2015 SMB Cloud InsightsTM INDONESIA
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, security, server backup, and database add-ons. Includes cloud servers, due to their increasing use among SMBs. 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 email services, including email security, email archiving, along with mobility and hosted phone services, including hosted PBX. As of 2015, 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 4.4 million such SMB establishments in Indonesia today. SMB segments include: micro (1-9 employees), small (10-49 employees) and medium (50-250 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. 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.
The Overall Indonesian SMB Cloud Services Market Rp15T ($1.2B 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). Globally and locally, we are finding that 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. Odin estimates the 2015 Indonesian SMB cloud service market to be Rp15T ($1.2B USD). Infrastructure-as-a-service accounts for Rp6.1T ($496M USD) of the overall market. Web presence adds Rp1.6T ($128M USD), unified communications adds Rp4.0T ($324B USD), and business applications adds Rp3.6T ($289M USD). Service providers can use the information contained in this report to understand how SMBs are using cloud services and identify growth opportunities in the coming years. 1
INFRASTRUCTURE-AS-A-SERVICE (IaaS) IaaS Accounts for 40% of the Cloud Services Market in 2015 40% 26% 24% IaaS 10% Web presence Rp1.6T ($128M USD) Unified communications Business apps Rp6.1T ($496MUSD) Rp4.0T ($324M USD) Rp15.2T ($1.2B USD) Rp3.6T ($289M USD) The IaaS category is the largest within the overall Indonesian SMB cloud services market reaching Rp6.1T ($496M USD) in 2015. As this is an emerging market, many SMBs have recently started to rely on server systems to run their businesses. This often results in SMBs bypassing in-house servers and leaping straight to hosted servers as a solution. Virtual private servers (VPS) are the most popular form of hosted server in Indonesia. The exception is medium firms who prefer dedicated hosted servers. 25% 75% 9% Physical servers VPS Cloud servers Note: 20% of SMBs interviewed use more than one type of hosted server 2
Top Workload for Hosted Servers 1 2 3 44% Web server 42% Database applications 26% Business intelligence SMBs Are Willing to Pay More for High Availability and Unlimited Storage High Availabity 68% 25% SMBs would pay up to Rp60,000 more each month SMBs would pay up to Rp120,000 more each month Unlimited Storage 79% 31% 3
Current and Projected Server Add-On Usage 49% 74% 47% 73% 28% 44% Security Control panel Database applications 26% 44% Server backup 12% 29% LAMP stack 11% 28% Development platform 2015 2018 Over 90% of Indonesian SMBs that use hosted servers also purchase at least one add-on with their server. Over the next three years, security and control panels will maintain their prominence, while other add-ons will see strong growth. 22% 48% of SMBs with hosted servers reported using fully managed servers of SMBs with self-managed servers want to upgrade to fully managed servers within three years 4 Indonesian SMBs are starting to outsource the management of their servers to their service providers and third parties. This allows SMBs to focus on their businesses while providing new opportunities for service providers.
IaaS Opportunity through 2018 54% Cloud leapers (New adoption) 29% Cloud expanders (Increase spending) 24% CAGR Rp6.1T ($496M USD) Rp11.7T ($956M USD) 2015 2018 The IaaS market will see a 24% annual growth rate and reach Rp11.7T ($956M USD) by 2018. As noted above, most of this growth will come from firms without any type of server who will leap into the cloud market for the first time. As many SMBs entering the cloud space will be unfamiliar with this technology, service providers can differentiate themselves in the market by offering higher-touch services to their customers. 5
WEB PRESENCE Web Presence Market is Small, but Will Grow in Coming Years 10% Web presence Rp1.6T ($128M USD) 40% 26% 24% IaaS Unified communications Business apps Rp6.1T ($496MUSD) Rp4.0T ($324M USD) Rp15.2T ($1.2B USD) Rp3.6T ($289M USD) The Indonesian web presence market is currently valued at Rp1.6T ($128M USD). Although only 11% of SMBs have a website in 2015, the market is set to more than double in the next three years as SMBs enter the web presence market. Basic and managed websites, website applications, and website design will see strong adoption by Indonesian SMBs. WebSite Design 36% 33% 60% Third-party web design In-house design 64% 67% 40% Micro Small Medium 6 Mobile optimized Displays on mobile without optimization Only displays properly on a computer 55% 22% 23%
Website Design Third-party hosted 72% 28% Self hosted 220 億 円 Website Hosting Top Website Applications 1 2 3 42% 40% 27% 84% Website Management SEO Content E-commerce management 14% 2% In-house Web designer Web hoster Website Add-On Purchase Location 38% Purchased from web hoster at time of website purchase 28% Purchased from web hoster after website purchase 22% Puchased directly from application developer 12% Other third-party 50% of SMBs are planning to switch to external website management within 3 years 7
Top Social Media 41% 36% 23% Facebook LinkedIn Local Directories Web Presence Opportunity through 2018: 76% Cloud leapers (New adoption) 86% Cloud converters (Switch from in-house) 36% CAGR Rp1.6T ($128M USD) Rp4.0T ($322M USD) 2015 2018 Growing at an impressive CAGR of 36%, the web presence market will reach Rp4.0T ($322M USD) by 2018. The biggest opportunities in this market will come from SMBs deploying websites for the first time and SMBs moving from in-house hosting to third-party hosting. 8
UNIFIED COMMUNICATIONS With 20% Using Email and Only 7% Using Business Voice Services, Unified Communications Category is Ripe for Expansion 10% Web presence Rp1.6T ($128M USD) 40% 26% 24% IaaS Unified communications Business apps Rp6.1T ($496MUSD) Rp4.0T ($324M USD) Rp3.6T ($289M USD) Rp15.2T ($1.2B USD) Unified communications which includes hosted business voice services, email, and collaboration applications is the second largest category of the Indonesian cloud market valued at Rp4.0T ($324M USD). As only 7% of Indonesian SMBs use business voice services and 20% use an email service, the market is still emerging. As a result, there is significant opportunity for service providers as SMBs continue to see the business value of these services. 9
Business Voice Services Location 9% Hosted In-house 91% 28% Growth Top Concerns about Hosted Business Voice Services 32% 24% 17% Unaware of hosted PBX Price Top Purchase Triggers for Hosted Business Voice Services 32% 30% Technical concerns 16% Hosted Business Voice Features Increase Productivity and Customer Satisfaction 45% Instant messaging 40% Mobile connectivity 35% Auto call distribution 23% Auto attendant Major change to business (growth) Good price point Add new business locations 10 Although very few Indonesian SMBs use hosted business voice services, those who do find that it improves productivity and customer satisfaction. For SMBs without hosted business voice services, the largest barrier to adoption is simply being unaware of the product. Service providers should address this education gap in their messaging to potential customers.
Business Email Varieties 80% 12% 7% 1% Free service Hosted by a service provider In-house server Do not use email Advantages of Paid Business Email over a Free Service Security Calendar functionality Archiving 89% 72% 48% Top Purchase Triggers for Premium Hosted Email Increased need for security Need professional look and feel Good price point 30% of SMBs plan to add paid hosted email over the next three years Similar to business voice services, Indonesian SMBs are presently not heavy users of business email but will grow their capabilities in coming years. SMBs find the greatest value of paid business email in the security that it offers over free services. 11
Unified Communications Opportunity through 2018 56% 75% 81% 70% 45% 85% Cloud leapers (New adoption) Cloud converters (Switch from in-house) Cloud expanders (Increase spending) Business voice services Email 8% 25% 3% 20% 4% 17% Web conferencing Instant collaboration Mobile device management 2015 2018 12
Unified Communications Opportunity through 2018 23% CAGR Rp4.0T ($324M USD) Rp7.3T ($597M USD) 2015 2018 The Indonesian unified communications market will grow to Rp7.3T ($597M USD) by 2018 as SMBs adopt hosted services to improve their communications. For many of these firms, this will be their first foray into hosted communication tools and they will need guidance on the benefits that service providers can provide. Additionally, this market will see exceptional growth in the collaboration application sub-category (instant messaging, mobile device management, and web conferencing) with a 38% CAGR into 2018. 13
BUSINESS APPLICATIONS Business Applications Will Soon Become the Fastest Growing Cloud Category in Indonesia 40% 26% 24% IaaS 10% Web presence Rp1.6T ($128M USD) Unified communications Business apps Rp6.1T ($496MUSD) Rp4.0T ($324M USD) Rp15.2T ($1.2B USD) Rp3.6T ($289M USD) The business applications market (sometimes referred to as SaaS) is valued at Rp3.6T ($289M USD). Presently, file sharing and online backup are the most commonly used applications and will be adopted by many more SMBs in coming years. Less commonly used applications will also gain traction as more SMBs recognize their value. Present and 2018 Usage of Top Business Applications 10% 27% 7% 25% File sharing Online backup 5% 17% Support / help desk 4% VDI 17% 3% 16% Online accounting 3% 16% Payroll and HR 1% 13% Online CRM 2015 2018 14
More Than Three Quarters of Application Sales Were Captured With a Free Trial Purchased after free trial expired Purchased to access more features Purchased without a free trial 58% 27% 15% Sources for Finding Online Applications 44% 39% 31% 30% 29% 25% Online ads Online research Online marketplace Online reviews Word-ofmouth Note: 45% of Indonesian SMBs use at least two sources when researching business applications Trade publications 15
Business Application Opportunity in 2018 27% Average new use 18% Average increase in spending Business Applications 43% CAGR Rp3.6T ($289M USD) Rp10.4T ($847M USD) 2015 2018 The business applications category is set to be the fastest growing in the Indonesian SMB cloud market. Expanding at a CAGR of 43%, the business applications category will be valued at Rp10.4T ($847M USD) in 2018. Service providers can capture this growth by offering best-in-breed applications and developing strong online marketing. Free trials are an effective method for capturing sales as many Indonesian SMBs are hesitant to purchase applications outright. 16
BUYING CLOUD SERVICES Buying Cloud Services Almost three quarters of all Indonesian SMBs purchase their services from just one or two service providers. This is both an advantage and a challenge for the service provider. While it does mean that service providers have the potential to sell multiple products to their customers, it also places higher stakes on the initial transaction with the SMB. Number of Service Providers 50% 40% 30% 20% 10% 0% 1 2 3 4 5 5+ When purchasing hosted services, SMBs are split between buying in bundles and buying separately. The reason for this apparent split is that SMBs want to maximize the efficiency of their spending. If a bundle can offer savings to the SMB, then a bundle is preferred. However, if a bundle offers unnecessary services to the SMB, then separately purchased services will save the SMB money. This demonstrates the need for service providers to offer high-value, bestin-breed bundles and transparent pricing structures. 1717
Bundled Services Decision Process of SMBs prefer to purchase their cloud services in a bundle 47% 53% of SMBs prefer to purchase their cloud services seperately Discounts on services is the highest rated reason to purchase cloud services in bundles Only paying for services used is the highest rated reason to purchase cloud services separately How do SMBs Contact Their Service Providers? 38% 23% 26% 13% Email support Online chat Over the phone Regular in-person visits 18
Total Market Opportunity 30% CAGR Rp33T ($2.7B USD) Rp15T ($1.2B USD) 2015 2018 Rp11.7T Rp10.4T 24% CAGR Rp4.0T Rp7.3T 23% CAGR 43% CAGR Rp6.1T 36% CAGR Rp1.6T Rp4.0T Rp3.6T IaaS Web presence Unified communications Business applications 2015 2018 The Indonesian cloud services market is set for very strong growth in coming years as many SMBs are now discovering the value of cloud services and will enter the market for the first time. This is spurred on by improvements in network infrastructure and high expectations of economic growth. By 2018, the market will double its present size, reaching Rp33T ($2.7B USD) at a CAGR of 30%. All categories of cloud services are expanding and offer significant opportunity to service providers. Those who are able to meet the evolving needs of SMBs will be able to benefit from this growth. 19
Learn More Please contact SMB@odin.com with any further questions. 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. About Odin Odin provides the software that powers the cloud ecosystem, from small and local hosters to some of the world s largest telecommunication companies. By partnering with Odin, service providers gain access to industry expertise, a catalog of the most indemand 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 http://odin.com, follow us on Twitter, or like us on Facebook. 2015 Parallels IP Holdings GmbH. All rights reserved. Odin and 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. 20
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