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Service providers to seize the Cloud Services opportunity in emerging markets     Date added: 01/11/2012

Service providers in emerging regions will see substantial growth in Cloud Services revenue and market share, driven by M&A activities and cloud integration capabilities, says AMI

New York, New York – January 11, 2012 – As cloud computing continues to gain acceptance in emerging markets, service providers (such as telcos, MSOs and hosters) are well positioned to gain mindshare and become an important route to market (RTM) for small and medium businesses (SMBs—firms with 1-999 employees) for acquiring cloud solutions.

AMI-Partners’ recently released 2011 Route-to-Market Opportunity Model shows that in emerging markets, such as China, India, Brazil and Russia, SMB cloud services spending and investments through service providers will increase nearly six-fold from $111M in 2011 to $615M by 2015. This represents a 4-year annual growth rate of 54%—the largest among all RTMs tracked by AMI and far outpacing the growth in total SaaS spending over the same period.

“Service providers in emerging markets will gain considerable market share in the cloud services space, due to several key factors,” says Rohan Bose, Associate for AMI’s Channels Practice. “The first is due to mergers and acquisition activity within the channel landscape. Larger telcos and service providers are in the process of acquiring smaller VARs and local channel partners/resellers. The acquisition of these partners allows service providers to diversify their product portfolios and enter the cloud market by providing basic SaaS solutions (such as accounting, business intelligence/analytics, email and CRM). This is an important step for many telcos and MSOs, as they believe that their traditional offerings such as voice, data and video services will begin to enter a phase of modest growth over the next couple of years. Cloud services allow service providers the ability to meet the growing SMB demand and differentiate themselves from other competitors.”

The second factor for the expected increase in SPs’ share is their ability to bundle SaaS solutions with broadband and high-speed Internet connectivity. Other cloud providers such as channel partners can bundle multiple SaaS applications together, but cost-conscious SMBs are more likely to purchase bundles containing broadband. Says Bose, “As the demand for cloud services continues to rise, SMBs in emerging markets will require access to high-speed internet to increase business efficiency; it is the service providers who are uniquely positioned to offer such packages.”

Finally, many of these SPs offer datacenters and hosting capabilities to SMBs looking to store infrastructure externally. Similarly, SPs can offer datacenter hosting to traditional channel partners such as VARs for the same reason. Other channel partners who require space to host their own apps often turn to SPs to meet their needs. AMI studies have shown strong interest by channel partners to partner with SPs for hosting needs and it is up to the SPs to foster and grow the relationship.

Given the gradual shift in SMB preference, IT vendors would be wise to take advantage of this lucrative opportunity. Since many smaller SPs do not yet have the necessary business applications to offer SMBs, SaaS and other cloud vendors can utilize SPs as a viable option to go-to-market. By entering into strategic and symbiotic relationships, vendors can help SPs add further value to their services.

Related Study

AMI’s small and medium business Route-to-Market Opportunity (RTM) Model is a capacity planning tool that provides the size and flow of ICT investments through 5 key channels: Vendor Direct, Channel Partners, Retail, DMRs, and Service Providers. Each channel is sized for over 70 ICT categories, by 6 Regions, 27 countries and 8 SMB sub-employee bands. The channel size and share are forecasted till Year 2015. The numbers are provided in a simple-to-use and navigate pivot table format for multiple views and breakouts.

This sizing model enables ICT vendors to:

• Gain a competitive advantage by understanding the channel size and the changes in channel share over the short and long term.

• Determine the channel investments and channel mix that will provide the highest ROI.

• Compare and contrast the channel share by product type, customer size and country/region.

For more information about our studies, AMI-Partners, or our global SMB research, call 212-944-5100 or e-mail

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