Steve Hilton

Each month, SMB expert Steve Hilton of Yankee Group answers real reader questions about small and midsize business technology in Ask Steve.

Folks often ask me why my Ask Steve column covers so many types of technology. Doesn't surprise me one lick: SMBs and the ecosystem serving them want to understand their options and purchase wisely.

I recently spoke at a Hewlett-Packard roadshow with prospective customers in Florida. SMB and mid-market enterprise decision-makers filled the audience. The questions were incredible: mobility, networking, security, remote connectivity, video communications and compliance, just to name a few topics. This week Ask Steve tackles one very relevant question from a technologist in the Tampa crowd.

Joe from Tampa, FL: What is happening with virtualization and SMBs?

A: The power of virtualization has reached SMB markets, although not as deeply as enterprise markets. According to Yankee Group 2008 SMB survey data, 26% of medium businesses (100-499 employees) are using server virtualization in production servers. By comparison 43% of enterprises (500+ employees) are using server virtualization today. Within 24 months, 69% of medium businesses expect to use server virtualization, quite a 2-year growth rate. Just for the record, 23% of small businesses (20-99 employees) and 8% of very small businesses (2-19 employees) use server virtualization in production servers.

Why do SMBs adopt server virtualization? Like their larger enterprise brethren, SMBs adopt virtualization to reduce or contain costs associated with the number of servers they own. However, a secondary reason is that SMBs want to provide disaster recovery and failover solutions: both of which are more easily and cheaply implemented inside virtualized server environments.

Exhibit 1: SMB Adoption Drivers for Virtualization Source: Yankee Group Anywhere Enterprise-Small and Medium: 2008 US IT Infrastructure Survey Let's turn our attention to the most important services and applications SMBs run on virtualized machines. Well, not surprisingly, SMBs are a little hesitant in running the most critical business applications like CRM, ERP, custom J2EE or .net applications in virtualized environments. That being said, they've begun running some of the communications-centric services like file/print, Web, database and e-mail servers on virtual machines. Virtualization allows increased server utilization and SMBs are willing to take some perceived chances with these less-critical applications in order to gain the efficiencies promised by virtualization.

SMBs have a bevy of security concerns related to virtualization. Of course, security issues rarely stop SMBs from implementing technology solutions that have very quick payback periods. Compliance and regulatory issues associated with virtualization are medium businesses' top security-related issues. In addition, managing access and security policies to different virtual machines concerns medium businesses. Both of these concerns are serious, but addressable with appropriate planning and policies.

Considering server virtualization for your small or midsize business and wonder which vendors have greatest market share? Well, if you're an SMB already running virtualization on production servers, most likely you're using a VMWare product, the company with 52% of the market share for this type of SMB. If you're an SMB testing virtualization today or plan to adopt in the next 24 months, you're 42% likely to consider a Microsoft virtualization solution and 30% likely to consider a VMWare solution. Other virtualization vendors include Parallels, Virtual Iron (recently acquired by Oracle), Citrix, Novell, Red Hat, Oracle, and Sun. Amazing what mindshare Microsoft has created in a very short period of time. This awareness building helps make virtualization more of a reality for all SMBs.

Exhibit 2: Virtualization vendor market share in the SMB sector Source: Yankee Group Anywhere Enterprise-Small and Medium: 2008 US IT Infrastructure Survey

Virtualization has made large inroads in SMBs markets and still has a long way to go. And we've only discussed server virtualization. Stay tuned for more Q&A about desktop virtualization and virtualization in the mobile world, as well as related topics of business continuity and disaster recovery for SMBs.

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Do you have a question to ask Yankee Group analyst Steve Hilton?
Send your questions to asksteve@yankeegroup.com. Please include your name, city, state (province), and phone number. Only first names and locations will be published.

See more Ask Steve columns

Steve Hilton is VP of Enterprise and SMB research at Yankee Group. Hilton is recognized as a leading, global SMB expert.

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