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1/28/2009
12:18 PM
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Cloud vs. SaaS For Small Business

A new survey shows small business is shy of the cloud. At the same time, a SaaS provider that focuses on SMBs is growing fast. Does SaaS resonate more than "cloud"?

A new survey shows small business is shy of the cloud. At the same time, a SaaS provider that focuses on SMBs is growing fast. Does SaaS resonate more than "cloud"?Some 73% of small businesses aren't familiar with the term "cloud hosting," and 57% have no plans to adopt it. That's according to a new survey from Rackspace, which surveyed small and midsize businesses on their awareness of cloud hosting.

I found that to be a surprise, given that small and medium-sized companies can get some real benefits from cloud-based services, such as storage, archiving, e-mail, and Web hosting.

I asked Rackspace CTO John Engates what he makes of these results. "I think it's probably partially the sheer number of messages that are out there in cloud land. I think they are erring on the side that this is just a buzz word."

He says small businesses don't have the time and resources to explore all the incarnations of cloud services. "The smaller they are, the more focused they are on hitting next's week's goals. They don't think about the cloud."

Meanwhile, a SaaS provider of collaboration tools, Central Desktop, announced a 150% increase in users and revenue in 2008 -- healthy growth in a down economy. Central Desktop aims squarely at small and midsize businesses. These are the very same kinds of companies that Rackspace says aren't showing much interest in the cloud.

I realize this isn't an apples-to-apples comparison, but it made me wonder if there are significant differences in the perception of SaaS vs. cloud services for small business.

My guess is that for small businesses, the issue may be front office vs. back office. The ability to spin up a business application without the capital expense of on-premises software has great appeal to companies with tight budgets. Apps that improve employee productivity and make it easier for them to share information and get work done are top of mind for a small business.

By contrast, cloud services such as online storage are back-office issues. Storage doesn't generate revenue, and disk is cheap enough that they can toss another server in a rack because it's what they've always done, and it's faster than trying to weigh the costs and other issues of a service.

It also may simply be a market issue. SaaS as a concept has had a few more years than "cloud" to become part of the technology atmosphere that businesses breathe in, and as a technology category it's pretty well defined. The cloud market is the new kid on the block, and as a category it's still fairly nebulous.

Am I on to something here? Let me know.

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