A Custom Technology Adoption Profile Commissioned by Egnyte SMBs File Storage Needs Are Growing, But 57% Underestimate File Server Costs 45% Are Interested In Cloud Options September 30, 2011 Many SMBs Have More Than A Terabyte Of Data And Have Data Growth That Exceeds 10% Per Year IT managers at small and medium businesses (SMBs) with 20 to 999 employees face continued budget pressure as data growth booms. Over 61% of North American SMBs have a terabyte or more of data, and 18% have 10 terabytes or more (see Figure 1). Almost half of SMBs report that their general file storage will exceed 10% growth this year. About 12% report hyper-growth in data, with an expected growth of 25% or more this year. The rise of cloud and as-a-service offerings has created new options for file servers, a storage capability that almost every SMB needs. Now IT managers can choose to manage on-premises file servers, use cloud file services, or hybrid options that combine cloud file services synchronized with an on-premises server. But will they be interested in a Softwareas-a-Service (SaaS) model for file servers? Forrester s Annual Surveys Show SMBs Have A Lot Of Data And Are Interested In SaaS In our annual survey of business decision-makers at SMBs, we asked about the usage or plans to use SaaS and learned that 28% already use some form of SaaS and another 22% have plans or are interested in using SaaS (see Figure 2). But it s not just the business decision-makers looking at SaaS. Information workers, employees who use a computer at work, have embraced online services that help them manage their work and personal content, including files. Forty-one percent of US information workers are using one or more personal cloud services at work rather than IT s offerings. 1 As information workers adopt services such as file synchronization, file sharing, and online back-up services, IT needs to endorse and manage these options for legitimate uses that aren t supported by their current file server capabilities.
Figure 1 About 61% of SMBs Have A Terabyte Or More Of Data In General File Storage, Including File Servers, And 43% Of SMBs Report Growth Rates Of 11% Or More For General File Storage, Including File Servers Overall, including the data/information on networked and direct-attached disk storage that you know about, how much data/information does your firm currently maintain? For each data/information type, what do you expect will be the growth at your company over the next 12 months? General file storage, including file servers 100TBto 999TB 3% More than 100% 1% 50% to 100% 2% 10TB to 99TB 15% 26% to 50% 1TB to 9TB 43% 11% to 25% 31% 100GB to 999GB 2 Grow 1% to 10% No growth 5% 4 Less than 100GB Shrinking 1% (Total percentages do not = 100% due to removing respondents who said don t know or none) Base: 420 North America SMB IT decision-makers Source: Forrester Forrsights Hardware SMB Survey, United States, Q3 2010 Base: 414 North America SMB IT decision-makers Page 2
Figure 2 About 50% Of Respondents Currently Use Or Plan To Use SaaS In The Next 12 Months What are your group s/department s plans to use the following technologies and services? Software-as-a-service Frequently use Occasionally use 1 28% use SaaS Planning to use in the next 12 months Interested in using 13% 22% plan to use SaaS Don t use and not interested 40% (Total percentages do not = 100% due to removing respondents who said don t know) Base: 512 North America SMB IT decision-makers Source: Forrester Forrsights Business Decision-Makers Survey, Q4 2010 Most Firms Use File Servers, And Many Use Service Providers For File Services Though file servers are common among SMBs, in Forrester s annual Forrsights Hardware SMB Survey, 21% of respondents report not using an on-premises file server (see Figure 3). In September 2011, Egnyte commissioned Forrester Consulting to conduct a custom survey of 53 SMB IT decision-maker s to learn more details about how firms meet their file server needs. We discovered that most SMBs have a file server, but that 40% use hosted file servers and 17% are using cloud file services (see Figure 4). The difference between the two is important. Hosted file servers are dedicated software and often hardware set up for the use of one specific customer. The customer s costs and responsibilities are similar or somewhat lower to the costs of purchasing and maintaining an on-premise file server. Cloud file services are different from hosted file servers because they are built on multitenant software platforms that host all customers in one platform, using appropriate security and separation, to gain greater efficiencies of cost, operations, and performance for all customers. Note that some cloud file services offer options for a synchronized on-premises file server that speeds performance and ensures offline operation for the cloud file service. Page 3
Figure 3 A Majority Of SMBs Use An On-Premises File Server But 21% Report Not Using One Does your firm use the following types of servers onpremises? A file server 3% 21% Base: 184 North America SMB IT decision-makers Source: Forrester Forrsights Hardware SMB Survey, United States, Q3 2010 76% Don t know No Yes, onpremises Figure 4 SMBs Use Multiple File Server Delivery Strategies And 17% Of Respondents Use Cloud File Services How does your firm meet its needs for storing, sharing, and collaborating on computer files? On-premises file server 87% Hosted file server 40% Cloud file server 17% Base: 53 US IT decision-makers (multiple responses accepted) Source: A commissioned study conducted by Forrester Consulting on behalf of Egnyte, September 2011 Page 4
Fifty-Seven Percent Of IT Managers Report That They Underestimate The Total Costs Of Owning And Operating A File Server We surveyed SMB IT decision-makers to get their views on the costs of building and operating file servers and learned that respondents often underestimate the total costs. When we asked respondents for an initial overall estimate of their annual file server costs, including annualized product purchase expenses, labor, and maintenance, just over half reported costs under $5,000 per year, and 12% reported costs over $20,000 per year (see Figure 5). Then we prompted respondents to think about the annualized costs of hardware, software, and personnel time. For hardware, we prompted them to sum the annualized costs of server and storage hardware, redundant power, and networking gear. For software costs, we prompted them to consider the annualized costs of file server OS and software licenses, VPN software, security and firewall software, backup software, and maintenance contracts. For personnel costs, we prompted them to consider the annualized costs for an IT administrator to maintain and expand the file server and manage and support users, plus any use of consultants or systems integrators. After the respondents reviewed all the components of file server costs, 32% reported a total cost of $20,000 or more, up from the 12% who chose that as their initial estimate (See Figure 6). Most importantly, 57% of respondents increased their total cost estimate after prompting on the all the cost elements of owning and operating a file server. This gap between initial and detailed estimates on the costs of files servers means that SMB IT managers need to correctly estimate their file server costs before comparing those costs to hosted file server and cloud file service offerings. Confusion over their total cost of ownership is hindering many IT decision-makers from realizing the full cost savings potential of cloud file servers. Figure 5 IT Decision-Makers Underestimate The Total Cost Of Ownership Of File Servers INITIAL ESTIMATE DETAILED ESTIMATE Under $5,000 51% Under $5,000 38% $5,000 to $9,999 15% $5,000 to $9,999 13% $10,000 to $14,999 15% $10,000 to $14,999 8% $15,000 to $19,999 8% $15,000 to $19,999 More than $20,000 12% More than $20,000 32% Base: 53 US IT decision-makers Source: A commissioned study conducted by Forrester Consulting on behalf of Egnyte, September 2011 Page 5
Figure 6 About 57% Of Respondents Increased Cost Of Ownership Estimates Upon Reviewing Typical File Server Costs Difference between initial and detailed total costs Decreased 6% Remained the same 38% Increased less than $5,000 1 Increased between $5,000 and $9,999 Increased more than $10,000 8% 11% Fifty-seven percent underestimate file server costs Increased more than $25,000 1 Base: 53 US IT decision-makers (Please note that due to rounding the sum does not equal 100%) Source: A commissioned study conducted by Forrester Consulting on behalf of Egnyte, September 2011 Takeaway SMB IT Managers Should Evaluate Cloud File Services Cloud file services offer some or many of the features of an on-premises file server but charge per user per month rather than requiring lots of up front expense and often cost less per employee on an annualized basis. Since 57% of our SMB respondents initially underestimated their file server costs by a significant amount, it is important for IT managers to correctly estimate their costs before judging the costs of cloud file services or hosted file servers. After prompting for detailed file server cost estimates, we asked SMB IT managers about their level of interest in various options for file services. The most popular service provider option for IT managers, with 45% of respondents somewhat or very interested, was a variety of cloud file server options, rather than the 18% for a hosted file server (See Figure 7. It s also worth noting that 32% of respondents were not enthusiastic about a traditional onpremises file server. SMB IT managers should develop a detailed cost estimate for their file servers so they can do a true cost comparison to cloud file services. Then they ll be able to fully compare their file server requirements to the cloud file service offerings while doing an apples-to-apples cost comparison. And note that it s not an either or choice. Some firms find that both file servers and cloud file services have a place in meeting their needs. In addition, with 41% of information workers using various unapproved online file storage and data services for work purposes, SMB IT managers should offer an approved cloud service, rather than let company files be stored in personal services. Page 6
Figure 7 One-Third Of Respondents Are Interested In A Cloud-Based Portal/Collaboration Services Now that you have estimated your total number of costs, on a scale of 1 to 5, with 1 being not interested and 5 being very interested, what is your level of interest in the following? Traditional on -premise file server 68% 1 Cloud based file server options 45% 13% Hosted file server at a service provider 18% 26% Base: 53 US IT decision-makers Interested (4 or 5) Neutral ( Cloud based file server options are based off five different price and user packages) Source: A commissioned study conducted by Forrester Consulting on behalf of Egnyte, September 2011 Methodology This Technology Adoption Profile was commissioned by Egnyte. To create this profile, Forrester leveraged its Forrsights Hardware Survey, Q3 2010, and Forrsights Business Decision-Makers Survey, Q4 2010. Forrester Consulting supplemented this data with custom survey questions asked of 53 US IT decision-makers who are responsible for file server decisions at SMB organizations with less than 1,000 employees. Survey questions were related to the perception of the total cost of ownership of file servers and interest in cloud-based file services. The auxiliary survey was conducted in August 2011. For more information on Forrester s data panel and Tech Industry Consulting services, visit www.forrester.com. Page 7
About Forrester Consulting Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit www.forrester.com/consulting. 2011, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com. [1-HOBYOL] Endnotes 1 Source: The Personal Cloud: Transforming Personal Computing, Mobile, And Web Markets and Forrsights Workforce Employee Survey, Q3 2010. Page 8