SMB Cloud InsightsTM 2015 POLAND
THE OVERALL SMB CLOUD SERVICES MARKET IN POLAND zł 3.4B 2015 ($996M USD) 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. The last time Odin researched Poland was in 2012. This year, we returned to Poland to update our findings and dive deeper into the trends of Polish SMBs. The overall SMB Cloud Service market reached an impressive zł 3.4B ($996M USD) in 2015. Infrastructure-as-a-service (IaaS) is currently the largest portion of the market at zł 1.6B ($463M USD). Web presence reached zł 721M ($213M USD) and unified communications reached zł 439M ($130M USD). Finally, business applications, sometimes referred to as software-as-a-service (SaaS), reached zł 645M ($191M USD).
INFRASTRUCTURE-AS-A-SERVICE (IaaS) IaaS Accounts for 46% of the Polish Cloud Service Market 46% 21% 14% 19% zł 1.6B ($463M USD) zł 721M ($213M USD) zł 439M ($130M USD) zł 645M ($191M USD) IaaS Web presence Unified communications Business applications As mentioned, the Polish IaaS market is valued at zł 1.6B ($463M USD). SMBs are relatively split between in-house servers and hosted servers proportionally using them at 25% and 31%, respectively. This demonstrates dramatic growth from our 2012 research, in which 16% of SMBs used in-house servers and only 9% used hosted servers. The adoption of hosted services, particularly VPS, has been an important trend as we detail below. VPS Used More Heavily than Cloud or Physical Servers 30% Physical servers 81% Virtual private servers (VPS) 13% Cloud servers 25% of SMBs interviewed use more than one type of hosted server 1
Top Barriers to Hosted Infrastructure 42% 23% Price Security concerns SMBs have identified price as their largest concern with moving to hosted servers. Service providers can engage potential customers by offering competitive pricing and providing total cost of ownership tools to demonstrate when and why hosted servers are actually more costeffective than in-house servers. Top Workload for Hosted Servers 1 2 3 47% Web server 40% Database applications 35% Business intelligence Note: In addition to these workloads, medium-sized businesses use their hosted servers for accounting/financials and CRM. 2
SMBs are Willing to Pay More for High Availability and Unlimited Storage High Availability Unlimited Storage 47% 55% SMBs would pay up to zł 5 more each month SMBs would pay up to 22% zł 10 more each month 27% Current and Projected Server Add-on Usage 42% 65% 33% 59% 39% 58% 33% 48% 19% 30% 9% 17% Security Server backup Database add-ons Control panel LAMP stack Development platform 2015 2018 More than three quarters of SMBs that use hosted servers will purchase at least one server add-on. Over the next three years, security will remain the top add-on while server backup, database and control panel add-ons will increase in popularity. 20% of SMBs with selfmanaged servers want to upgrade to fully managed within three years 37% of SMBs with selfmanaged servers want to upgrade to fully managed servers within three years Polish SMBs are starting to use external management for their hosted servers. Although only 20% of SMBs currently use fully managed servers, an additional 37% plan to upgrade management within the next three years. 3
IaaS Opportunity through 2018 49% 61% 23% Cloud leapers (New adoption) Cloud Convertes (Switch from in-house) Cloud expanders (Increase spending) 11% CAGR zł 1,563M ($463M USD) zł 2,137M ($632M USD) 2015 2018 The Polish market for IaaS will reach zł 2.1B ($632M USD) by 2018. This growth will come from a combination of SMBs leaping directly to hosted servers and SMBs converting from in-house servers. Service providers should market to each segment separately as well as offer strong migration support for SMBs entering the cloud. Hightouch offerings, such as fully managed servers, will also help service providers generate new revenue streams. 4
WEB PRESENCE As Web Presence Market Matures, Opportunity Shifts to High-Touch Services 46% 21% 14% 19% zł 1.6B ($463M USD) zł 721M ($213M USD) zł 439M ($130M USD) zł 645M ($191M USD) IaaS Web presence Unified communications Business applications Since 2012, the number of SMBs with websites has grown 33% to a 56% penetration rate. This significant growth has expanded the Web Presence market from zł 189M ($55M USD) to zł 721M ($213M USD). As almost three quarters of SMBs websites are hosted by a third party, there is a great deal of opportunity within this market for both basic as well as high-touch website management. When SMBs design their websites, they are relatively split between using in-house and third-party web designers. Sitebuilders (Wix, Yola, etc.) are used by a third of SMBs designing their websites in-house. Once the website is designed, most websites are hosted by a thirdparty provider 77% of which are managed in-house. Third-party website management provides significant opportunity as 33% of SMBs say they plan to switch to external website management in the next three years. 5
Web Design 41% 59% 49% 51% 42% 58% Micro Small Medium Third-party web designer In-house web designer Third-party hosted 74% Web Hosting Self hosted 26% Mobile Optimization of Website Mobile optimized Website Displays on mobile without optimization Only displays property on a computer 41% 40% 19% Website Applications 1 2 3 31% 20% 18% Website Management 77% 19% 4% SEO Security Content management Note: 30% of medium business use SSL certificates In-house Web designer Web hoster One in three SMBs are planning to switch to external website magagement within 3 years. 48% 22% 21% 9% Purchased from web hoster at time of website purchase Other third party Purchased from web hoster after purchasing website Purchased directly from application developer 6 63% of SMBs with websites purchase at least one add-on application for their website. The majority of these applications are purchased from the web hoster. However, third-party resellers and application developers do account for 31% of application sales.
Top Social Media 52% 34% 14% Facebook Local directories Twitter Web Presence Opportunity through 2018 75% 87% 3% Cloud leapers (New adoption) Cloud converters (Switch from in-house) Cloud expanders (Increase spending) Web Presence 16% CAGR zł 721M ($213M USD) zł 1,114M ($330M USD) 2015 2018 Expanding at a CAGR of 16%, the Polish web presence market will grow to zł 1.1B ($330M USD) by 2018. SMBs building their first website and those redesigning their sites will take advantage of managed services if offered in a well-priced package. This means that service providers will find success by offering high-touch solutions including website design, hosting, management, and an application marketplace. 7
UNIFIED COMMUNICATIONS Polish Unified Communications Market is Maturing with Steady Growth 46% 21% 14% 19% zł 1.6B ($463M USD) zł 721M ($213M USD) zł 439M ($130M USD) zł 645M ($191M USD) IaaS Web presence Unified communications Business applications In 2015, the Polish unified communications market reached zł 439M ($130M USD). Hosted business voice services accounts for half of this market while hosted email and collaboration applications (instant messaging, web conferencing, mobile device management) account for 15% and 35% of the market, respectively. Although most Polish SMBs do not currently use these communication services, many are interested in expanding into this market in the near future. This section outlines several factors that affect SMB hosted communication services adoption rates. Note: Since our 2012 report, collaboration applications have been shifted into the unified communications category in order to clarify market opportunity. Readers will find that this has resulted in small changes from the 2012 Poland report. Communication Devices Used by Polish SMBs 73% 56% 47% 21% 15% Smartphone Landline Tablet IP phone Softphone 8
Most SMBs Keep Their Business Voice Services In-House In-house Hosted 25% 75% Top Barriers to Hosted Business Voice Services 23% 26% 11% Price Unaware of hosted PBX Technical concerns 9
Top Purchase Triggers for Hosted Business Voice Services 25% Major change to business / growth 17% Good price point 14% Office location is changing Hosted Business Voice Features that Increase Productivity and Customer Satisfaction 30% 29% 24% 23% Instant messaging Mobile connectivity Auto call distribution Auto attendant One quarter of SMBs with business voice services use a hosted solution. Lack of knowledge about the product and price are the main barriers to switching for the remaining three quarters of SMBs which rely on in house solutions. Service providers should work to address these barriers and offer migration tools to allow for seamless adoption. 10
HOSTED EMAIL Business Email Varieties 39% 26% 7% 28% Hosted by a service provider Free service In-house server Do not use email Primary Advantages of Paid Business Email over a Free Service 1 2 3 Security Archiving Share calendar Top Purchase Triggers for Premium Hosted Email 38% 28% 28% 20% Good price point Increased need for securtiy Need professional look and feel Company adds more employees 11
72% of Polish SMBs use email for their business but only 39% use hosted business email. Security is clearly an important factor for SMBs, and service providers should make an investment in their security offerings. SMBs that were interviewed also indicated that email brand is important for purchasing decisions. As SMBs continue to move from in-house email to hosted email, service providers offering secure, brand name solutions (such as hosted Exchange or Office 365) can take advantage of these trends. Unified Communications Opportunity through 2018 Hosted PBX 33% 36% Cloud leapers (New adoption) 85% 52% Cloud converters (Switch from in-house) 27% 22% Cloud expanders (Increase spending) Email 33% 56% Instant collaboration 11% 29% Web conferencing 8% 27% Mobile device management 2015 2018 Unified Communications 17% CAGR 12 zł 439M ($130M USD) zł 705M ($208M USD) 2015 2018 Polish SMBs are recognizing value and continuing to adopt hosted communication services, pushing the market to zł 705M ($208M USD) by 2018. The most notable growth will come from the adoption of collaboration applications. This sub-category will grow at an impressive 31% CAGR into 2018.
BUSINESS APPLICATIONS Business Applications Continues to Show Strong Growth 46% 21% 14% 19% zł 1.6B ($463M USD) zł 721M ($213M USD) zł 439M ($130M USD) zł 645M ($191M USD) IaaS Web presence Unified communications Business applications The business applications market often referred to as SaaS reached zł 645M ($191M USD) in 2015. Currently, file sharing and online backup are the most heavily consumed hosted applications. Over the next three years, online accounting and virtual desktop infrastructure (VDI) will also gain significant market share among SMBs. 27% 46% File sharing 25% 45% Online backup 17% 33% Online accounting 10% 23% Virtual desktop interface (VDI) 9% 23% Payroll and HR 7% 22% Support/help desk 6% 19% Online CRM 2015 2018 13
Use of Free Trial When Purchasing Software MIcro Small Medium 34% 34% 57% 56% 54% 40% 10% 12% 3% Purchased without a free trial Purchased when free trial expired Purchased to access more product features Among micro and small businesses, two thirds of software purchases occur after a free trial. This can be contrasted with medium businesses which tend to rely on free trials much less frequently. Service providers can leverage this information by developing free trial options for smaller firms while using other go-to-market strategies for medium businesses. Top Sources for Finding Online Applications Word-ofmouth Online research Online reviews 14
Business Application Opportunity through 2018 16% Cloud leapers (New adoption) 7% Cloud expanders (Increase spending) Business Applications 23% CAGR zł 645M ($191M USD) zł 1,204M ($356M USD) 2015 2018 Growing at a CAGR of 23% into 2018, the Polish business applications market will reach zł 1.2B ($356M USD). Most applications within this market will see strong growth in coming years, providing significant opportunity for developers and service providers. Free trials and bundled services can be strong avenues for encouraging sales however there are challenges with bundling which are explored in the following section. 15
BUYING CLOUD SERVICES Number of Service Providers 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 With more than 80% of SMBs using only one or two service providers, the service provider has the opportunity to sell multiple services to its customers. The go-to-market strategy to sell multiple services often results in bundled offerings. However, this is not always the right tool to sell to the SMB market. SMBs are attracted to bundles if there are clear cost savings but would prefer purchasing separately if they perceive the bundles as locking them into unnecessary services. of SMBs prefer to purchase their cloud services in a bundle 43% 57% 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 Service providers who offer bundled services should create bundles that include best-in-class brands and transparent pricing. 16
TOTAL MARKET OPPORTUNITY 15% CAGR zł 3.4B ($996M USD) zł 5.2B ($1.5B USD) 2015 2018 3-Year CAGR: zł 1,563M zł 2,137M IaaS 11% zł 721M zł 1,114M Web presence 16% 3-Year CAGR: zł 439M zł 705M Unified communications 17% zł 645M zł 1,204M Business applications 23% 2015 2018 One of the largest trends that Odin has identified in Poland and similar maturing countries is the value SMBs are finding in moving traditional business services into the cloud. From communications to business applications to customer support, service providers have the opportunity to offer valuable hosted solutions to SMB customers. Odin is optimistic that the Polish SMB cloud services market will see continued growth in coming years. 17
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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. 19
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