Parallels SMB Cloud Insights TM for APAC Regional Model

Transcription

1 Profit from the cloud TM 2013 Parallels SMB Cloud Insights TM for APAC Regional Model APAC

2 Table of Contents Executive Summary...1 Definitions...2 Key APAC Market Segments...3 Infrastructure as a service (IaaS)...4 Web Presence and Web Applications...7 Hosted Communication and Collaboration...9 Hosted Premium Hosted PBX Business Applications Conclusion... 15

3 Executive Summary Cloud services continue to reshape the IT market for small and medium businesses (SMBs) around the world, with an immense array of services and applications now available to help SMBs grow, collaborate, and compete in a global marketplace. In the Asia-Pacific region (APAC), SMBs adoption of cloud services still lags behind that their North American and European counterparts, pointing to significant opportunity as this market matures. As Internet infrastructure spreads throughout these countries, the SMB cloud market growth will come from in new cloud service adopters, those migrating from in-house services, and existing cloud customers looking to augment their core services. Now entering its third year of SMB Cloud Insights reports, Parallels research focused on four major SMB cloud markets in APAC Japan, Australia, China and India. Using the results from this in-depth country level research and trends gathered from Parallels research around the world, Parallels modeled the APAC region, estimating the regional market size and highlighting the most important opportunities for growth over the next few years. For the major cloud services infrastructure as a service (IaaS), web presence and web application, hosted communication and collabora tion, and business applications Parallels estimates the 2013 APAC SMB market to be $10.9B USD. As Figure 1 shows, IaaS contributes $3.7B USD to this market; web presence services contribute $2.3B USD; hosted communication and collaboration which includes hosted and hosted PBX adds $937M USD, and the online business applications category makes up the remaining $3.8B USD. Figure 1. APAC market size by cloud service type According to our research, the APAC SMB cloud services market will continue to grow rapidly in the coming years. By 2016, we estimate that the APAC SMB market for the major hosted services will total $23.3B USD, representing a year-over-year growth rate of 29%. IaaS will make up $7.6B USD of that total, web presence and web applications will reach $3.8B USD, hosted communication and collaboration - with the fastest growth - will contribute $3.6B USD, and business applications will triple to add $10B. 1

4 Definitions This research is focused on the cloud services that matter most to SMBs: infrastructure as a service, web presence and web applications, hosted communication and collaboration, and a general category we refer to as business applications. We define each of these cloud service categories as follows: Infrastructure as a service (IaaS; formerly called hosted infrastructure in Parallels SMB Cloud Insights ). This category includes dedicated servers, virtual private servers (VPS), managed hosting, and utility or elastic computing. In 2013, we expanded this category to include add-on applications and services for IaaS, such as control panels, development platforms, LAMP stack (Linux, Apache, MySQL, PHP), security, server backup, and SQL databases. Web presence and web applications. This category includes third-party web hosting, blogging services, domain registration, SSL and ecommerce add-ons, and site-building tools. In the 2013 research, this category expanded to include additional high-opportunity web applications web server backup, content delivery networks (CDN), content management, mobile optimization tools, search engine optimization (SEO), and web server security and health monitoring. Hosted communication and collaboration. This category consists of business-class services, including security, archiving, and mobility; and hosted phone services, including hosted PBX. Business applications. This category includes ten major types of software applications that can be accessed online file sharing, instant collaboration, online accounting, online backup and storage, online CRM, payroll HR, phone conferencing, support and help desk, virtual desktop (VDI), and web conferencing. As for our definition of small and medium businesses also known as small and medium enterprises, or SMEs we follow the general academic practice of defining SMBs as 1 to 250 employees. Sub-categories within the SMB segment include: Micro SMBs (companies with 1-9 employees) Small SMBs (companies with employees) Medium SMBs (companies with employees) As in last year s research, we divide opportunities in the SMB cloud market into three segments: Cloud leapers: SMBs with no in-house IT solution who choose to consume it for the first time as a cloud service (e.g., SMBs with no servers who purchase IaaS) 2

5 Cloud converters: SMBs with in-house IT who convert to the corresponding cloud service solution (e.g., SMBs with in-house servers who switch to IaaS) Cloud expanders: SMBs currently consuming a cloud service who will increase their spending on that service over time (e.g., SMBs with IaaS who choose to add infrastruture add-ons or purchase additional hosted server space) Key APAC Market Segments Parallels has identified two major segments in the APAC cloud services market, representing both different degrees of development within the countries and differences in the extent to which they have adopted cloud services: Developed with mature or maturing cloud services. This group consists of countries that have a developed economy, with both in-house and hosted IT solutions easily accessible. We further classify the countries in this group according to the development stage of their cloud services market: o Mature. Countries in this sub-group generally have more than 75% of the population using the Internet. o Maturing. Countries in this sub-group typically have Internet usage rates of anywhere from 45% to 75%. With lower Internet usage, SMBs in these markets also have lower cloud penetration rates than those in the mature markets. In both sub-groups, however, SMBs adoption of cloud services lags behind that of their counterparts in other developed countries, such as the US and Germany. Most countries in East Asia, including China, as well as a few countries in Oceania, such as Australia and New Zealand, fall into the developed with mature or maturing cloud services group Developing with early-stage or advanced-stage cloud services. Countries with developing economies belong to this group and make up the vast majority of the APAC region, as shown in Figure 3. In these countries, less than 45% of the population uses the Internet, and SMBs usage of cloud services is also low. We further classify the countries in this group according to the development stage of their cloud services market: o Early stage. Countries in this sub-group have less than 25% of the population accessing the Internet. With such low Internet penetration, the presence of cloud services is also low. Approximately 50% of the APAC countries fall into this sub-group, including most of the countries in South Asia - including India and Pakistan - as well as many of those in Southeast Asia and Oceania. 3

6 o Advanced stage This sub-group consists of countries with 25-45% of the population using the Internet. These countries have both more hosted offerings available and a higher penetration of SMBs currently using them than do the early-stage countries. Countries in this sub-group include many of the major economies in Southeast Asia, including Indonesia, Thailand and the Philippines. A few countries in Oceania also are part of these group. Figure 2. Distribution of the APAC cloud services market segments The following sections examine each market in more detail as it relates to the four types of cloud services: IaaS, web presence, hosted communication and collaboration, and business applications. Infrastructure as a Service (IaaS) In the past year the IaaS market in APAC has grown a substantial 32% to reach $3.7B USD. The level of development of a country remains major factor in the both the current use of IaaS within a country and its growth opportunities. Developed countries, together, contribute over $3B USD to the current market size. This is a much larger market than developing countries, which are currently estimated at $700M USD. As this gap in IaaS use closes, the IaaS market in developing countries is poised for significant growth to $2.5B USD in 2016, giving them approximately equal share with each of the developed markets (see Table 1). 4

7 TABLE 1. APAC SMB Opportunity in IaaS Developed with Mature Cloud Services Developed with Maturing Cloud Services Developing with Early-stage or Advanced-stage Cloud Services Current IaaS Penetration Rate <25% <15% <10% Compound Annual Growth Rate 12% 31% >50% 2013 Percentage of APAC SMB Market 2016 Percentage of APAC SMB Market 2013 Market Size (USD) 53% 28% 19% 36% 31% 33% $2B $1.1B $700M 2016 Market Size (USD) $2.8B $2.4B $2.5B Developed with Mature or Maturing Cloud Services While developed countries have stronger IaaS markets than developing countries, there is still plenty of room for the market to grow within these countries. For example, Japan has a hosted server penetration of less than 25%, which is higher in other developed countries such as the UK, at 31% penetration. In developed countries where the cloud services market is even less mature, such as Malaysia, the hosted server penetration rate is even lower, indicating that there is still significant room to grow for the IaaS market in developed APAC countries. Many of the developed countries in East and Oceania regions within APAC show solid plans for increasing their adoption of IaaS within the next few years. In particular countries such as Malaysia, China (which is now a maturing market), French Polynesia, and Australia are projected to dramatically increase their share of the market. Developing with Early-stage or Advanced-stage Cloud Services Overall, only about 10% or fewer of the SMBs in developing APAC countries use IaaS. This is a natural consequence of the low levels of Internet penetration in these countries. The largest developing country markets are concentrated in the South and Southeast APAC regions and include countries such as Indonesia, India, the Philippines and Pakistan. These markets, as well as the other developing areas of APAC are expected grow substantially as these countries increase their Internet infrastructure, thereby improving their demand for hosted services. 5

8 FOCUS ON INFRASTRUCTURE ADD-ONS In addition to hosted servers, much of the opportunity for growth in the IaaS market in the past year has come from add-ons purchased with hosted servers. Parallels has found that SMBs in APAC countries continue to prefer add-ons such as security applications (including anti-virus / antispam), SQL databases, server backup and webserver control panels (see Figure 3) with their hosted servers ; as many as 70% of SMBs with hosted servers are choosing to buy one or more of these add-ons, and nearly all SMBs with hosted servers are interested in buying add-ons over the next several years. Looking forward, infrastructure add-ons will continue to be an important part of market growth, particularly in developed markets where demand for IaaS is likely to saturate and slow in upcoming years. Offering addon applications not only can motivate more SMBs to move to the cloud through the promise of enhanced security, for example but also can increase service providers revenues. The top infrastructure add-ons will remain stable over the next several years, though they vary slightly across developed and developing countries. As shown in Figure 3, the most popular add-ons in mature markets like Japan and Australia will be server backup, security applications and database add-ons. In maturing countries, like China, and developing countries, like India, server backup is again most popular, followed by database addons and webserver control panels. Figure 3. Current and planned top infrastructure add-ons in APAC region 6

9 Web Presence and Web applications The web presence and web applications market grew strongly in 2012, reaching $2.3B US and growing 35%. As with IaaS, the market segment to which a country belongs determines to some extent the the current level of web presence and the opportunity for expansion within the market. Parallels estimates the current market size for web presence services in developed APAC countries to be $2.1B USD, up from $1.3B USD in The market size for developing APAC countries is estimated to be $274M USD (see Table 2). This is less than the $452M USD from This decrease, and some of the corresponding increase in the developed market, can be attributed to the progression of China from developing to maturing status, due to its higher Internet penetration. Even so, both of these numbers are projected to rise over the next three years, with developed countries reaching $2.7B USD; and developing countries, with their fast-growing Internet use, expanding to $1.1B USD. Table 2. APAC SMB Opportunity in Web Presence Developed with Mature Cloud Services Developed with Maturing Cloud Services Developing with Early-stage or Advanced-stage Cloud Services Current Website Penetration Rate Percentage of Websites that are Third-Party Hosted <60% 35% <20% <45% <25% 15% Compound Annual Growth Rate 7% 21% 57% 2013 Percentage of APAC SMB Market 2016 Percentage of APAC SMB Market 2013 Market Size (USD) 72% 17% 12% 54% 18% 28% $1.7B $396B $274M 2016 Market Size (USD) $2B $697B $1.1B 7

10 Developed with Mature or Maturing Cloud Services Just over 60% of SMBs in developed APAC countries have websites, including many countries in East and Oceania regions. This is a lower portion than other developed countries, like the US or Germany where website penetration has reached 70% or higher. Furthermore, less than 50% of websites across the APAC region are are hosted by a third party a number that also lags behind many other regions worldwide. In the next several years, most of the growth in this market for developed countries will come from cloud leapers and cloud converters. Cloud leapers will go directly to third-party hosted websites as they enter they market, while cloud converters will seek to switch their self-hosted websites to third-party hosted websites. Developing with Early-stage or Advanced-stage Cloud Services Many of the countries in developing parts of APAC are distributed among the South, Southeast, and Oceania regions, and only about 25% of SMBs in these countries have websites. In early-stage countries, such as India, the rate is even lower less than 10%. With such a low website penetration, cloud leapers pose a strong opportunity for market growth. According to our research, about 50% of these SMBs without websites are looking to add third-party web hosting within the next three years. FOCUS ON WEB APPLICATIONS AND ADD-ONS For all SMBs, additional opportunity for market growth exists in offering value-added tools and services that SMBs can use to strengthen their web presence. These include web applications and social media tools. According to our research, the most popular add-ons are search engine optimizaiton and security, while the most popular social media tools are Facebook, Twitter, and blogs. Through 2016, many web applications will be popular, as SMBs look for new ways to enhance and secure their websites. The top five add-ons across the region will be search engine optimization, content management systems, ecommerce capabilities, mobile optimization and security add-ons. Figure 4. Top web applications through 2016 in APAC region Mobile optimization An important trend in the APAC region is the use of mobile devices rather than personal computers to access the Internet. Especially in developing countries, mobile subscriptions far outpace broadband penetration and Internet access from PCs. As a result, SMBs need to have websites that are easily accessible from a mobile device with full functionality. Today only about 30% of SMBs in APAC are optimizing their websites for mobile access, and over 40% say their websites only display properly on a computer. With many SMBs both adding their first websites and seeking to create mobile versions of their existing sites, mobile optimization tools are one web add-on that service providers do not want to miss in their offerings. 8

11 Figure 4. Mobile optimization trends in APAC region Buying web applications Finally, we want to touch briefly on how and when SMBs are buying web applications. The majority of APAC SMBs are buying web applications from their web hoster, with less than 30% going directly to the web application provider or to another third party. However, it turns out that as many as 50% of SMBs buy their web applications bundled with their websites, making the initial web hosting transaction a crucial time to sell additional add-ons to these businesses. This trend is especially true of micro SMBs (those with less than 10 employees); these companies rarely, if ever, come back to their web hoster for more services after their initial web hosting purchase. Medium SMBs, on the other hand, are much more likely to return, making them a good target for upsell campaigns. Figure 5. APAC SMBs purchase of web applications Hosted Communication and Collaboration In the area of hosted communication and collaboration, we again focused our research on two areas: hosted premium and hosted PBX. In the APAC region, the SMB market for both of these services is 9

12 still small but growing rapidly at $972M USD. The market in developed countries estimated at $850M USD, and in the developing countries at $122M USD. Over the next three years, we see this market as being the fastest-growing of all the cloud service categories, more than tripling to $3.7B USD with $2.4B USD of this spending in the developed countries and $1.3B USD in the developing countries (see Table 3). Table 3. APAC SMB Opportunity in Hosted Communication and Collaboration Developed with Mature Cloud Services Developed with Maturing Cloud Services Developing with Early-stage or Advanced-stage Cloud Services Hosted Hosted PBX Hosted Hosted PBX Hosted Hosted PBX Current Hosted Penetration Rate Percentage of Hosted that is Premium (Paid) 45% 22% 15% 5% 6% 10% 6% 3% 2% Compound Annual Growth Rate 34% 49% 118% 2013 Percentage of APAC SMB Market 2016 Percentage of APAC SMB Market 2013 Market Size (USD) 54% 34% 13% 35% 30% 35% $523M $328M $122M 2016 Market Size (USD) $1.3B $1.1B $1.3B Hosted 10 The hosted market in APAC is still very small less than 10% of SMBs purchase hosted premium today. In developed countries, about one-third of SMBs have hosted , and less than 25% of those pay for hosted premium (about 8% of overall SMBs). In the developing countries, the portion of SMBs with hosted is even lower, at 15%, and just 20% of those pay for hosted premium (about 2-3% of overall SMBs). With such low penetration, this market presents ample opportunity to grow. According to Parallels research, about 40% of those who do not use hosted premium , might add

13 it in the coming years. Service providers should focus on the following areas to capture this growth opportunity: 1. Encourage adoption among SMBs using in-house servers. Parallels research finds that more than 20% of the small and medium SMBs in developed regions of APAC and over 10% in developing regions have in-house . Small companies don t often have the IT staff required for this costly and complex solution. Over 40% have indicated an interest in switching to hosted premium , creating large plenty of opportunity for paid hosted within the developed APAC market. In Japan specifically, more than 50% of the small and medium in-house users report interest in switching within three years. 2. Upsell SMBs currently using free . Over 30% of small and medium SMBs in both developed and developing countries in APAC use free . These businesses are using free , either from a hosting service, their ISP, or other provider. We consider these SMBs as potential cloud expanders, if they upgrade from free hosted to paid hosted . The pay-per-seat pricing model and collaboration features of hosted premium can be strong upselling points for these businesses. 3. Understand SMBs purchase triggers. In order to successfully convert SMBs from in-house servers or to upgrade them from free hosted , service providers need to understand what events will cause SMBs to purchase hosted premium . Parallels found that in APAC developed markets, the need for the enhanced security features of premium , as well as rapid growth in an SMB s company were most likely to encourage SMBs to purchase hosted premium . In developing countries, an attractive price point or the need for a professional look-and-feel from communications were the most common purchase triggers. Figure 6. APAC SMBs purchase triggers for hosted premium 11

14 Hosted PBX Hosted PBX is still emerging as a major cloud services and as a result the market remains very small throughout APAC. Over the past year, the hosted PBX penetration rates has grown from 3% to 6%, in both developed and developing regions. As more SMBs become aware of hosted PBX and the benefits it can offer to their businesses, Parallels sees vast opportunity for service providers focusing on hosted voice services. With over 20% of SMBs indicating an interest in adding hosted PBX in the next few years, these following strategies can be used strengthen and maximize the opportunity for growth in the APAC hosted PBX market: 1. Help overcome SMBs concerns about the service. When we asked APAC SMBs what their reservations were about switching to hosted PBX, they cited technical and security concerns as their main reasons for keeping PBX inhouse. Many of them also reported not knowing what hosted PBX was. Many of the security and technical concerns are result from a lack of awareness or misconceptions about hosted PBX. SMBs still need to be educated that hosted PBX offers the same security and technical features as in-house PBX, without the maintenance trouble. 2. Understand popular Hosted PBX features and common purchase triggers. SMBs consistently note the same features that interest them in hosted PBX and the same types of events that would cause them to move forward with the hosted PBX purchase. As shown in Figure 7, the most popular hosted PBX features are an automated attendent, call control (including call holding, forwarding, etc.), and having a unique number for each employee or department. Hosted PBX offerings can vary in their features and complexity, so service providers should make sure to include these capabilities at minimum in their offerings. For hosted PBX purchase triggers, the leading answer was a good price point, followed by adding new locations to the business, having broken or unreliable existing in-house PBX systems, and having explosive growth within an SMB s business. Understanding these triggers can help service providers determine the highest-value SMB targets to pursue to boost new customer growth. 12

15 Figure 7. Popular hosted PBX features and purchase triggers Business Applications Business applications represent one of the fastest-growing areas of the cloud services market at a current market size of $3.8B USD - a 61% growth rate over the course of As Table 4 shows, we estimate the current market to be $2.3B USD, with $1.2B USD in developed countries and $94M USD in developing countries. By 2016, we project these numbers to grow to $3.6B USD, $2.8B USD, and $2B USD, respectively for a total market size of $8.4B USD. Table 4. APAC SMB Opportunity in Business Applications Developed with Mature Cloud Services Developed with Maturing Cloud Services Developing with Early-stage or Advanced-stage Cloud Services Current Penetration Rate Compound Annual Growth Rate 2013 Percentage of APAC SMB Market 2016 Percentage of APAC SMB Market 2013 APAC Market Size (USD) 2016 APAC Market Size (USD) <70% <40% 25% 13% 32% 255% 66% 32% 2% 43% 34% 24% $2.5B $1.2B $94M $3.6B $2.8B $2B 13

16 Parallels research shows that 40-70% of SMBs in developed APAC countries are using business applications of some type. This is lower than other developed countries, where over 70% of SMBs are using Saas. Developing countries have even more catching up to do-only 25% of SMBs are using SaaS. Despite the lag in business application use in APAC, there continues to be rapid growth in the adoption across many different application categories, driven by high interest in these cloud services and the increase in Internet infrastructure. APAC SMBs report that their top business applications currently are instant collaboration tools, file sharing, and online backup and storage. Other top applications include payroll and phone conferencing. These are the same applications that SMBs report an interest in adding within the next few years, although there is some variation across countries with different levels of development as seen in Figure 8. Figure 8. Current and planned top businss applications in APAC region Whether or not SMBs pay for their business applications or use a free version, is dependent on the quality and quantity of free versions available, as well as the size of the business. We ve found that more medium businesses require premium paid versions of applications where micro and small SMBs often stick to free versions. When asking SMBs about their SaaS purchase behavior, Parallels discovered three interesting preferences among SMBs: 1. Price and brand are generally considered equally important when purchasing applications 2. The majority of SMBs prefer to purchase applications as part of a bundle 14

17 Figure 9: APAC SMBs preference for bundled cloud services 3. Many SMBs, especially those in developing markets, are more likely to purchase paid versions of applications after using a free trial. (See Figure 10). Figure 10. APAC SMBs purchase of business applications With these preferences in mind, service providers can take advantage of the high demand for business applications across all regions of APAC. For other country-specific business application opportunities, refer to the Parallels SMB Cloud Insights reports for the country or countries in which you re interested. Conclusion As of summer 2013, Parallels estimates the APAC SMB cloud service market for the major services infrastructure as a service, web presence and web applicaitons, hosted communication and collaboration, and business applications to be about $10.9B USD. The market grew 43% from $7.6B USD in 2012 and showed strong growth across both developed and developing markets within APAC. By 2016, Parallels projects that the market will continue to grow rapidly to reach $23.3B USD. While APAC countries SMB cloud markets vary, depending on level of Internet infrastructure and development, we see many areas for growth potential within all areas of cloud services. As a result, Parallels sees excellent opportunities for service providers who are able to adapt to the changing cloud services landscape and offer SMBs the widening range of cloud services and applications they need. 15

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19 Learn more This Parallels Market Outlook for 2013 report only covers a portion of the extensive data included in Parallels SMB Cloud Insights research. Custom analyses from our entire research database are available for Parallels Partner community members upon request. For more information, please reach out to your sales account manager or us directly at SMB@parallels.com. Visiting Parallels PartnerNet. For Parallels Partners, register for Parallels PartnerNet and go to the SMB Knowledge Center for more SMB Cloud Insights data analysis and go-to-market materials. Find Parallels PartnerNet at Attending an SMB Cloud Insights webinar. Register for our monthly webinar series highlighting Parallels research and teaching SMB marketing strategy, tips, and best practices to help grow your hosting business. Go to subscribe/ to sign up for webinar notifications. Talking to Parallels Business Consulting team. Parallels Business Consulting delivers services designed to accelerate time-to-revenue by 20-35%, increase profits, and grow subscribers. We provide critical business thinking and best practices forged from hundreds of deployments, custom research by SMB Cloud Insights, and go-to-market workshops. Start a conversation with Parallels Business Consulting team. Get in touch at accelerate@parallels.com. Please contact SMB@parallels.com with any further questions. About Parallels Parallels enables service providers to rapidly launch and efficiently deliver the most profitable cloud services by automating the delivery of the broadest set of solutions demanded by small businesses. Founded in 1999, Parallels is a fast-growing company with 900 employees in North America, Europe, and Asia. For more information, please visit Parallels IP Holdings GmbH. All rights reserved. The Parallels logo and Parallels are registered 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. 17

20 Global Headquarters 500 SW 39th Street, Suite 200 Renton, Washington USA main: EUNA Willy-Brandt-Platz Munich Germany main: HostingSales.eu@parallels.com APAC 3 Anson Road, #36-01 Springleaf Tower Singapore main: HostingSales.apac@parallels.com For more office locations