Odin
2015 SMB Cloud Insights
TM
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
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INFRASTRUCTURE-AS-A-SERVICE (IaaS)
28%
SMBs use in-house servers Total Server of Add-ons by Industry
Top Reasons to Keep Servers In-House Price Security and privacy Legacy systems and other tech concerns Bandwidth
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.
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38%
of SMBs use hosted servers Total Server Add-ons by Industry
6% of SMBs have both hosted and in-house servers.
Buying IaaS SMBs Start Using Hosted Servers When: Business model changed In-house servers did not do enough Company changed size quickly In-house servers had too many issues
38% 36% 15% 11%
IaaS Research Methods
50%
Trusted advisor or VAR
41%
Online research
9%
Existing service provider
3
Top IaaS Purchase Locations
41% 21% 10% 5%
Web hoster Local IT resource (VAR) Telco/cable co Pure cloud provider
Common Purchase Methods
50% Online
33% VAR
12% Phone
Most Important Factor in Choosing a Service Provider
32% 24% 19% 13% 6% 6% Ease of management
4
Price
Existing relationship
Security or privacy concerns
Service Ability to expand provider’s or contract physical location quickly
Using IaaS Top Workloads in Production
31% 25% Content management system
15% 22% CRM
27% 64%
25% 32%
20% 20%
14% 17%
11% 41%
19% 19%
ERP
Database applications
Business intelligence/ analytics
Payroll/ HR admin
Hosted
E-commerce systems
Project management/ productivity tools
In-house
Top Hosted Server Add-ons
37% 42% 60%
43% 40% 48%
20% 27% 28%
10% 19% 15%
Security
Server backup
Control panel
Development platform
Micro
Small
3%
14%
4%
LAMP stack
Medium
5
Customer Experience
83%
of SMBs have a positive opinion
Total Server Add-ons by Industry of their IaaS provider 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
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60% 21% 19%
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
€475M
2015
2018
($436M USD)
($608M USD)
Estimated Probability of Entering the Cloud Market
25% Cloud leapers (New adoption)
53%
Cloud converters (Switch from in-house)
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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%
82%
82% of SMBs have a website hosted by a third-party.
Buying a Website Key Factors in Choosing a Service Provider Most SMBs take several factors into consideration when choosing a service provider.
63% 49% 32% 15% Price
Customer experience
Existing relationship
10% 9%
Ability to scale resources
Website Service Provider 77% 9%
Web hoster Local IT resource (VAR)
8%
Telco
2%
Pure cloud provider
19%
of SMBs bundle their web Total Server Add-ons byhosted Industry hosting with their server 8
Security
Brand recognition
Top Purchase Method 1
2
58%
28% VAR
Online
3
10% Phone
Building a Website
24%
63%
of in-house used a paid site
of SMBs build their website in-house
37%
of in-house used a third-party web designer
Mobile Optimized Website Mobile optimized Displays on mobile without optimization Only displays properly on a computer
38% 32% 30%
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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
45% 22% 18% 15%
(63% purchase from web hoster.)
Top Website Add-ons
24% 33% SEO
22% 28% 20% 26% Security
Backup
2015
10
18% 26%
15% 19%
13% 18%
SSL
E-commerce
Content management
2018
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 SMBs have a positive opinion
Total Server Add-ons by Industry of their web hoster Areas for Improvement
34%
Performance
25%
Usability
18%
Self-service administration
16%
Support experience
13%
Security vulnerabilities
11
How SMBs are Resolving Issues 68%
16%
Exploring alternative options
16%
Escalating with the vendor
Moving in-house
Web Presence Opportunities through 2018
7% CAGR
€155M
€189M
2015
2018
($198M USD)
12
($242M USD)
Estimated Probability of Entering the Cloud Market
42% Cloud leapers (New adoption)
58%
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.
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UNIFIED COMMUNICATIONS
Email Type of Business Email
65%
Hosted by a service provider
23% Free service
of third-party hosted email is bundled with website hosting or a hosted server
7% Hosted on an in-house server
49%
Top Features of Paid Hosted Email Security
Outlook integration
Calendar alerts
Archiving
27% 19% 9% 7%
78% 14
of SMBs have a positive opinion of their email service provider
Areas for Improvement Self-service administration Security
Performance
Usability
25% 22% 18% 15%
How SMBs are Resolving Issues 60%
26%
Exploring alternative options
13%
Escalating with the vendor
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
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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% Price
28%
Lack of knowledge about hosted business voice services
10%
9%
Concerns about complexity
Technical concerns
Top Purchase Triggers for Hosted Business Voice Service 1 Significant growth to business
16
2
Good price point
3
Current phone system becomes outdated
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 Single number reach
2 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 Escalating with the vendor
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2 Exploring alternative options
3 Moving service in-house
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
22%
33%
Instant collaboration
12%
2%
23%
Web conferencing
2015
15%
Mobile device management
2018
19
Unified Communications Opportunity through 2018
6.5% €157M
€190M
2015
2018
($201M USD)
CAGR
($243M USD)
Probability of Entering the Cloud Market
37%
23%
Cloud leapers (New adoptions)
Email
29% 40% Cloud converters (Switch from in-house)
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.
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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% Trusted advisor
Online research
17% 12% Local IT resource
Existing service provider
10% Industry news
Most Important Factors in Choosing Business Applications 34%
Features and capabilities
29%
Price
26%
Business need
11%
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
22
2
3 Hosted server
Other business applications
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% Payroll and HR
Online accounting
50% 40% 30%
Online backup and storage VDI
Web conferencing
20% 10% 0%
Online CRM
Mobile device manager
Instant collaboration
Support/ help desk
10%
File sharing
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%
Online accounting
15% 25% Payroll and HR
2015
12% 23%
Support and help desk
24
8% 16% Online CRM
4% 15% VDI
2018
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) 2015
€312M ($243M USD)
17.7% CAGR
2018
25
Cloud Market Opportunity through 2018
€844M
€1.2B
($1.1B USD)
($1.5B USD)
2015
2018
11.5% CAGR
€475M
11.7% CAGR
€312M €189M 7% CAGR
€192M 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.
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Learn More This report covers only a portion of the extensive data included in Odin SMB Cloud Insights™ research. Please contact
[email protected] 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.
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