Click here to close now.


@CloudExpo Authors: Chris Witeck , Deep Bhattacharjee, David Dodd, Anders Wallgren, Liz McMillan

Related Topics: @CloudExpo, Microservices Expo

@CloudExpo: Article

What Movers in the Cloud Stand to Win in the $444B SMB Market Space

The likely technology vendor winners will be those firms that have built the strongest end-user customer relationships

While much discussion of the cloud assumes the needs and concerns of large enterprises will determine how the cloud evolves, in fact AAPL, MSFT, DELL, AMZN signal that the migration of the fragmented $444B annual SMB tech spend from small datacenters to the cloud will redefine the industry far sooner and on a more sweeping and final scale than presently anticipated. The move of the SMB may determine the winners and losers long before the enterprise has made a significant investment.

While "smokestack" and "brick and mortar" firms remain highly susceptible to "oil price shock," ecommerce firms like AMZN increasingly remain highly dependent on the efficiency of the Internet in order to ensure growth and profitability. Unlike many other participants in the cloud computing space, Amazon has hundreds of millions of end users and millions of businesses already using its ecommerce interface to purchase and sell goods. Is Amazon playing in a much larger game and other participants see only the shadows of these moves, not the body or the head of this organism? What can the launch of Kindle, mobile computing, and Amazon AWS teach us about the present and future dynamics of the cloud marketplace? Does Amazon, like Google, perceive the current inefficiencies of the Internet and computing as potentially slowing or capping its growth? How will the cloud impact the way present and incumbent vendors do business in the small- and medium-sized business market space? Why is the SMB market a critical battle that may determine the winners and losers in the cloud? Who will be the winners and losers in this high-stakes game? Is corporate IT an incumbent service provider or the actual customer in this new world? Is the business unit going to own the technology services relationship going forward? It's going to be a wild ride! Let's look at some of these questions.

Once Amazon put the "cloud" horse on this multidimensional chessboard, the marketplace forever changed. While one might argue that teaching consumers to purchase things on the Internet took 10 years, clearly in the cloud and datacenter space, change ripples or waves through the system in an order of magnitude more quickly. At Cloud Expo on June 8, 2011, at the CEO panel, Treb Ryan of OpSource stated that just six months from now the industry will have moved forward in a meaningful way and that issues in the foreground now would not be in the foreground then. Currently I see less discussion of the small and medium business marketplace, and more focus on the cloud and the enterprise. In six months, I think we will all realize that the migration of the SMBs to the cloud will largely determine the winners and losers in what I've termed an "Extinction Event" as it conjures up the kind of massive ecological event that resulted in the extinction of the dinosaurs.

Surveys tell me that I am wrong. Why do I ignore such important and painstaking research? For one thing, the survey results I see reflect opinions and fears, but don't provide much insight into "Who" is being surveyed or the depth of the participant's actual experience with the cloud. At the Cloud Expo New York CEO Power Panel, Treb Ryan noted that many potential customers have yet to actually "spin-up" an instance in the Public Cloud and get a hand-on sense of what the service really is. If people with no actual experience of the cloud are widely represented in these surveys, then there's room for rapid change in attitude as people become more personally familiar with cloud services.

Surveys also report that small and medium-sized businesses will be the first firms to move to the cloud. Research I haven't yet seen presented along with these surveys is the context that implies just how significant the SMB market is in the evolution of cloud. Presently the SMB market is highly fragmented and it's extremely labor intensive and inefficient to serve SMB customers. Big vendors mostly serve these customers through the channel, or have organized in order to be able to serve these customers profitably. Another bit of data I don't often see included in the forecast that SMB will be first is that the SMB tech spend is a $444B annual spend. What if you could capture 10 percent of the SMB tech spend as these firms move to the cloud? What if you could capture a third of it? If cloud does nothing else than disrupt the SMB technology marketplace, it will still reorganize the technology industry as we know it today. as Destroyer and Builder of Markets
The widely overused yet apt term "creative destruction" comes to mind when I think of's role in ecommerce. In every line of business from its genesis to today, has begun by applying ecommerce technology to redefine an existing industry. Amazon may start by taking on the brick and mortar tasks, yet over time increasingly seeks to replace physical commerce activity with the activity of third-party participants who actually interact with customers, deliver physical goods, and perform necessary personal services. In other words, Amazon creates a marketplace, demonstrates success, than moves to profit by selling other market participants the software services that enable the business. Amazon moves to exit the business of moving physical objects as quickly as it possibly can. Amazon seeks to sell the ecommerce application to other businesses that use that system to serve Amazon's customer base.

What Business Is Really In? How Does Cloud fit into This Puzzle?
Rich Wolski at Cloud Expo pointed this out to me by simply stating that Amazon's real business is being a SaaS provider of an ecommerce application. If delivering ecommerce services is Amazon's core business, then what is Amazon's Cloud business? And how does what do in the Cloud really relate to Amazon's core ecommerce business? If we think about the much-cited example of the invention of the telephone, the telephone itself wasn't worth anything until a network of communications could be built. In order to monetize the telephone, Bell had to build out the necessary infrastructure. In recent history, in order for Amazon to extinguish physical books and enable the ecosystem for ebooks, Amazon had to invent the Kindle. Think about the Kindle and how it has fostered mobile tablet form factor computing as you handicap the expected outcome of Amazon's emboldened move to remake the business Internet.

Create the Climate and Ecosystem Necessary for Amazon to Achieve Hypergrowth and World Domination (Exaggerated, but Maybe not so Much)
Amazon's cloud strategy achieves several key objectives:

  1. Disrupted the datacenter market in terms of service delivery, quality, provisioning, size of a viable datacenter, and cost. In other words Amazon invented the cloud. Rich Wolski validated my opinion of this the other day.
  2. Disintermediate the major vendors of datacenter compute, network, and storage inputs so as to ignite innovation and destroy the viability of current production and pricing models.

Presently, IBM, Intel, HP, Oracle sell to mid-market firms through an ecosystem of distributors and partners collectively called "The Channel." However, in the cloud phase ignited by Amazon's disruptive move, the Channel will cease to participate in this ecosystem. Cloud datacenter requirements will determine order size, configuration and delivery. These types of orders can be fulfilled directly by the manufacturers and do not require a Channel to mediate between the manufacturer and the consumer. Intel could, in theory, manufacture and deliver industrial-sized datacenter compute / network / storage units. At the conferences I've attended one area of consensus is that the compute architecture will be Intel. Maybe this is why Amazon AWS is nurturing Nvidia GPUs for floating point intensive workloads. In any case, I expect to see more compute vendors enter the datacenter space because the order size and volume might make it feasible for chip manufacturers smaller than Intel to deliver the compute component, but I don't really know how anyone can surpass Intel in terms of volume. Even, so, with the scale of the mobile build-out, Intel's position in the ecosystem is no longer a certainty in this new ecosystem. Presently Cisco offers PODS, which combine compute / network / storage in a pluggable shipping container.

What and How Will the (Fewer) Cloud Datacenters Buy?
Rather than buying individual servers, network components, and cable datacenters in the cloud era, purchase large "pluggable" blocks of compute and storage directly from the manufacturers. In this phase, mid-market firms no longer buy a significant volume of compute or storage because the small and mid-market firms will move first and rapidly to the cloud. Once the mid-market fully commits to cloud, there will be no turning back. Public Cloud changes the role of corporate IT from being the "locked-in" service provider, to one of many possible technology service providers. Given the highly manual and labor-intensive means of production in most present-day SMB technology shops, in-house IT seems like the equivalent of "cottage industry" weaver.

Prior to the application of scale and automation that ignited one of Earth's most disruptive events, the Industrial Revolution, individual "weavers" were able to make a living by producing cloth in their homes using hand looms. At the dawn of the Industrial Revolution, these hand weavers were no longer able to compete with automated factories, and had to move from the country to the city and find work in these factories. Similarly, everyone else who participated in the cottage industry / ecosystem had to follow the weavers into the city. Perhaps part of what we see moving before us is the "industrialization of the Internet." Similarly, I see computing and technology workloads moving from SMB "cottage" datacenters into automated and scaled up "cloud" datacenters. We will witness this industrialization of the datacenter in this first wave.

As a result of these SMB workloads moving, the industrial datacenter, the cloud, now becomes the consumer and customer and mediator of technology goods and services. As a result, pricing power by incumbent compute and storage vendors will diminish. New relationships with yet unknown vendors will form and thrive. The new customer, the industrialized cloud datacenter, has different needs and will purchase and consume differently, and will maintain a laser-sharp focus on efficiency of operations and capital. This new customer is very different from any customer previously served by technology vendors.

As cloud datacenters capture and increase share of the $444B SMB technology spend, significant restructuring seems inevitable. While manufacturers such as AAPL, MSFT, IBM, HP, DELL, CISCO, and EMC could realize substantial costs savings through consolidation of products into fewer, larger, and more-focused solutions, this shift from selling to consumer-sized businesses to selling to larger cloud datacenters will require significant adjustment. It's also a great opportunity for new firms to participate and for incumbents to change the share or mix of products sold. The types of products demanded will now be defined by the requirements of cloud datacenters. Imagine the kind of purchasing power held by Walmart, yet applied to a much narrower basket of goods of services. Think about this.

When we see Microsoft, Dell, Apple, and Amazon building out cloud datacenters, it's not because they think the cloud is cool, or that it might work. It's because they believe that in order to keep their customers they need to own the cloud services their customers demand. These firms are building out cloud infrastructure because if they don't, they fear extinction.

Without a cloud datacenter, somebody else controls the relationship between you and your customer. These same firms coincidentally have focused intensively on understanding and serving their customers, both consumers and SMBs. Because they are attuned to their customers, these firms understand earlier than others the ramifications of the Cloud Extinction Level Event.

Who Will Win? Customers Will Win. Roles Will Change.
The likely technology vendor winners will be those firms that have built the strongest end-user customer relationships. As firms seek to move to the cloud, they will most likely choose to work with vendors that are trusted and familiar and seem like a good fit. In the SMB space, firms that have strong SMB customer ties such as MSFT, AMZN, AAPL, and DELL may be best positioned to migrate their existing SMB customers to the cloud. The firms that win the small and medium-sized business cloud hold a very strong advantage to leverage this scale and experience and to define the industry, the standards, and the rules in this new marketplace.

More Stories By Brian McCallion

Brian McCallion Bronze Drum works with executives to develop Cloud Strategy, Big Data proof-of-concepts, and trains enterprise teams to rethink process and operations. Focus areas include: Enterprise Cloud Strategy and Project Management Cloud Data Governance and Compliance Infrastructure Automation

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.

@CloudExpo Stories
I recently attended and was a speaker at the 4th International Internet of @ThingsExpo at the Santa Clara Convention Center. I also had the opportunity to attend this event last year and I wrote a blog from that show talking about how the “Enterprise Impact of IoT” was a key theme of last year’s show. I was curious to see if the same theme would still resonate 365 days later and what, if any, changes I would see in the content presented.
Cloud computing delivers on-demand resources that provide businesses with flexibility and cost-savings. The challenge in moving workloads to the cloud has been the cost and complexity of ensuring the initial and ongoing security and regulatory (PCI, HIPAA, FFIEC) compliance across private and public clouds. Manual security compliance is slow, prone to human error, and represents over 50% of the cost of managing cloud applications. Determining how to automate cloud security compliance is critical...
The Internet of Things (IoT) is growing rapidly by extending current technologies, products and networks. By 2020, Cisco estimates there will be 50 billion connected devices. Gartner has forecast revenues of over $300 billion, just to IoT suppliers. Now is the time to figure out how you’ll make money – not just create innovative products. With hundreds of new products and companies jumping into the IoT fray every month, there’s no shortage of innovation. Despite this, McKinsey/VisionMobile data...
Just over a week ago I received a long and loud sustained applause for a presentation I delivered at this year’s Cloud Expo in Santa Clara. I was extremely pleased with the turnout and had some very good conversations with many of the attendees. Over the next few days I had many more meaningful conversations and was not only happy with the results but also learned a few new things. Here is everything I learned in those three days distilled into three short points.
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty ...
In his General Session at DevOps Summit, Asaf Yigal, Co-Founder & VP of Product at, explored the value of Kibana 4 for log analysis and provided a hands-on tutorial on how to set up Kibana 4 and get the most out of Apache log files. He examined three use cases: IT operations, business intelligence, and security and compliance. Asaf Yigal is co-founder and VP of Product at log analytics software company In the past, he was co-founder of social-trading platform Currensee, which...
DevOps is about increasing efficiency, but nothing is more inefficient than building the same application twice. However, this is a routine occurrence with enterprise applications that need both a rich desktop web interface and strong mobile support. With recent technological advances from Isomorphic Software and others, rich desktop and tuned mobile experiences can now be created with a single codebase – without compromising functionality, performance or usability. In his session at DevOps Su...
As organizations realize the scope of the Internet of Things, gaining key insights from Big Data, through the use of advanced analytics, becomes crucial. However, IoT also creates the need for petabyte scale storage of data from millions of devices. A new type of Storage is required which seamlessly integrates robust data analytics with massive scale. These storage systems will act as “smart systems” provide in-place analytics that speed discovery and enable businesses to quickly derive meaningf...
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
The buzz continues for cloud, data analytics and the Internet of Things (IoT) and their collective impact across all industries. But a new conversation is emerging - how do companies use industry disruption and technology enablers to lead in markets undergoing change, uncertainty and ambiguity? Organizations of all sizes need to evolve and transform, often under massive pressure, as industry lines blur and merge and traditional business models are assaulted and turned upside down. In this new da...
Culture is the most important ingredient of DevOps. The challenge for most organizations is defining and communicating a vision of beneficial DevOps culture for their organizations, and then facilitating the changes needed to achieve that. Often this comes down to an ability to provide true leadership. As a CIO, are your direct reports IT managers or are they IT leaders? The hard truth is that many IT managers have risen through the ranks based on their technical skills, not their leadership ab...
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
In recent years, at least 40% of companies using cloud applications have experienced data loss. One of the best prevention against cloud data loss is backing up your cloud data. In his General Session at 17th Cloud Expo, Sam McIntyre, Partner Enablement Specialist at eFolder, presented how organizations can use eFolder Cloudfinder to automate backups of cloud application data. He also demonstrated how easy it is to search and restore cloud application data using Cloudfinder.
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and t...
As organizations shift towards IT-as-a-service models, the need for managing & protecting data residing across physical, virtual, and now cloud environments grows with it. CommVault can ensure protection & E-Discovery of your data - whether in a private cloud, a Service Provider delivered public cloud, or a hybrid cloud environment – across the heterogeneous enterprise.
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now ...
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true ...
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound...