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Cable’s SMB Forecast: Cloudy and Bright

Sun, 01/01/2012 - 2:13am
Craig Kuhl, Contributing Editor

The experts are forecasting increasing revenue showers.

The latest forecast for running a small to mid-size business (SMB) in the cloud calls for greater cost efficiencies and productivity with increasing revenue showers, particularly for those cable operators adding cloud-based services to their expanding business services model.

And the list of service providers in the cloud is growing fast, with many calling the cloud the next stage in the Internet revolution, a stage ideally suited for that much-sought-after new revenue opportunity: the SMB market.

“Business customers, especially SMBs, will use cloud services, and many already are,” said Lynda Stadtmueller, program director for cloud computing services at Stratecast, a division of Frost & Sullivan. “Cable operators are already in the door, and their business customers are using their network capabilities. So why wouldn’t cable step in and take some of that business? Myriad cloud services are available and provide interfaces or portals for their business customers to reach out to other services. Why not take that next step?”

Many already are, she said, with major MSOs seeing cloud-based services as a natural extension of their existing networks.

“It’s surprisingly easy for MSOs to expand cloud services,” she added. “One good model is to provide a cloud portal that gives business customers access to all the business services applications in the cloud, like HR. But right now, there is no sensibility about what’s available or where. It’s a clean way to position business services that happen to be in the cloud.”

It also affords an opportunity for MSOs to claim a significant chunk of business with little skin in the game.

“We’re projecting $2 billion in revenues in six years via cloud services. It’s a significant opportunity,” said Roger Crisman, director of data and video product management at Cox Communications.

Cox is ready to roll out its Business Technology Solution to help integrate cloud services into the SMB community, according to Cox Business’ director of voice and managed services product management, Greg Rothman.

“We believe the cloud will help support the SMB model,” Rothman said. “Our research tells us loud and clear that SMBs want help with online security, backup and more. Offering them in the cloud model has many advantages.”

One advantage is cloud services for mobile devices. And rightfully so.

The research group In-Stat predicts that 86 percent of smartphone/tablet users will view video on their mobile devices, and by 2016, 200 million people in the U.S. will own a smartphone and/or table PC.

But where they’ll be getting information about local businesses and how many apps will be available, and at what price, are questions not lost on cloud-based service providers.

Added Rothman: “We’re seeing increased popularity with mobile devices. We are absolutely no longer developing solutions with PCs in mind. We must have a mobile strategy. It’s a high priority.”

Yet for the SMB cloud model to flourish, there’s a nagging awareness issue that needs to be addressed, experts maintain.

“We love the cloud, but not because it’s the cloud. Few SMBs even know what it is, or that they are probably in it already and don’t even know it. But 30 to 40 percent of SMBs have adopted some type of cloud apps. For us, the economics and simplicity are so compelling, with a 40 to 50 percent CAGR on the cloud,” said Kevin O‘Toole, senior vice president of product management and strategy for Comcast Business Services.

Just as compelling, he noted, is the true cost-effectiveness of the cloud for SMBs.

Said O‘Toole: “The beauty of the cloud is that it doesn’t need killer apps, just lots of smaller ones. So it’s cost-effective with low barriers of entry and gives SMBs the right tools for their business, like CRM and HR. One SMB saved $30,000 over a three-year period.”

For smaller businesses, that’s not chump change. So entering the cloud is a highly recommended move.

“In many ways, cloud computing is an ideal model for the small business. It’s a cash flow-oriented service model, meaning there is little or no upfront cost to acquire services, and the users typically pay a price proportional to the amount of service they consume. And there is a wide variety of services available for the small business to choose from. The cloud is simply a better IT model than buying and operating their own gear,” said James Urquhart, cloud programs and communications manager at Cisco.

The cloud isn’t without its challenges, however. As one industry techno-marketer put it: “Unfortunately, the marketing guys got hold of the term before the technical folks knew what it meant.”

Many have attempted to define the cloud; few have succeeded. Now, the cloud is beginning to define itself.

“Businesses want access to their apps – that’s all. Facebook is a massive cloud app, but end users don’t care what it’s called. For SMBs, they’re buying functionality and access to apps they wouldn’t ordinarily have without the cloud,” Stadtmueller explained.

So, call it what you want, but the cloud is now an appealing new business model with a bunch of moving parts, and apps, for cable operators and their SMB market.

“It takes the total cost of ownership and drives it through the floor,” O‘Toole said.

Yet for cable operators, the cloud has some additional silver linings, as in stretching their core services.

Susan Simmons“Cable companies have significant opportunities in cloud computing. They can further ramp up current growth in the SMB segment by offering compute-asa-service, storage-as-a-service, and other Web hosting and managed app services. And they can bring together best-of-breed business-in-a-box SaaS suites, including CRM, communications, productivity and other apps,” said Susan Simmons, senior vice president and managing director for CSMG, a provider of strategic guidance to service providers in the cloud.

And that’s not all. Added Simmons: “They’re also finding ways to use cloud architecture to improve core triple-play product sets. We’re definitely seeing significant strategic moves into the SMB cloud space by players like Comcast and TWC, most notably with its recent $230 million acquisition of NaviSite.”

But the new mantra “everything in the cloud” may not be for everyone, particularly for those smaller businesses whose need for more automation is years away, if ever.

“There’s a huge, growing need for SMBs to use cloud services. But many smaller businesses haven’t reached the point where they need all that automation. As they grow, they’ll need to improve productivity, help margins and increase revenue. Then they’ll look at cloud-based services,” Stadtmueller said.

In the meantime, companies such as ActiveVideo Networks are exploring ways to increase their participation in the cloud, with ActiveVideo doing it via its cloud TV platform.

“It’s a new technology that will enable cable operators to build their own set of apps. We’re definitely seeing positive feedback using cloud-based technology, with plenty of opportunity to grow cloudbased services to connected TV devices,” said Tarun Kripalani, platform product manager at ActiveVideo.

For the SMB market, that means more cloud-based services, and for cable operators, a potentially huge new revenue stream. But there are some caveats, O‘Toole admitted.

“There is some difficulty in customization, like hooking into a billing service. And if there is an existing set of servers and you want to move to the cloud, you must migrate data to new environments, and that is tricky. So migrating to the cloud can be a blessing and a curse.”

Most industry experts agree that running key SMB functions via the cloud is a blessing. The curses are likely to occur in choosing just what those functions are and how to put them into the cloud.

For the cable industry and its burgeoning SMB market, the experts are forecasting that cloud-based services will continue to improve and expand, and they’re forecasting increasing revenue showers.

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