Cloud Services Begin to Impact SMB ICT Shipments, Report Finds

Small to medium-size businesses in the United States are rapidly increasing
their use of cloud services, which is beginning to reduce their need for
on-premises information and communication technology (ICT) equipment and is
also allowing them more flexibility in the types of mobile devices they use,
according to a report from IT research firm AMI-Partners.

The report found this development is beginning to affect the demand patterns
for on-premises ICT hardware like servers, storage and networking, as well
client devices such as notebooks, smartphones, netbooks and tablets, The
company’s research focuses on the adoption of cloud services by SMBs in a dozen
countries.

Broadly, AMI’s analysis shows demand shifts
in three areas. While the overall SMB server shipments are still growing, these
are driven by first-time server buyers, who need it for improving their
productivity, as well as replacements and upgrades by SMBs who had delayed
their purchases due to the economic environment over the last couple of years.
However, with the growth of hosted cloud services, SMBs no longer need
on-premises servers for many applications, the report found. AMI
found this factor, combined with consolidation and the growing use of
virtualization, especially among the larger medium-size businesses, is reducing
the growth rate of server shipments.

“While a majority of SMBs are using cloud services in conjunction with their
existing applications and services, a small but growing number are using them
to replace their on-premises infrastructure. This is especially true for cloud
services like CRM, hosted e-mail, hosted
SharePoint and others. This has started to affect demand for ICT infrastructure
required to run these applications,” said Anil Miglani, senior vice president
of IT infrastructure and managed services research at AMI-Partners.
“The full impact of this shift will be seen much more visibly over the next
couple of years, once the replacements/upgrades are completed and also more
SMBs start moving their on-premises applications to the cloud.”

Secondly, the report predicted demand for storage products would also follow
the server demand. In addition, the increasing use of the cloud for backup and
storage is reducing the need for on-premises storage hardware and software,
Miglani said. The report noted that while part of the SMB server and storage
demand will likely shift toward the cloud service providers, their multitenancy
models will prevent them from fully offsetting the decline in total SMB server
shipments.

“Thus, the SMB server market will be pulled in two different directions:
toward smaller, less powerful and less expensive servers driven by first-time
server buyers and toward more powerful servers by the larger SMBs as they
consolidate their servers and use virtualization on a broader scale,” the
report said.

The third shift taking place relates to mobile devices. With applications
hosted in the cloud, some SMB employees no longer need the full functionality
of the larger notebook PCs as they can meet their needs using lighter devices
like netbooks, smartphones and tablets. These lighter mobile devices have shown
significant increase in penetration and ownership among SMBs, the report found.
Notebook shipments, which have been growing at a brisk pace for the last few
years as businesses replace their desktops with notebooks, are likely to see
lower growth rates, followed by a long-term decline in the coming years, AMI
predicted.