SMB Cloud InsightsTM

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SMB Cloud Insights

TM

2015

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DEFINITIONS

SMB Definition and Segmentation

We define SMBs—also known as small and medium enterprises (SMEs) - as companies with 1 to 250 employees. There are around 4.4 million such SMB establishments in Indonesia today. SMB segments include: micro (1-9 employees), small (10-49 employees) and medium (50-250 employees).

Cloud Opportunity Type

Cloud leapers: This category consists of SMBs that currently are not using an in-house IT solution (no servers, no web server, or no PBX system) and are likely to move straight to the cloud, “leaping over” the intermediate in-house IT solutions.

Cloud converters: These SMBs currently have in-house solutions but are either moving or planning to move to hosted services. For example, many SMBs that currently have in-house servers may switch to hosted servers when it comes time to upgrade their infrastructure.

Cloud expanders: These SMBs, who are already using some form of cloud services, represent an opportunity for upselling to new and expanded cloud offerings. For example, an SMB who is using web hosting would be acting as a cloud expander when they purchase mobile optimization to complement their website.

Cloud Services Categories

This research is focused on the cloud services that matter most to SMBs: IaaS, web presence and web applications, unified communications, and a general category we refer to as business applications.

Infrastructure-as-a-service (IaaS): Dedicated servers, virtual private servers (VPS), managed hosting, as well as add-on applications and services for hosted infrastructure, such as control panels, development platforms, LAMP stack, security, server backup, and database add-ons. Includes cloud servers, due to their increasing use among SMBs. Web presence and web applications: Third-party web hosting, domain registration, SSL and ecommerce add-ons, site-building tools, high-opportunity web applications – web server backup, content delivery networks (CDN), content management, mobile optimization tools, search engine optimization (SEO), and web server security and health monitoring. Unified communications: Business-class email services, including email security, email archiving, along with mobility and hosted phone services, including hosted PBX. As of 2015, includes communication and collaboration applications, such as web and phone conferencing, instant collaboration, and mobile device management (MDM).

Business applications: The major types of software applications that can be accessed online – file sharing, online accounting, online backup and storage, online CRM, payroll and HR, support and help desk, and virtual desktop (VDI).

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Odin SMB Cloud Insights™_{has entered its fifth year of research into}

the consumption of cloud services by small and medium businesses (SMBs). Globally and locally, we are finding that SMBs from a variety of sectors are moving business functions into the cloud. Tools and solutions previously reserved for enterprise-level organizations are being implemented in smaller firms as developers create services specifically for the SMB market. Our research is intended to help cloud service providers take advantage of the trends outlined in this report in order to meet the evolving needs of their SMB customers. Odin estimates the 2015 Indonesian SMB cloud service market to be Rp15T ($1.2B USD). Infrastructure-as-a-service accounts for Rp6.1T ($496M USD) of the overall market. Web presence adds Rp1.6T ($128M USD), unified communications adds Rp4.0T ($324B USD), and business applications adds Rp3.6T ($289M USD). Service providers can use the information contained in this report to understand how SMBs are using cloud services and identify growth opportunities in the coming years.

The Overall Indonesian SMB Cloud Services

Market

2015

($1.2B USD)

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INFRASTRUCTURE-AS-A-SERVICE (IaaS)

IaaS Accounts for 40% of the Cloud Services

Market in 2015

The IaaS category is the largest within the overall Indonesian SMB cloud services market reaching Rp6.1T ($496M USD) in 2015. As this is an emerging market, many SMBs have recently started to rely on server systems to run their businesses. This often results in SMBs bypassing in-house servers and “leaping” straight to hosted servers as a solution.

Virtual private servers (VPS) are the most popular form of hosted server in Indonesia. The exception is medium firms who prefer dedicated hosted servers.

40%

26%

24%

Rp15.2T ($1.2B USD)

Rp6.1T ($496MUSD) Rp1.6T ($128M USD) Rp4.0T ($324M USD) Rp3.6T($289M USD)

IaaS Unified Business apps communications

Note: 20% of SMBs interviewed use more than one

type of hosted server

Physical servers VPS Cloud servers

9%

75%

25%

10%

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Top Workload for Hosted Servers

1

2

3 44%

Web server

42%

Database applications

26%

Business intelligence

68%

25%

79%

31%

SMBs Are Willing to Pay More for

High Availability and Unlimited Storage

SMBs would pay

up to Rp60,000

more each month

SMBs would pay

up to Rp120,000

more each month

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Over 90% of Indonesian SMBs that use hosted servers also purchase at least one add-on with their server. Over the next three years, security and control panels will maintain their prominence, while other add-ons will see strong growth.

Indonesian SMBs are starting to outsource the management of their servers to their service providers and third parties. This allows SMBs to focus on their businesses while providing new opportunities for service providers.

Current and Projected Server Add-On Usage

2015 2018

74%

73%

29%

44%

28%

44%

49%

47%

12%

28%

11%

26%

Security Control panel Database

applications Server backup

LAMP stack Development platform

22%

48%

of SMBs with hosted servers reported using fully managed servers

of SMBs with self-managed servers want to upgrade to fully managed servers within three years

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The IaaS market will see a 24% annual growth rate and reach Rp11.7T ($956M USD) by 2018. As noted above, most of this growth will come from firms without any type of server who will leap into the cloud market for the first time. As many SMBs entering the cloud space will be unfamiliar with this technology, service providers can differentiate themselves in the market by offering higher-touch services to their customers.

IaaS Opportunity through 2018

Cloud leapers (New adoption) Cloud expanders (Increase spending)

29%

54%

Rp11.7T

($956M USD)

Rp6.1T

($496M USD)

24%

CAGR 2015 2018

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Web Presence Market is Small, but Will

Grow in Coming Years

The Indonesian web presence market is currently valued at Rp1.6T ($128M USD). Although only 11% of SMBs have a website in 2015, the market is set to more than double in the next three years as SMBs enter the web presence market. Basic and managed websites, website applications, and website design will see strong adoption by Indonesian SMBs.

WEB PRESENCE

55%

22%

23%

Mobile optimized

Only displays properly on a computer Displays on mobile without optimization

WebSite Design

Rp15.2T ($1.2B USD)

In-house design

Micro Small Medium

Third-party web design

36%

60%

64%

67%

33%

40%

26%

24%

10%

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Website Design

SEO

In-house Web designer Web hoster E-commerce Content management

Website

Hosting

Third-party

hosted

Top Website Applications

Website Add-On Purchase Location

Website Management

Self

hosted

28%

72%

84%

14%

2%

of SMBs are planning to switch to external website management within 3 years

50%

38%

28%

22%

Purchased from web hoster at time of website purchase

Purchased from web hoster after website purchase Puchased directly from application developer 220 億円 1 2 3

42% 40% 27%

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Web Presence Opportunity through 2018:

Top Social Media

Growing at an impressive CAGR of 36%, the web presence market will reach Rp4.0T ($322M USD) by 2018. The biggest opportunities in this market will come from SMBs deploying websites for the first time and SMBs moving from in-house hosting to third-party hosting.

LinkedIn

Local

Directories

Facebook

36%

23%

41%

Rp4.0T

($322M USD)

Rp1.6T

($128M USD)

Cloud leapers (New adoption) Cloud converters (Switch from in-house)

86%

76%

36%

CAGR

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Rp15.2T ($1.2B USD)

Unified communications – which includes hosted business voice services, email, and collaboration applications – is the second largest category of the Indonesian cloud market valued at Rp4.0T

($324M USD). As only 7% of Indonesian SMBs use business voice services and 20% use an email service, the market is still emerging. As a result, there is significant opportunity for service providers as SMBs continue to see the business value of these services.

UNIFIED COMMUNICATIONS

With 20% Using Email and Only 7% Using Business Voice Services, Unified Communications Category is Ripe for Expansion

40%

26%

24%

10%

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28%

_G

row

th

Business Voice Services Location

Hosted

In-house

91%

9%

Although very few Indonesian SMBs use hosted business voice services, those who do find that it improves productivity and customer satisfaction. For SMBs without hosted business voice services, the largest barrier to adoption is simply being unaware of the product. Service providers should address this education gap in their messaging to potential customers.

Top Concerns about Hosted

Business Voice Services

Top Purchase Triggers for

Hosted Business Voice Services

Hosted Business Voice

Features Increase Productivity

and Customer Satisfaction

Unaware of

hosted PBX Price Technical concerns

32% 24% 17%

45%

40%

35%

23%

Instant messaging Mobile connectivity Auto call distribution Auto attendant Major change to business (growth) Good

price point Add new business locations

32% 30%

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Business Email Varieties

Increased need

for security Need professional look and feel Good price point

Do not use email Free service Hosted by a service provider In-house server

7%

_1%

12%

80%

Advantages of Paid Business Email over

a Free Service

89%

72%

48%

Archiving Calendar functionality Security

30%

of SMBs plan to add paid hosted email over the next three years

Top Purchase Triggers for Premium

Hosted Email

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Unified Communications Opportunity

through 2018

2015 Web

conferencing collaborationInstant Mobile device management 2018

25%

20%

17%

8%

3%

4%

Business voice services Email

75%

70%

85%

56%

81%

45%

Cloud expanders (Increase spending) Cloud converters

(Switch from in-house) Cloud leapers

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The Indonesian unified communications market will grow to Rp7.3T ($597M USD) by 2018 as SMBs adopt hosted services to improve their communications. For many of these firms, this will be their first foray into hosted communication tools and they will need guidance on the benefits that service providers can provide. Additionally, this market will see exceptional growth in the collaboration application sub-category (instant messaging, mobile device management, and web conferencing) with a 38% CAGR into 2018.

Unified Communications Opportunity

through 2018

($597M USD)

($324M USD)

23%

CAGR 2015 2018

Rp4.0T

Rp7.3T

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Business Applications Will Soon Become

the Fastest Growing Cloud Category

in Indonesia

BUSINESS APPLICATIONS

Present and 2018 Usage of Top Business

Applications

2015 File sharing Online backup

Online accounting

Support / help desk

Payroll and HR VDI Online CRM 2018

27%

25%

16%

17%

16%

17%

13%

10%

7%

3%

5%

3%

4%

1%

The business applications market (sometimes referred to as SaaS) is valued at Rp3.6T ($289M USD). Presently, file sharing and online backup are the most commonly used applications and will be adopted by many more SMBs in coming years. Less commonly used applications will also gain traction as more SMBs recognize their value.

Rp15.2T ($1.2B USD)

40%

26%

24%

10%

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More Than Three Quarters of Application

Sales Were Captured With a Free Trial

Sources for Finding Online Applications

Online

ads researchOnline marketplaceOnline reviewsOnline Word-of- mouth publicationsTrade

44%

39%

31%

30%

29%

25%

58%

27%

15%

Purchased after free trial expired

Purchased without a free trial Purchased to access more features

Note: 45% of Indonesian SMBs use at least two

sources when researching business applications

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Business Applications

The business applications category is set to be the fastest growing in the Indonesian SMB cloud market. Expanding at a CAGR of 43%, the business applications category will be valued at Rp10.4T ($847M USD) in 2018. Service providers can capture this growth by offering best-in-breed applications and developing strong online marketing. Free trials are an effective method for capturing sales as many Indonesian SMBs are hesitant to purchase applications outright.

($847M USD)

($289M USD)

Business Application Opportunity in 2018

Average

new use

Average increase

in spending

18%

27%

43%

CAGR 2015 2018

Rp3.6T

Rp10.4T

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BUYING CLOUD SERVICES

Buying Cloud Services

Almost three quarters of all Indonesian SMBs purchase their services from just one or two service providers. This is both an advantage and a challenge for the service provider. While it does mean that service providers have the potential to sell multiple products to their customers, it also places higher stakes on the initial transaction with the SMB.

When purchasing hosted services, SMBs are split between buying in bundles and buying separately. The reason for this apparent split is that SMBs want to maximize the efficiency of their spending. If a bundle can offer savings to the SMB, then a bundle is preferred. However, if a bundle offers unnecessary services to the SMB, then separately purchased services will save the SMB money. This demonstrates the need for service providers to offer high-value, best-in-breed bundles and transparent pricing structures.

50% 40% 30% 20% 10% 0%

1 2 3 4 5 5+

Number of Service Providers

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Bundled Services Decision Process

How do SMBs Contact Their Service

Providers?

53%

47%

of SMBs prefer to

purchase their cloud services in a bundle

Discounts on services is the highest rated reason to purchase cloud services in bundles

Only paying for services used is the highest rated reason to purchase cloud services separately

of SMBs prefer to purchase their cloud services seperately

38%

23%

26%

13%

Email support Online chat Over the phone Regular in-person visits

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Total Market Opportunity

Rp15T

($1.2B USD)

Rp33T

($2.7B USD)

The Indonesian cloud services market is set for very strong growth in coming years as many SMBs are now discovering the value of cloud services and will enter the market for the first time. This is spurred on by improvements in network infrastructure and high expectations of economic growth. By 2018, the market will double its present size, reaching Rp33T ($2.7B USD) at a CAGR of 30%. All categories of cloud services are expanding and offer significant opportunity to

2018 2015

30%

CAGR

2015 2018

IaaS Web presence Unified

communications applicationsBusiness

Rp6.1T

Rp11.7T

24% CAGR

Rp4.0T

Rp1.6T

36% CAGR

Rp7.3T

Rp4.0T

23% CAGR

Rp10.4T

Rp3.6T

43% CAGR

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Learn More

Please contact [email protected] with any further questions. Odin is committed to helping our partners understand the best opportunities in the SMB cloud market.

This report covers only a portion of the extensive data included in Odin SMB Cloud Insights™_research.

About Odin

Odin provides the software that powers the cloud ecosystem, from small and local hosters to some of the world’s largest telecommunication companies. By partnering with Odin, service providers gain access to industry expertise, a catalog of the most in-demand cloud applications, and the most comprehensive selection of software including web server management, server virtualization, provisioning, and billing automation. With offices in 15 countries, Odin supports more than 10,000 service providers in delivering applications and cloud services to more than 10 million SMBs. For more information, visit http://odin.com, follow us on Twitter, or like us on Facebook. © 2015 Parallels IP Holdings GmbH. All rights reserved. Odin and Odin logo are trademarks of Parallels IP Holdings GmbH.

No part of this publication may be reproduced, photocopied, stored on a retrieval system, or transmitted without the express written consent of Parallels.

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