Part 4 of a 5-part series detailing Parallels SMB Cloud Insights research

 

Welcome to Part 4 of our overview of findings from our Parallels SMB Cloud Insights report. So far in this series, we’ve discussed the different segments of the SMB cloud services market and how they relate to hosted infrastructure and web presence. 

 

In the area of hosted communication and collaboration, the opportunities for hosted email penetration are the same for SMBs working with either mature or maturing cloud service markets in developed countries. Therefore, in this post we’ll look at all developed countries as a single group. We’ll also focus our research on two areas: premium business email, including security, archiving, and mobility features; and hosted PBX.

 

Worldwide, the SMB market for both these services is small, with less than 10% of SMBs currently paying for premium hosted email and less than 5% using hosted PBX services (see Table 3 below).

 

 

 

Hosted Email

 

About 50% of SMBs in countries with mature cloud services use hosted email (see Table 3), and less than 10% of those in mature and maturing cloud service environments pay for it (except in the US, where over 15% do). Though this may seem like a challenge, current low usage of paid hosted email actually offers two major growth opportunities for service providers.

 

The first is in encouraging adoption among micro and small SMBs currently using in-house email servers. Our research found that around 10% of micro SMBs and more than 20% of small SMBs in developed countries use in-house email servers. This is an expensive and complicated solution for small companies, particularly those without dedicated IT staff. And since some 25 to 40% of SMBs with in-house email servers are either definitely planning to or at least considering switching to premium hosted email in the next three years, these SMBs represent a sizable opportunity for service providers.

 

The second opportunity lies in upselling small and medium SMBs that are currently using free email. Free is hard to compete with, but free only gets business so far. In fact, 20 to 50% of small and medium SMBs using free email are either planning to or considering adding premium hosted email in the next three years. The trick to upselling to these businesses is demonstrating the benefits of hosted email, like its team collaboration aspects and its “pay-per-seat” pricing model.

 

For the markets with emerging cloud services, less than 20% of SMBs are even using email at all, and only 5% are paying for it. These companies can benefit from the same features as SMBs in developed countries, so the best opportunity here is to upsell small and medium SMBs using free email through a hosting service, ISP, or other free provider. 

 

Hosted PBX

 

Hosted PBX is a fairly new service in all geographies, which means the SMB market for this service looks similar in both developed and developing countries. Our research found that, except in the U.S., less than 5% of SMBs in any country have a hosted PBX system (see Table 3). For U.S. companies, it’s still a meager 10%. Nevertheless, we expect other countries to catch up to the U.S. rate quickly.

 

The easiest targets for service providers looking to step into the hosted PBX market are SMBs that currently use in-house PBX systems (about 10 to 20% of micro SMBs and more than 30% of small SMBs). Selling points include the less complicated, more flexible options hosted PBX offer. 

 

Service providers will also have to address the three big stumbling blocks to hosted PBX adoption for SMBs: price, security and privacy issues, and technical know-how. We believe the trick to working around this is two-fold: offer small bundles in order to keep prices lower, and actively educate SMBs about security and technical aspects. Hosted and in-house PBX systems have similar technical features and are equally secure, yet many SMBs mistakenly think otherwise. 

 

SMBs also often indicate that it’s important to them that their service provider has a local presence. It’s crucial for service providers with a local presence push this advantage, by emphasizing their expertise in local language voice offerings, for example. 

 

In our last series entry, we’ll discuss opportunities in Business Applications, and wrap up the findings in our Parallels SMB Cloud Insights report. 

 

 

Register Now! for the April 10^th  Parallels Cloud Services Webinar for Service Providers

8:00 AM, Pacific Standard Time (GMT-08:00, Seattle)

 

Cloud Services Providers should attend this webinar to hear directly from leading application and hosted services vendors who can help you profit by offering the most in-demand applications to small and medium business customers. This is a great opportunity for service providers to learn how to easily market and sell high-demand commercial applications and services, and how Parallels can help providers of any size be successful in increasing ARPU and reducing customer churn.

 

This month’s scheduled presentations include:

 

Google – How you can Increase ARPU & Reduce Churn with Google Apps, Jeff Ragusa, Google Apps SMB Channel Lead

Jelastic – The PaaS for Hosters “Rock-Solid Java in the Cloud”, Judah Johns, Chief Evangelist

SiteLock – Your Partner in Cloud Security,  Neill Feather, President

Asigra – How to Deliver a Profitable Cloud Backup Service, Eran Farajun, Executive Vice President

 

Register Now! for the April 10^th  Parallels Cloud Services Webinar for Service Providers

 

This case study is part of series conducted by Parallels that examines how Parallels partners are optimally using our products.  For a complete copy, click here [PDF].

 

Partner Summary

 

Pacificnet Hosting Limited (PacHosting) was established in January 2002 and has since grown to become one of the leading hosting service providers in Hong Kong. It is focused on providing easy-to-use, effective and reliable online business solutions and the latest information technologies to help businesses gain a competitive advantage on the web.

 

Over the years, the company has built up a strong portfolio of solutions which include Web Hosting, Email Hosting, Virtual Private Servers (VPS), Cloud Servers and Hosted Exchange 2010 for small to large corporations.

 

Business Situation

 

To further strengthen its position in the market, PacHosting sought to capitalize on emerging opportunities, particularly in the Software-as-a-Service (SaaS) space, to broaden its portfolio and deliver greater value to its customers. 

 

In order to achieve this in an efficient and cost-effective manner, PacHosting needed to find a way to reduce time-to-market for the new services while grappling with the problem of IT skills shortage in the Hong Kong market.

 

Solution

 

To address these challenges, PacHosting decided to utilize the Application Packaging Standard (APS) capabilities of Parallels Automation, which it had deployed in 2010 to address its requirements for end-to-end automation. 

 

Parallels Business Automation allows the hosting provider to automate functions such as ordering, account management, billing, invoicing, promotions and customer relationship management, while Parallels Operations Automations helps take care of back office operations such as server infrastructure provisioning, management of service plans and the monitoring of resource usage and server health. 

 

With APS, PacHosting can now go one step further and easily configure applications for seamless integration into cloud delivery systems. APS is a set of specifications that simplifies the delivery of SaaS applications by packaging them in a standard format. Designed from ground-up to address the requirements of SaaS and cloud computing – such as full automation and delegated administration – APS covers provisioning, management, and integration of cloud-based services and applications. 

 

With built-in support for APS, Parallels Automation enables PacHosting to offer APS-certified applications without having to spend time and money developing special control panels or writing custom code to integrate the applications into its service infrastructure.

 

APS already works with hundreds of key applications that are available in the market. Many third-party application vendors are also working with Parallels to create APS-compliant SaaS applications based on Parallels technologies and products. These include applications for collaboration, content management, customer relationship management, online backup, and more.

 

Benefits

 

With APS, PacHosting has been able to create new revenue opportunities in the SaaS space, reduce time-to-market for its new software services and reduce its reliance on technical expertise which is in short supply in Hong Kong. 

 

Creation of new revenue opportunities

 

The APS support that is built into Parallels Automation has enabled PacHosting to go beyond its traditional offerings such as pure web hosting and VPS, to introduce new revenue opportunities based on the SaaS model. There are currently over 300 APS-ready applications listed on Parallels’ web site which PacHosting can easily package and configure as new service offerings for its customers.

 

Adding SaaS to the product mix allowed PacHosting to increase revenue in a number of ways. SaaS applications allowed them to create new product bundles that rounded out existing offers. Consequently, average revenue per user has risen. Also, PacHosting has been able to go back to their existing customers with new offers and new opportunities to engage their customer.

 

From the customer’s perspective, these SaaS applications give them access to useful business applications without the need for high up-front capital investments or to worry about ongoing software upgrades, maintenance and support. 

 

Reduced time-to-market

 

APS helps PacHosting to reduce time-to-market for its new SaaS offerings by allowing applications to be packaged for delivery as cloud services in a matter of days. “APS enables us to launch a new cloud service within one or two weeks, even if we factor in the time needed to procure and provision the necessary hardware resources and to test the application. Previously, in order to deploy software into a cloud or shared hosting environment, custom code or special control panels had to be developed for each application. The process could take weeks or even months,” said Natalie Kong, Business Analyst, Pacificnet Hosting Limited.

 

Rapid ramp-up of services

 

With APS, enabling an application for the cloud environment involves a one-time effort, after which the service can be delivered to multiple customers. This eliminates the need to write custom code for each deployment and allows the service to be rolled out quickly to a large number of users.