May 19, 2010
By Lenin Srinivasan, of Vembu Technologies

Is the SMB market ripe enough for IT Service Industry, especially in a recession environment?  While large companies had a rough sledding through the recession, SMBs made a relatively good financial progress.

SMBs – Steering well in rough seas
Here’s an excerpt from the May 1st Edition of Wall Street Journal :  “Like most companies, smaller firms used the global crisis to pare costs and trim inventories. They are running lean nowadays and have relatively strong balance sheets, with more cash and less debt as a percentage of market capitalization than do large companies, according to Standard & Poor’s data. Also smaller companies tend to thrive most during low-interest-rate environments, when they don’t have to pay much to get capital to fuel their growth—the very conditions that have prevailed in the U.S. for much of the past decade”.

Now this means a huge potential for the Hosted IT Services to the SMBs.

Now let’s take a closer look at the SMB market and the impact of Information Technology.  According to a recent Survey from Microsoft, Small and Midsize Businesses using Hosted Services have shown better financial performance. Of the Small and Midsize Businesses that viewed IT as a critical element, 60% of them saw their revenues grow in the past 12 Months (i.e. 2009). In contrast, among the SMBs who viewed IT as insignificant, less than 29% saw an increase in revenue. Now, this is makes the point very clear that IT services have a positive impact on SMBs.

YIPPEE! – Cloud Computing
Contrary to my previous blog on ‘SMBs reaction to Cloud – A Pro/Con Analysis’ where I focused on the point that SMBs are reluctant to cloud,  I am finding this climate to be changing. According to the Microsoft 2010 index, Small and Midsize businesses are starting to see the benefits of Cloud Computing and more than 40% of respondents that used Cloud Computing technology reported a revenue rise of more than 30%. SMBs see Cloud Computing as an effective platform for IT Management, Maintenance and reduced operation cost.

How to solve the IT Requirements of SMBs effectively? – Give what they want!
Whether it is E-Mail, File Sharing, Data Backup, CRM, Website Hosting or E-Commerce, roughly ~50% – 70% of SMBs have their IT Services On-Premise and ~20% – 30% of them have it hosted and ~10% – 20% don’t have these IT Services at all. If we see Data Backup in particular, almost 71% of SMBs have their Data Backup installed On-Site and 22% of them have them hosted on a Offsite Server and nearly 7% of them don’t have Data Backup at all.

Data Backup

Now this being the case, if you are trying to pitch your offsite backup solution to a customer who has his present backup data on-site, it’s going to be difficult winning the customer until he completely trusts your solution. The best way to handle this situation is to propose a hybrid backup solution model, where there will be a local copy of backup data on the customer’s premises and the backed up data is then optionally replicated to an offsite server / cloud platform for additional redundancy. Online Backup Software like Vembu StoreGrid can be deployed as a Managed On-Premise Backup Solution for customers who prefer that option and the backed up data can be optionally replicated to an offsite replication server in a co-lo facility or a Cloud Platform like Amazon Web Services. This becomes a win-win situation for the SMB as well as the Service Provider as this kind of a hybrid backup model is mutually beneficial.

These research reports say one thing very clearly that Small and Midsize Businesses show greater awareness to the benefits of IT and indicates a clear path towards better financial performance for those who take advantage of IT advancements such as hosted services. The SMB market is really big and hot out there for IT solution providers or the managed service providers and what is needed is the right strategy and execution to win big.

The above post was written by Lenin Srinivasan of Vembu Technologies. Vembu Technologies is a backup software vendor whose product, StoreGrid, powers the online backup services of a large number of service providers across the globe. Besides remote backup, StoreGrid is also used for on premise backups of workstations and servers at various companies & universities.

Vembu Home is the only FREE consumer backup solution for free local backups and optional Amazon Cloud backups.

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