Despite a vaccine and the end of the pandemic on the horizon, it’s still too early to say with confidence what the business lessons of COVID-19 have been. However, one takeaway is already crystal clear: Companies that have strong digital capabilities, or the ability to pivot to digital quickly, have had an advantage.
This is especially true for small-to-medium-sized businesses (SMBs), which have had to get creative to find flexible, fast, and cost-effective ways to quickly adopt digital solutions. In practice, this means that more SMBs than ever before are turning to subscription-based “as a service” offerings, such as software as a service (SaaS) and infrastructure as a service (IaaS).
IaaS in particular presents exciting new opportunities for SMBs, to quickly scale up capacity, to access the power of machine learning, and much more. Below, I discuss how SMBs are using IaaS, the challenges they’re facing, and what SMBs can expect in the future as IaaS becomes more widely adopted.
IaaS Adoption Is on the Rise, but Challenges Hinder Potential
For many SMBs, the start of the pandemic meant a quick education on emerging trends in digital ecosystems and cloud consumption models. In general, SMBs have been eager adopters of SaaS. Now, as their understanding of—and comfort with—the public cloud has increased, many SMBs are using IaaS solutions to manage critical parts of their businesses.
According to a recent report, SMBs are turning to the cloud for a range of needs. In fact, the vast majority of SMBs are using IaaS for storage and database, while about half use IaaS for networking, desktop virtualization, and machine learning. So far, SMBs are slightly less enthusiastic about using IaaS for compute power, while only a third of SMBs use IaaS for mobile services.
Even as enthusiasm grows, the SMB market for IaaS is still relatively young, which presents its own set of challenges. For example, many SMBs lack the staff and expertise needed to manage IaaS. Small businesses also have a difficult time finding providers who offer all of the solutions they require, meaning that resellers are not yet equipped to meet SMB demand for IaaS. Clearly, both resellers and SMBs need to educate each other and build awareness around IaaS and its mutual benefits.
Even so, it’s clear that SMBs are ready to spend more on IaaS. In fact, eight out of 10 small businesses plan to increase their IaaS spend over the next three years, while a much smaller number, 20 percent, plan to spend the same amount, according to the report.
Resellers Are Clearing Implementation Obstacles
When it comes to making IaaS buying decisions, SMBs have two primary options: working directly with a provider or working with a reseller. Though not universal, SMBs prefer to work with resellers. The primary reason is that resellers often provide a more personalized customer experience, but that’s not the only reason. When comparing resellers and providers, resellers come out on top when it comes to trust, support, understanding business needs, and flexibility. Though, providers do stay competitive when it comes to pricing and discounting options.
As an SMB IaaS buyer, be prepared to use different resellers and providers. So far, IaaS resellers have not made it a priority to offer IaaS solutions from multiple providers—a one. In other words, not many IaaS resellers offer a one-stop-shop experience. As SMB IaaS adoption grows, and resellers see the benefit of being able to capture more SMB spend, this reality will likely change.
The Road Ahead
Small businesses are already spending more than $60 billion on IaaS, a number that is set to hit more than $90 billion by 2023. As more small businesses turn to IaaS solutions, it’s important to understand the changing needs and challenges SMBs face. While nearly all SMBs already use the cloud for storage and database services, many still have some catching up to do when it comes to adopting IaaS and other digital solutions.
There’s no way around it, the pandemic has forced businesses of all sizes to address how they deploy digital services, but for SMBs, the pressure has been intense. Now is the time to be bold and implement a digital-first approach. If you’re unclear on where to start, remember there are a range of providers and expert resellers ready to help. Set your priorities, plan a high-level strategy, and start reaching out.
Daniel Saks is President and Co-CEO of AppDirect. An expert in cloud technologies, he was named to the 2015 Forbes 30 Under 30 Enterprise Technology list and has spoken at numerous industry conferences (Web Summit, Collision, and more). He is an advocate for cloud-based delivery and frequently advises Fortune 500 executives on software distribution and cloud strategies. He previously worked in finance and investment banking and has pursued other entrepreneurial projects. He holds degrees from McGill and Harvard universities.