($2.8B USD) 2018 88B RUB ($1.6B USD) 2015 20% CAGR Since Odin last researched Russia in 2013, the cloud services market has maintained steady growth despite a tumultuous economic climate. IaaS and business applications see strong demand and will continue to experience growth for at least the next three years. As prices decline and more services are developed for SMBs, we expect that many more SMBs will enter the cloud space. Service providers can encourage this trend by offering strong security, quality customer support, and transparent pricing. 25
Learn More Odin is committed to helping our partners understand the best opportunities in the SMB cloud market. This report covers only a portion of the extensive data included in Odin SMB Cloud Insights research. Please contact SMB@odin.com with any further questions. About Odin Odin provides software that powers the cloud ecosystem, from small and local hosters to some of the world s largest telecommunications providers. By partnering with Odin, service providers gain access to industry expertise, a catalog of the most in-demand cloud applications, and the most comprehensive selection of software including web server management, server virtualization, provisioning, and billing automation. With offices in 15 countries, Odin supports more than 10,000 service providers in delivering applications and cloud services to more than 10 million SMBs. For more information, visit www.odin.com, follow us on Twitter, or like us on Facebook. 2015 Parallels IP Holdings GmbH. All rights reserved. Odin and the Odin logo are 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. 26
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