GigaOM » SMB

Cloud provider Internap adds hosted offerings for itty-bitty companies

Barb Darrow — Thu, 26 Apr 2012 19:18:04 +0000

Earlier this year Internap bought Voxel to boost its dedicated hosting and public cloud portfolios and to extend its reach into small companies. And on Thursday, it launched new Agile Hosting services from Voxel.net that will let even tiny businesses configure and deploy IT infrastructure from a new online configurator, aka configuration tool.

The rationale is that small businesses, in aggregate, represent a huge opportunity for cloud providers and hosting companies that can make such IT services easy for them to deploy and consume. And there is outside data to support Internap’s bet that small businesses equal big upside. A new Microsoft-funded survey shows that SMB spending on cloud deployment could double in the next five years. And Internap points to research from The 451 Group projecting that the overall market for dedicated hosting and cloud infrastructure-as-a-service (IaaS) could hit the $3.8 billion mark by the end of 2012, with a 14 percent compound annual growth rate.

Wanted: More of the IT spending from small businesses

The new Internap services build on Voxel’s orchestration technology to let small companies — typically those that spend less than a few thousand dollars a month on IT — deploy servers instantly, said Paul Carmody, SVP of product management and business development for Atlanta-based Internap.

One rationale for the Voxel buy was that it would give Internap address a bigger chunk of the addressable market for hosted or cloud-based IT services. Internap customers typically spent tens of thousands of dollars per month on IT infrastructure, while Voxel targeted those that spent maybe $1,000 per month, Carmody said.

With this new offering, Internap can go even further down into small businesses — the tens of thousands of companies that spend maybe a few hundred dollars per month on IT.”That’s a sign-up sort of market. We don’t have a sales rep walk into your office or call you, instead we put an order configurator on the Voxel.net web site, you click to order your servers and get a range of options. You can choose servers that are instantly deployed, you can sign up for bare-metal servers and within a few minutes you can have it all provisioned,” Carmody said.

The services are now running at Internap’s Singapore, Amsterdam, New York City, Santa Clara and Dallas data centers. Internap has also tied Voxel into its high-performance IP network which aims to reduce network latency.

Internap-Voxel integration work continues

Internap, which was first out of the chute last fall with an OpenStack-based compute cloud, is working to put that OpenStack cloud management layer atop Voxel’s Xen-based public cloud offerings, Carmody said.

It will be interesting to see how many of these very small companies do opt for Voxel’s Agile Hosting or similar servcies. Not many small companies have IT staffs. That means they don’t want to run a lot of their own server room gear themselves but at the same time, it’s unclear how many would be confident enough to use an online configurator to deploy hosted services. My guess is that many will turn to a VAR or integrator or other trusted advisor that would either configure these systems on their behalf or — more likely — take on the hosting duties themselves.

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Vidyo raises $22.5m more, doubles headcount and revenues

Ryan Lawler — Thu, 22 Sep 2011 04:01:19 +0000

Vidyo has been on a roll lately, announcing new products and partners to get its high-quality video conferencing technology embedded in enterprise and small- and medium-sized business applications. To meet that demand and accelerate growth, it’s ramping up headcount, mostly in sales and marketing, and on Thursday will be announcing a new round of financing.

Vidyo has raised a $22.5 million Series D round of financing led by QuestMark Partners, with participation from existing investors Menlo Ventures, Rho Ventures, Star Ventures and Four River Group. Since being founded in 2005, the startup has raised a total of $97 million.

That funding comes as the startup has grown its sales and marketing team pretty aggressively. Vidyo CEO Ofer Shapiro told us in a phone interview that the company has doubled headcount over the past year, from 100 to more than 200 employees, as it attempts to snag new enterprise customers and OEM partners to license its technology.

Earlier this year it released its VidyoPanorama product, a telepresence system that enables up to 20 screens to conference with HD video quality. The telepresence system also boasts much lower cost than competing products, at as little as $4,500 per screen. That’s a huge discount from more traditional room-based video conferencing systems from Cisco or Polycom.

A lot of Vidyo’s business today comes through partnerships with third parties that resell its video conferencing services to their customers. For instance, telecom carriers such as Chunghwa, KDDI and Elisa are partners in providing its collaboration software to enterprises in their footprint. But it’s also expanding its efforts to provide teleconference technology to OEMs through an API that they can integrate into their own applications. It’s already seen a number of partners take advantage of this, particularly in the healthcare, education and finance fields.

That partner strategy has also helped it grow revenues pretty substantially. Without stating numbers, Shapiro said that the company’s sales have more than doubled over the past year. As more SMBs seek less expensive ways to collaborate, and more partners build applications based on its technology, Vidyo seems poised to continue that success into the future.

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iPad’s enterprise growth bested only by iPhone

Darrell Etherington — Wed, 03 Aug 2011 14:27:15 +0000

The iPad is leading the tablet charge in small and medium-sized businesses (SMB), resulting in a growth spurt that puts the Apple device out in front of nearly all other comers when it comes to new ActiveSync activations performed by enterprise cloud services provider Intermedia. I say nearly because there’s still one device that sees even more activations: the iPhone.

Source: Intermedia. Click the image for more.

Intermedia handles around 350,000 premium hosted Microsoft Exchange servers, making it the largest such email provider operating worldwide. It surveys the device makeup of its customers’ ActiveSync-capable smartphones and tablets (basically any device that isn’t a BlackBerry) in the process of running said servers, gathering the data in cloud mobility reports.

This time around, for the period between the end of May and August, iPad activation rose a considerable 102 percent compared to the period immediately preceding it, making it the number two most-activated device (including smartphones) that Intermedia supports. The breakdown of total activations for the period saw the iPhone at number one with 51 percent overall, followed by the iPad with 21 percent. Rounding out the top five were Motorola devices with 9 percent, HTC handsets with 8 percent, and finally LG, Nokia, Palm and Samsung devices with a combined total of less than 4 percent.

Apple’s success with SMB customers can likely be accounted for somewhat by the greater willingness of smaller enterprise customers to embrace “bring your own device” models of IT hardware support, but it’s a trend that seems to apply equally among enterprises of all sizes.

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Small Biz So Far Not So Crazy About the Cloud

Jordan Golson — Mon, 31 Aug 2009 04:01:08 +0000

Many companies are slashing budgets to improve the bottom line — or at least postponing purchases until later — but not all. Thirty-nine percent of small and medium businesses reported budget cuts this year, averaging a 22 percent reduction in IT funding, according to Spiceworks’ annual survey of SMB tech departments released this morning. However, 31 percent said budgets were flat year over year, and 30 percent saw their budgets increase in 2009, averaging 27 percent. Overall, IT spending was down barely 1 percent. Spiceworks polled 1,130 IT pro’s supporting companies with fewer than 500 employees. So, whether the budgets were smaller or larger, where was all the money going?

Almost 37 percent of IT budgets were spent on hardware, with 24 percent going to software.
Desktops remained slightly more popular than notebooks, but not by much. The average SMB plans to buy 13 desktops and 10 laptops in the next year, plus two servers. Companies plan to get 50 months of use — more than four years — from their hardware purchases, up from 40 months last year.
Backup and recovery (38 percent), antivirus and spam prevention (46 percent) and virtualization software (30 percent) topped the list for software companies’ purchase plans this year.
44 percent of SMBs are using virtualization, with companies reporting 21 percent of total computing capacity virtualized.
56 percent of SMBs use at least one cloud service, with web hosting (25.4 percent), email (21.2 percent) and online backup (16 percent) being the most popular.

Despite all the hype regarding hosted or cloud-based solutions, 65 percent of companies surveyed prefer on-site antivirus, and 75 percent use on-site backup. Thirty-five percent use hosted antivirus, and 25 percent subscribe to hosted backup services.

Only 4.8 percent of total SMB storage allocation is hosted off-site with services like Amazon’s S3, but going forward, companies plan to allocate 6.6 percent of their storage to hosted services.

The economy might be throwing some industries for a loop, but SMBs are still planning to buy — though they expect to get more useful life out of their purchases. However, it doesn’t seem like full-scale cloud technologies like Amazon’s S3 and EC2 have caught on as quickly outside Silicon Valley — the majority of the companies surveyed preferred to keep things in-house rather than trust an outside company. Plus, some companies simply don’t have the computational needs that tech firms have, so cloud computing is simply not as attractive.

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Self-Service Nation: Why Targeting Small Business Is Good Business

Mike Speiser — Sun, 28 Jun 2009 07:00:21 +0000

One of the key concepts at the core of traditional marketing is the 80-20 rule — that some 80 percent of the effects (or in this case, profits) are the result of 20 percent of the causes (here, customers). Indeed, if you’re able to target just a small group of people in order to successfully yield most of your profits, there are all sorts of benefits — it’s easier to reach a small group, it’s easier to build them the right product, and so on. Most large technology sales and marketing organizations have taken the 80-20 rule to heart and focus on some small fraction of the tens of millions of businesses on the globe, often targeting just the Global 2000.

While the 80-20 rule can be very powerful, the reality is that many of the costs associated with building, supporting, distributing and selling technology products have dropped dramatically in the past decade. Yet many enterprise technology executives are operating as though the cost of distribution hasn’t changed since the early 1990s. In the coming years, I expect startups to increasingly target the massively underserved small- and medium-sized business (SMB) segment by taking advantage of the arbitrage between actual and assumed costs of sales. Self-service sales models will be a key element of these startups that will forever change the face of the enterprise technology business.

U.S. Business Statistics | The Economics of Sales

A quick look at Census Bureau statistics on business size reveals some startling information:

Of the 25 million U.S. businesses, only 5.9 million employ one or more people.
Of the 5.9 million employer firms, only 17,047 have 500 or more employees, yet those firms account for 49 percent of U.S. employment and 61 percent of revenue. That translates into well under 1 percent of U.S. firms accounting for 61 percent of revenue
Of the 17,047 firms with more than 500 employees, the 890 with 10,000 or more employees account for 26 percent of U.S. employment and 37 percent of revenue.

Let’s say you’re an enterprise software company and that your economic model requires each sales professional to earn $2 million-$3 million in revenue a year to cover the costs of your operation, including the cost of the sales themselves (salaries, commissions, travel and entertainment, sales support and operations, etc.). Each one of these representatives can only do so many deals every quarter, so the revenue per deal must be fairly high — let’s say that the average deal size per customer, per year, must be around $100,000. And that’s just your part of the solution. There are likely other software, hardware and consulting costs associated with the complete solution.

If we assume that the average pre-tax margin of a small business is 10 percent and we take revenue for the 98 percent of U.S. firms with 99 or fewer employees, divide their aggregate revenue by the number of firms to get average revenue per firm and then take 10 percent of that number to derive pre-tax profit per firm, we get $103,962. In other words, the direct sales model would require taking roughly 100 percent of pre-tax profit from firms with fewer than 99 people for just your component of the solution. These are back-of-the-envelope assumptions and are for illustrative purposes only — the point is that direct sales organizations cannot serve the vast majority of businesses on the planet.

Currently the most effective way to reach the SMB segment is via bundling, for example to have your software or hardware bundled (that is, OEM agreements) with some big-ticket item like a server; that vendor then distributes the combined product through a single or two-tier distribution channel. A very small number of products have the import to be sold through the channel on a standalone basis (such as backup hardware and software). If you compare what the large enterprise has in terms of technology vs. the small business, there is a massive gap. Most small businesses hack together solutions for many of their problems with Microsoft Excel, pen and paper, or nothing at all.

Enter the Web

In Figure 1, I’ve depicted the universe of potential customers in the U.S., from the roughly 300 million consumers at the base of the pyramid to the 17,000 largest enterprises at the top. Large enterprise IT companies have been created by primarily selling to the largest customers. And large consumer web companies have been created by targeting a large percentage of the total population. Far fewer businesses have been created, at least in high technology, by serving the small- and medium-size business segment as they were hard to reach. But that’s all changing rapidly.

Figure 1: The Customer Segment Pyramid

In a web-based software firm, there isn’t a significant marginal cost of research and development (R&D). Cost of goods sold are often very small (especially in software), and CAPEX on a unit amortized basis is trivial. The biggest marginal expenditure is cost of sales. If a company can figure out how to simplify sales delivery and service by leveraging a self-service model, it can reach a large market segment hungry for better products and services.

Using techniques perfected by consumer web companies, a generation of enterprise IT companies will emerge that deliver a vastly superior user experience to IT professionals and employees alike. Improvements in ease of use will liberate employs from terrible software, server-side software development will increase the pace of product improvements and lower support costs, and the self-service model will change the economics of enterprise IT sales forever. Google’s success is as much about AdWords offering advertising services to the SMB segment as it is about serving consumers search services.

The dominant player in the SMB segment of the IT market today is Microsoft, as it’s been able to drive significant sales by riding Windows OEM agreements. If I were Microsoft, I would be more concerned about software-as-a-service solutions eroding my market share in the SMB segment than the threat of consumer web search, but I digress…

While the marginal cost of direct sales is very significant, the marginal cost of self-service looks more like the marginal cost of R&D — that is, very small. With a low marginal cost of sales, the 99 percent of firms that are poorly served today will be served much better in the coming years. And over time, these solutions will likely work their way up the pyramid to penetrate the small group of very large firms that are currently being served by direct sales professionals. If you’re looking for opportunities to disrupt enterprise technology businesses, you would be well-served to start with the sales model.

Mike Speiser is a Managing Director at Sutter Hill Ventures. His thoughts on technology, economics and entrepreneurship will appear at this time every week.

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Don’t Expect Mass Enterprise iPhone Adoption in 2009

Darrell Etherington — Tue, 23 Dec 2008 20:00:21 +0000

The iPhone has a lot of potential for enterprise use. It’s a powerful device, and it supports Exchange synchronization, and more and more, businesses are integrating Apple computers into their current IT loadout. Still, BlackBerry dominates the business market. Especially in more traditional corporate climates, the impetus required for a shift to Apple’s device isn’t there. At an organization I recently left, they were just undertaking BlackBerry adoption, and cautiously at that. Suggesting an iPhone solution would’ve been greeted by blank stares. Some involved in approving purchasing decisions wouldn’t even have known what one was. Yes, it is possible to be that insulated.

I still used my iPhone for work purposes, but not in a way that was fully integrated or supported by our in-house IT. It’s the type of thing that Forrester Research’s Michele Pelino sees as becoming more prevalent as we move in to 2009. Small and medium-sized businesses (SMBs) like the one I mention, according to Pelino, will see more of the iPhone, since their IT infrastructure is less strict, and open to a hodge podge of solutions supplemented by employees’ own equipment. Because of this, she sees iPhone adoption climbing to as much as 10 percent among SMBs.

SMBs are one thing, but what about large enterprise? Will the iPhone make inroads into this traditional bastion of BlackBerry users? Can they, when hardware is generally company-purchased, company-issued, and strictly mandated? According to Pelino, the Storm will reap the benefit of the large enterprise’s resistance to change. End users are clamoring for a touchscreen phone, and now they can provide one, without going outside of, or reexamining corporate mobile tech policies. The Storm, according to many accounts, doesn’t live up to the standards of the iPhone, but from a business standpoint, it’s a much more fiscally responsible solution, at least in the short term.

Bottom line? Don’t expect massive iPhone uptake from large corporations in 2009. Still, that doesn’t mean it’ll stay locked out forever. The upward trending SMB adoption bodes well for the iPhone down the line, in fact. Traditionally, smaller businesses anticipate the crest of tech trends, since they have the flexibility to do so. Enterprise-wide adoption is far easier on a smaller scale, so small companies are often incubators of big ideas that later sweep the business community. Especially when you consider that small businesses are career incubators as well. People often begin their professional lives at SMBs, and move on later to influential roles in larger companies. They bring with them their habits, working styles, and IT preferences, which can lead to innovation.

The groundwork is being laid, but as Pelino suggests, we probably won’t see major enterprise iPhone adoption in the coming year. Do expect, however, to see more offerings like KBOX from KACE, an iPhone management solution for those who are implementing enterprise-wide iPhone implmentation that allow companies to deploy, manage, and track handsets and users. KACE recognizes the growing appeal of the iPhone to business users, and are getting an early start at providing a framework for when big business catches up. Don’t expect any huge moves in corporate IT departments until after we’ve successfully emerged on the other side of the current economic situation, but if the iPhone continues to dominate the consumer market, look forward to big shifts when the dollars are there to spend.

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Microsoft Offers Free Online Small Business Summit

Scott Blitstein — Tue, 14 Oct 2008 15:30:19 +0000

I apologize for the last minute notification of this but I can’t believe the Microsoft Small Business Summit is upon us already.

The Small Business Summit is a free three day online conference featuring a host of experts sharing the secrets of their success.

This series is really a great resource for business owners. The majority of the sessions feature a fantastic assortment of guest speakers from a variety of industries. Mixed in are some Microsoft product specific sessions which can also be useful if you are looking for solutions for yourself or for clients.

This year they are doing the sessions based on a specific daily focus:

Tuesday, Oct 14th – Sales and Marketing
Wednesday, Oct 15th – Productivity and Security
Thursday, Oct 16th – Financial Management

Sessions start each day at 12:00 PM EDT

I’ve always found the sessions worthy of the time investment. It’s free and you can pick and choose the presentations you wish to attend. Visit the Small Business Summit for more information or to register.

If you can’t make this live event, they usually make the presentations available for later viewing.

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Cisco Out To Crush Netgear?

Om Malik — Fri, 25 Apr 2008 14:37:36 +0000

Looks like Cisco Systems (CSCO) is dead serious about turning the screws on the competitors of its Linksys line of products. Today, Netgear (NTGR) announced its first-quarter 2008 financial results and they were, to put it mildly, terrible. Sure, revenues were up 14 percent on a year-over-year basis, but operating income, net income and earnings per share took a big dip. Netgear stock is tanking this morning — down 10 percent as Wall Street cuts estimates and turns sour on the company.

Why? Because Cisco is waging a price war on the company and its brethren. In a press release, Netgear CEO Patrick Lo said,”We also observed a slowdown in the U.S. retail market, prompting our primary competitor to lower prices below ours for certain consumer products.” Who might be that primary competitor? Mark Sue of RBC Capital Markets points to Cisco.

Lo seems confident that Netgear can weather the attack and plans to introduce a whole new slew of products “that we believe will strengthen us further in the SMB market.” The company introduced 11 new products in the first quarter and aims to introduce 12 more in the second. For Cisco, SMB has been a good area of growth, and it wants to rev up the revenues, never mind the low margins. Of course, all this will come to naught if the company kills the Linksys brand and shoots itself in the foot, as our poll suggests.

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POLL: Should Cisco Kill the Linksys Brand?

Om Malik — Wed, 16 Apr 2008 14:25:31 +0000

PC Advisor, a UK-based magazine, reports that Cisco Systems (CSCO) may phase out its Linksys brand all together, making the company it acquired in March 2003 for $500 million a product category, according to Cisco’s VP of SMB solutions marketing, Rick Moran.

Last year, Cisco CEO John Chambers ruffled some feathers when he made similar kill Linksys noises. (See YouTube video) The idea is to simplify the product lines and branding. I wonder if it is such a good idea? In small biz and SOHO markets, Linksys is more well-known than Cisco. Moreover, this goes against Cisco’s strategy to woo the consumers. Have your say in our poll, below the fold.

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RingCentral Rings Up $12 Million

Om Malik — Tue, 04 Mar 2008 20:20:38 +0000

[qi:086] RingCentral, a Redwood City, Calif.-based VoIP company, has raised $12 million in Series B funding, doubling the amount it raised in its Series A round. New investor DAG Ventures led the latest funding, with existing investors Sequoia Capital and Khosla Ventures participating as well. The company claims some 50,000 customers, making it one of the more successful players in the hosted VoIP sector. I was highly skeptical of RingCentral when it launched, but I guess there are 50,000 reasons why I was wrong. (I am going to post a long overdue review of RingCentral’s service later this month. )

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