Small shops abandon servers for the cloud, Gartner reports

The cloud is casting a shadow over traditional server sales in the North American SMB market, a new Gartner Inc. study shows.
The report focuses on the very small business (VSB) market in NorthAmerica — companies with less than 20 employees — which accounted for about five per cent of x86 server revenue worldwide in 2010, according to Gartner.It’s a market that cloud providers will continue to chip away at in2012, says study author Kiyomi Yamada, a principal research analyst inGartner’s enterprise system group.

“Cloud services will be the single biggest competitive threat toselling servers to very small businesses for IT providers,” Yamadawrites in the report. “VSBs without IT resources and skills willconsider (a) cloud service outsourcing model instead of managing services on premises.”

And the SMBmigration from servers to the cloud isn’t motivated solely by costsavings, Yamada says. For many SMBs, the cloud trumps traditionalservers because it offers more flexibility in terms of cost, managementand future build-out, she says.

“(SMBs) don’t have to spend too much money for the initial (cloud)investment. By using cloud service, you pay for what you use. If yourbusiness is booming you can just increase your capacity. (SMBs) need tohave agility. If you buy a server it depreciates and they can’t buy(another server) until they get the funds,” Yamada says.

The cloud model is also attractive to the smallest SMBs because manydon’t even have dedicated IT staff to maintain and manage a traditionalserver, she adds, so adopting cloud appeals to them as an end-to-endsolution.

Some major vendors have responded to the cloud competition by launchinglow-cost servers (some for as little as $500) targeting the SMB market.HP introduced its ProLiant MicroServer last year, targeting businesseswith less than 10 employees that use PCs to manage server relatedtasks. And Fujitsu Ltd. launched its Primergy microservers soon after,which use non-traditional processors (including PC or embeddedprocessors) to save on power use and energy costs.
But those low-cost servers “have not seen significant volume sales,”Yamada’s report states, and “this shows that (VSB) customers have notbeen motivated by price.”
SMBs also don’t appear to be scared away from the cloud by security concerns, which consistently top the list of reasons most businesses haven’t adopted cloud yet.

“I’m not sure they have security concerns, to be honest. They are not aware of that (risk),” Yamada says.

But why not? Yamada says many SMBs are using free consumer-oriented cloud services like Google Apps and iCloudto run their businesses, a part of the consumerization of IT trend thatshe says is inevitably leading to greater security risks – risks thatmany SMBs don’t consider when they sign up.

“There’s so many consumer targeted cloud services that are free…another trend is BYOD(bring your own device) and they don’t care about security so much oraren’t aware so much about (the risks of) those activities,” Yamadasays.

One way server vendors can stave off further competition from the cloudis to bundle their server offerings with cloud-based services in a hybrid cloud model, Yamada suggests.

“Microsoft is doing this hybrid approach already and other providers can do the same.”

Microsoft Corp.’s Windows Small Business Server 2011 Essential providesboth on-premise and cloud services such as file management, databackup, remote Web access and document collaboration for SMBs with lessthan 25 employees, Yamada says.

Christine Wong Christine Wong is a Staff Writer at Follow her on Twitter, and join in the conversation on the IT Business Facebook Page.

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Christine Wong
Christine Wong
Christine Wong has been an on-air reporter for a national daily show on Rogers TV and at High Tech TV, a weekly news magazine on CTV's Ottawa affiliate. She was also an associate producer at Report On Business Television (now called BNN) and CBC's The Hour With George Stroumboulopoulos. As an associate producer at Slice TV, she helped launch two national daily talk shows, The Mom Show and Three Takes. Recently, she was a Staff Writer at and is now a freelance contributor.

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