SMBs still unsold on private cloud

A new survey shows that small and midsized firms are unlikely to adopt private cloud. So what are they doing instead?

Small and medium businesses (SMBs) are not sold on private cloud: Nearly two-thirds of those recently surveyed said they have no plans to try the model. The question is: why not?

A new TechTarget survey of more than 800 IT professionals and managers may shed some light on the growing trend of private cloud computing, the notion that an enterprise can mimic the delivery model and efficiency, on a small scale, that Amazon Web Services and Rackspace offer in their cloud services.

Large, technology-heavy enterprises like Raytheon, Eli Lilly, Bank of America, and telecoms like Verizon and AT&T are building and experimenting with cloud technologies, likewise academia and organizations like NASA. But the new Virtualization Decisions 2010 survey shows SMBs do not share that enthusiasm.

"IT has enough to do just to keep things running every day," said Brian Denton, CIO at ExamWorks, a medical services firm headquartered in Atlanta.

First of all, for SMBs, IT is always on a shoestring and doesn't have the luxury of experimenting with non-specific technology ideologies, Denton said.

Secondly, the SMB admin relies heavily on a web of third-party products and services that can't simply be "re-architected" for a different delivery type. A business that needs the private cloud model must either start fresh or find a gold-plated return on investment (ROI) scenario too good to pass up, said Denton.

He should know, because after years in the trenches, that's what he did at ExamWorks, a very young company; Denton runs a Cisco/VMware-based cloud platform to serve his users' desktop needs. Denton said while barriers are coming down, ROI for using a private cloud, even in a new venture, remains a high bar.

"When I did my ROI [calculation], it was clear than I had to have at least 200 employees for it to be worthwhile," he said.

Respondents in the study were a solid cross section of the small and medium enterprise. Less than 20% reported business revenues of more than $500 million per year; 58% overall said their firm had 1000 employees or less, with 19% reporting less than 50 workers total.

Interest in private cloud technology is moderate among these firms. Nineteen percent said they plan to implement a private cloud solution in the next twelve months; 12% already used some form of private cloud in-house, but the rest were solidly against the idea.

Why not a private cloud?
In a twist on what are commonly seen as the major barriers to cloud adoption, the reasons SMBs leaned away from cloud were not security and management concerns, as most research has reported to date. Instead, the number one reason respondents didn't want private cloud was that they didn't need some of its key characteristics. Tellingly, just over a third (35%) of those surveyed said they had no use for metered usage or chargeback in their IT operations.

IT has enough to do [at SMBs] just to keep things running every day.

Brian Denton, CIO at ExamWorks,

Other reasons, including security, were all roughly equal; about 25% of respondents said that cloud was either too complex a paradigm for their business, they lacked the technical skills in-house, or existing applications couldn't be used in a cloud environment. Only 14% said virtualization in itself was an issue, and 19% said they worried about compliance needs.

So what's the private cloud alternative?
Other industry watchers said while SMBs may have qualms about private clouds, they're fairly likely to go with public cloud implementations for some IT needs. Last week, CompTIA released its own cloud survey that said nearly three-fourths of all businesses plan to buy in or expand their use of cloud services in the next twelve months. Of those, medium-sized ($100 million in revenue) firms were the most likely at 64%, and the smallest enterprises the least likely (36%). Those firms also have the smallest budgets for IT.

A Spiceworks survey on SMBs and the cloud parallels TechTarget's survey almost exactly, and reports that of the SMBs that do go cloud, communication applications like email and Web hosting remain the most popular choices. IDC projects that in the cloud market, Software as a Service (SaaS), led by such offerings as Salesforce.com, will remain dominant by gobbling 40% of cloud customers by 2014; other services will split the remaining pie equally.

Carl Brooks is the Technology Writer for SearchCloudComputing.com. Contact him at cbrooks@techtarget.com and check out the rest of our Virtualization Decisions 2010 Purchasing Intentions Survey.

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