Odin 2015 SMB Cloud InsightsTM THE NETHERLANDS
DEFINITIONS SMBs Defined We define SMBs also known as small and medium enterprises (SMEs) as companies with one to 250 employees. There are around 650,000 SMBs in The Netherlands 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 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. 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, dedicated servers, virtual private servers (VPS), fully managed hosting, as well as add-on applications and services for hosted infrastructure such as control panels, development platforms, LAMP stack, security, and server backup. Web presence and web applications: Third-party web hosting, domain registration, and web applications including web server backup, content delivery networks (CDN), content management systems (CMS), e-commerce, site health monitoring, mobile optimization tools, search engine optimization (SEO), site-building tools, SSL, web server backup, and web server security. Unified communications: Business-class email services including email security, and email archiving, along with mobility and hosted business voice services such as hosted PBX. Includes communication and collaboration applications such as web and phone conferencing, instant collaboration, and mobile device management (MDM). Business applications (also known as software-as-a-service or SaaS): The major types of software applications that can be accessed online such as file sharing, online accounting, online backup and storage, online customer relationship management (CRM), payroll and human resources (HR), support and help desk, and virtual desktop (VDI).
The Netherlands Overall SMB Cloud Services Market 844M ($1.1B USD) 2015 Odin SMB Cloud Insights has entered our 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 their business functions into the cloud. Tools and solutions that were 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 market trends to meet the evolving needs of their SMB customers. New to this year s research is an exploration of how SMBs research, purchase, and use cloud services. Understanding these trends will help service providers build successful relationships with their customers. Odin most recently studied The Netherlands in 2013. Two years later, we have returned to update our research with new data and an updated methodology. 340M 155M 157M 192M Infrastructure-asa-service Web presence Unified communications Business applications 1
INFRASTRUCTURE-AS-A-SERVICE (IaaS) 28% of Total Server Add-ons SMBs use in-house by Industry servers Top Reasons to Keep Servers In-House Security and privacy Legacy systems and other tech concerns Bandwidth Price 36% 32% 15% 7% The Dutch infrastructure-as-a-service (IaaS) market reached 340M ($436M USD) in 2015 and represents 250,000 SMBs who use a hosted server. This market has seen growth over the past two years due to the falling costs of IaaS and the development of IaaS tools for SMBs. Pure cloud servers such as Microsoft Azure and Amazon Web Services have begun to capture a proportion of the market due to their unique advantages. SMBs use VARs (Value Added Reseller) and online research as their main tools to research and purchase IaaS. Service providers should develop marketing for both of these sales channels in order to capture this market. Looking at server usage, SMBs use in-house and hosted servers very differently. In-house servers see heavy usage of ERP, accounting, and payroll software while hosted servers are used for a much more varied set of tasks. This demonstrates that SMBs are taking advantage of the diverse capabilities of hosted servers. While almost all SMBs are pleased with their IaaS service provider, many would still like to see performance improvements especially in support and usability. Service providers should take SMB concerns seriously because SMBs are likely to resolve their issues by leaving their vendor and either going elsewhere or bringing the server in-house. 2
38% of Total Server Add-ons SMBs use hosted by Industry servers 6% of SMBs have both hosted and in-house servers. Buying IaaS SMBs Start Using Hosted Servers When: Business model changed 38% In-house servers did not do enough Company changed size quickly In-house servers had too many issues 36% 15% 11% IaaS Research Methods 50% Trusted advisor or VAR 41% Online research 9% Existing service provider 3
Top IaaS Purchase Locations Web hoster Local IT resource (VAR) Telco/cable co Pure cloud provider 41% 21% 10% 5% Common Purchase Methods 50% Online 33% VAR 12% Phone Most Important Factor in Choosing a Service Provider 32% Ease of management 24% Price 19% 13% 6% 6% Existing relationship Security or privacy concerns Service provider s physical location Ability to expand or contract quickly 4
Using IaaS Top Workloads in Production 31% 25% Content management system 27% ERP 64% 25% 32% 20% 20% Database applications E-commerce systems 15% CRM 22% 14% 17% Business intelligence/ analytics 11% 41% 19% 19% Payroll/ HR admin Project management/ productivity tools Hosted Top Hosted Server Add-ons In-house 3% 4% 37% 42% 60% 43% 40% 48% 20% 27% 28% 10% 19% 15% 14% Security Server backup Control panel Development platform Micro Small Medium LAMP stack 5
Customer Experience 83% of SMBs have a positive opinion of their IaaS provider Total Server Add-ons by Industry Areas for Improvement Performance Support experience Usability Security vulnerabilities Self-service administration 30% 19% 19% 18% 14% 51% 44% of SMBs would pay an additional 10 per month for unlimited storage of SMBs would pay an additional 10 per month for high availability How SMBs are Resolving Issues Exploring alternative options Moving in-house Escalating with the vendor 60% 21% 19% 6
The Dutch IaaS market is expected to grow at a CAGR of 11.7% and reach 475M ($608M USD) by 2018. Most of this growth will come from SMBs with in-house servers switching to hosted servers. Service providers offering migration tools will be able to benefit most from this trend. IaaS Opportunities through 2018 11.7% CAGR 340M ($436M USD) 475M ($608M USD) 2015 2018 Estimated Probability of Entering the Cloud Market 25% 53% Cloud leapers (New adoption) Cloud converters (Switch from in-house) 7
WEB PRESENCE 18% of SMBs have websites hosted in-house. Of those, 62% plan to add a third-party hosted website within three years. 18% Buying a Website 82% 82% of SMBs have a website hosted by a third-party. Key Factors in Choosing a Service Provider Most SMBs take several factors into consideration when choosing a service provider. 63% 49% 32% 15% 10% 9% Price Customer experience Existing relationship Ability to scale resources Security Brand recognition Website Service Provider 77% 9% 8% 2% Web hoster Local IT resource (VAR) Telco Pure cloud provider 19% of SMBs bundle their web hosting with their hosted server Total Server Add-ons by Industry 8
Top Purchase Method 1 58% Online 2 28% VAR 3 10% Phone Building a Website 63% of SMBs build their website in-house 24% of in-house used a paid site 37% of in-house used a third-party web designer Mobile Optimized Website Mobile optimized 38% Displays on mobile 32% without optimization Only displays properly 30% on a computer 9
Website Management Add-on Purchase Location Web hoster: bundles with website purchase Third-party provider Web hoster: returned after website purchase Directly from the application developer (63% purchase from web hoster.) 45% 22% 18% 15% Top Website Add-ons 24% 33% 22% 28% 20% 26% 18% 26% 15% 19% 13% 18% SEO Security Backup SSL E-commerce Content management 2015 2018 10
Type of Management 8% Web hoster 12% Third-party 18% of SMBs plan to move to third-party management within the next three years. 80% In-house Customer Experience The web presence market is valued at 155M ($198M USD). Since 2013, the number of SMBs with websites has grown from 74% to 80%. This is a result of the falling costs of web hosting and the explosion of user-friendly tools for website development and management. SMBs are extremely sensitive to web hosting price, meaning that niche service providers should look toward higher touch services to grow their revenue. These services can include site building, mobile optimization, social media integration and monitoring, and website management. 83% of Total Server Add-ons by Industry Areas for Improvement SMBs have a positive opinion of their web hoster 34% Performance 25% Usability 18% Self-service administration 16% Support experience 13% Security vulnerabilities 11
How SMBs are Resolving Issues 68% 16% 16% Exploring alternative options Escalating with the vendor Moving in-house Web Presence Opportunities through 2018 7% CAGR 155M ($198M USD) 189M ($242M USD) 2015 2018 12
Estimated Probability of Entering the Cloud Market 42% 58% Cloud leapers (New adoption) Cloud converters (Switch from in-house) Website management, in particular, holds significant potential as 18% of SMBs plan to switch to a fully-managed website within three years. Website add-ons also offer opportunities to service providers. SEO and security will remain the most popular add-ons through 2018. Over the next three years, these services and the growth of add-on usage will cause the web presence market to grow at a CAGR of 7% and reach 189M ($242M USD) by 2018. 13
UNIFIED COMMUNICATIONS Email Type of Business Email 65% 23% Hosted by a service provider Free service 7% Hosted on an in-house server of third-party hosted email is bundled with website hosting or a hosted server 49% Top Features of Paid Hosted Email Security Outlook integration Calendar alerts Archiving 27% 19% 9% 7% 78% of SMBs have a positive opinion of their email service provider 14
Areas for Improvement Self-service administration Security Performance Usability 25% 22% 18% 15% How SMBs are Resolving Issues 60% Exploring alternative options 26% Escalating with the vendor 13% Moving service in-house Top Purchase Triggers for Premium Hosted Email 1 Need professional look and feel 2 Increased need for security 3 Company adds more employees 15
HOSTED BUSINESS VOICE SERVICES of SMBs do not have business voice of SMBs have in-house business voice services of SMBs have hosted business voice services 66% 26% 8% Main Barriers to Hosted Business Voice Services 41% 28% 10% 9% Price Lack of knowledge about hosted business voice services Concerns about complexity Technical concerns Top Purchase Triggers for Hosted Business Voice Service 1 Significant growth to business 2 Good price point 3 Current phone system becomes outdated 16
Purchase Location Telco or cable company Email service provider Web hoster 33% 27% 26% Top Features that Improve Customer Satisfaction 1 2 Integration with employer s mobile devices Instant messaging presence Top Features that Improve Productivity 1 2 Single number reach Smartphone integration 17
79% of SMBs are satisfied with their hosted business voice service provider Top Areas for Improvement Usability Security Performance Self-service administration Support experience 36% 27% 25% 8% 4% How SMBs are Resolving Issues 1 2 3 Escalating with the vendor Exploring alternative options Moving service in-house 18
The unified communications market including hosted email, hosted business voice services, and collaboration applications is valued at 157M ($201M USD). Most SMBs view communication tools as critical components of their business and many have taken the leap to move these tools to the cloud. Sixty-five percent of SMBs use paid hosted email and 8% use hosted business voice services. Security and price are major concerns for SMBs switching to these services. As a result, service providers have the opportunity to compete on multiple fronts to win customers. Top-tier services, such as Office 365, can capture SMBs seeking a professional look and feel from their hosted services while second-tier solutions can capture price-oriented SMBs. Collaboration Applications in 2015 2% 22% 33% 12% 23% 15% Instant collaboration Web conferencing 2015 2018 Mobile device management 19
Unified Communications Opportunity through 2018 157M ($201M USD) 190M ($243M USD) 2015 2018 6.5% CAGR Probability of Entering the Cloud Market 37% 23% 29% 40% Cloud leapers (New adoptions) Cloud converters (Switch from in-house) Email Business voice services Collaboration applications represent a smaller amount of the overall market, but will see strong growth in the near future. Mobile device management is a new opportunity as the number of paying customers will expand by 62% over the next three years. Overall, the unified communications market will reach 190M ($243M USD) by 2018. Steady growth will come from SMBs adopting hosted email and hosted business voice services while the most explosive growth will come from collaboration application adoption. 20
BUSINESS APPLICATIONS Researching Options The business applications market has grown considerably over the past two years. In 2013, the market was valued at 137M ($175M USD), and now it has reached 192M ($250M USD). This has been driven by a proliferation of small business-focused software and SMBs increasing comfort with using hosted tools. SMBs rely on both online and local resources to research business applications, which means that service providers should market to both these communities. Just under half of SMBs purchase their applications after using a free trial. This is a substantial change from 2013 when two-thirds of SMBs purchased their applications after a free trial. We believe that the overall maturity of these offers combined with the abundance of online reviews and more accessible information has contributed to this trend. Business Application Research Methods 37% 24% 17% 12% 10% Trusted advisor Online research Local IT resource Existing service provider Most Important Factors in Choosing Business Applications Industry news 34% 29% Features and capabilities Price 26% 11% Business need Customer experience Free Trial Usage 51% Purchased after a free trial 49% Purchased without a free trial 21
Purchasing Preferred Purchase Location No preference Web hoster Local IT consultant Directly from developer 44% 23% 13% 11% Purchasing Bundled SaaS 14% With bundle 86% Separate from bundle Bundled with 1 Broadband provider 2 3 Hosted server Other business applications 22
36% 35% of SMBs would like their cloud services to integrate with single sign-on of SMBs would like their cloud services to share data with each other SaaS Applications in 2015 Percent of users paying for application 60% 50% 40% 30% 20% 10% 0% VDI Mobile device manager Online CRM Web conferencing Support/ help desk Payroll and HR Online accounting Online backup and storage Instant collaboration File sharing 10% 20% 30% 40% Percent of SMBs using application 23
Communication Applications through 2018 33% 46% File sharing 22% 36% Online backup and storage 21% 31% 15% 25% Online accounting Payroll and HR 2015 12% 23% 8% 16% 4% 15% 2018 Support and help desk Online CRM VDI 24
The business applications market has grown considerably over the past two years. In 2013, the market was valued at 137M ($175M USD), and now it has reached 192M ($250M USD). This has been driven by a proliferation of small business-focused software and SMBs increasing comfort with using hosted tools. SMBs rely on both online and local resources to research business applications, which means that service providers should market to both these communities. Just under half of SMBs purchase their applications after using a free trial. This is a substantial change from 2013 when two-thirds of SMBs purchased their applications after a free trial. We believe that the overall maturity of these offers combined with the abundance of online reviews and more accessible information has contributed to this trend. Looking toward specific applications, the most popular services for SMBs are file sharing (224,000 users), online backup (153,000 users), and online accounting (142,000 users). While certain applications are used heavily, only a small proportion of users actually pay for the service. As a result, online accounting has the largest paying customer base with 84,000 paying customers. Over the next three years, the market will grow at an impressive 17.7% CAGR and reach 312M ($412M USD). Usage rates will grow quickly for top applications such as file sharing and online backup, while usage rates will double for less popular applications. Overall, there is a strong opportunity in this market as SMBs move toward greater adoption of hosted business applications. Business Applications Opportunity through 2018 192M ($201M USD) 312M ($243M USD) 17.7% CAGR 2015 2018 25
Cloud Market Opportunity through 2018 844M ($1.1B USD) 1.2B ($1.5B USD) 2015 2018 11.5% CAGR 475M 11.7% CAGR 312M 189M 192M 7% CAGR 6.5% CAGR 17.7% CAGR 340M 155M 157M 192M IaaS Web presence Unified communications Business applications 2015 2018 Overall The total Netherlands SMB cloud service market is set to reach 1.2B ($1.5B USD) by 2018. As hosted services become the new normal, growth will no longer be driven primarily by early adopters. This means there is tremendous opportunity for service providers who offer competitively priced and wellfeatured cloud products. 26
Learn More 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. Odin is committed to helping our partners understand the best opportunities in the SMB cloud market. 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 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 http://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. 27
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