Telcos could win the SMB cloud market

Here is a survey that does, if only in a somewhat back-handed way, strengthen the arguments which emerged at the Parallels Summit back in February that indicate the majority of service providers still fail to understand quite what it is they are really selling to their customers. Here’s a clue: it is not technology or access to compute resources.

Amdocs, a US-based provider of customer experience systems and services, has recently released new global research that explores small- to medium-sized businesses’ (SMB) cloud services consumption and purchasing patterns. One of the key findings is that almost half of SMBs surveyed said they would switch to their primary communications service provider for the cloud solutions they require, if they were offered as bundles of traditional and cloud services.

The research surveyed 1,311 SMB decision makers from North America, Europe, Latin America and Asia Pacific. The company claims it is the first study of such scale, and it does offer valuable insight into what service providers should be selling, so that they can develop an effective cloud-based SMB offering strategies.

The underlying trend is that small businesses would prefer to get their services from the businesses that are already servicing them. This is hardly surprising as most of them do not have the time, or the expertise, readily available to do anything else. For example, the survey showed that a whopping 74 percent of respondents said they prefer to receive cloud-based services from their primary service provider. By contrast, only 41 percent believe they can get better deals from independent cloud vendors.

And while there is obvious evidence that cloud services are being more widely used, the survey also shows the opportunities that exist for the provision of bundled solutions. For example, only 41 percent use cloud services to provide the business with any form of office software. The most consumed services, however, are storage and backup at 72 percent.

What this would seem to show, quite clearly, is that the vast majority of SMBs are actually seeking packaged, bundled up solutions to their business problems, rather than face trying to divine what they need for themselves. As a result, they are primarily sticking with a simple service – storage – that they have the time and expertise to understand.

It is also to be suspected that the majority of those that go seeking better deals are searching mainly on the basis of price for the provision of raw compute and storage resources. That will certainly be the cheaper approach but may not be cost-effective over the long haul of providing the full business solution that an SMB may in practice require.

It is also only a short-term market opportunity for the service provider community, as all price-based competition in any marketplace tends towards zero (or at least a standard bare minimum cost-plus that can sustain the survival of the service providers). The more sustainable market, and the one with more revenue and margin potential, is in providing aggregated packages of business solutions tailored to market sectors.

This will require more investment in terms of applications research and in their engineering together as collaborative packaged bundles, but for those service providers that can identify and service the needs of specific markets there can be a good future. The alternative is shown by the Amdocs survey: at the moment, the majority of SMBs would rather go to their existing communications service providers – the Telcos – for their cloud services. And if nothing else they will tend to win on the basis of `better the devil you know’.      

As if to make the point clearly, the survey showed that 68 percent of respondents said they are more likely to select a service provider that offers cloud-based services over one that does not, and that 44 percent would switch from third-party cloud services providers to their primary communications services providers if offered bundles of traditional and cloud services.

Other findings in the Amdocs survey show that 66 percent of respondents said cloud-based services are very important to their business, with 57 percent stating that their companies already take advantage of cloud-based services. Forty-four percent of those who are not yet using cloud-based services are actively considering it.

Only 45 percent of respondents said their companies get cloud-based services from their primary service provider; 32 percent did not ask for or receive information about cloud-based offerings from their primary service provider, and 31 percent do not believe their primary service provider even offers cloud-based services

“The research validates that there is increasing need and adoption of cloud-based services by SMBs,” said Ian Parkes, managing director at Coleman Parkes Research, which conducted the research on behalf of Amdocs. “The research identified that service providers are considered a viable and even preferred source for cloud-based services, representing a big revenue opportunity for service providers who choose to capitalise on this. Those that become a one-stop-shop for all SMB communication needs, focusing on what SMBs consider essential such as bundles with cloud-based and traditional services, as well as a unified bill, will be most successful.”