Your business is going places. Can your IT support keep up?

Every business strives to become more efficient, and the challenges to reach greater efficiency are growing every year, as managers are being asked to do more with less. Smaller budgets. Fewer resources. Shrinking timelines.

As you’ll see in the following articles and infographics, many companies are finding improved efficiency — and significant savings — by outsourcing some or all of their IT and communication services. In fact, some businesses, especially midsize companies, are reaping the greatest rewards by making the move to managed services.

Contents More Money, More Performance: A Look at Business Cloud SpendingDick Csaplar

Managed Services OverviewInfographic

Outsourcing Rising: More Businesses Delegating ITFrank Grillo

Are Managed Services Right for Your Business?Infographic

Business Cloud Deployment: Does Size Matter?Dick Csaplar

Midsize Businesses Gain More With CloudInfographic

Small and Midsize Companies Are Gaining Different Benefits From Using the CloudAberdeen Group

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More Money, More Performance: A Look at Business Cloud Spendingby Dick Csaplar

Business cloud users plan to increase their yearly spending on cloud programs by 8.6 percent, far greater than the planned 1 percent increase in overall IT spending. This was a finding for the Aberdeen Group in my January survey of a wide range of companies to learn more about their public cloud use.

But how they will spend that increase in their cloud budget?

The short answer, I found, is to improve cloud performance and add new levels of sophistication. The chart below ranks the top five of 19 technologies to be deployed.

It’s interesting that two of the planned technologies have expected deployment rates higher than what is already in place. This shows that cloud tools continue to mature and that we are still in the beginning stages of the cloud computing revolution.

The planned technology investments fall into three categories:

Security

Encryption of cloud data: This includes encrypting data as it travels to and from the cloud as well as encryption once it’s stored in the cloud.

Secure connection to the cloud: Companies with a secure connection can avoid using separate network ports and premise-based firewall services to connect to the cloud and remote offices.

Improved Networking Performance

WAN optimization software: This collection of tools increases data-transfer efficiencies across wide area networks to improve an end user’s cloud experience.

Boosting the performance on internal networks: Leading cloud programs will be investing in software-defined networks, switches, and hubs to improve overall network performance.

Advanced Management Capabilities

Bringing on-premise internal infrastructure and cloud capabilities under a single IT management umbrella is becoming more popular.

How does your business cloud spending compare with the survey results? What will be the most important cloud technology for your business in the next 12 months?

Source: Aberdeen Group, January 2013

Dick Csaplar Dick has over 30 years of experience in the IT field working for startups, international companies and in Silicon Valley.

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Outsourcing Rising:More BusinessesDelegating ITby Frank Grillo

The past few years have seen more businesses turn to cloud computing for more IT services. So it was only a matter of time before this trend pointed toward an even bigger change in the way businesses handle IT: wide-ranging outsourcing.

Expect to see that come to fruition in the next five years, when about 70 percent of all business IT infrastructures will be outsourced. This is according to the latest Global IT Leadership Report from Savvis, a CenturyLink company.

The report, a survey of 550 IT leaders in organizations worldwide, shows how the new IT reality turns today’s owned-outsourced equation on its head, with cloud, colocation, and managed services being used for a majority of IT services. This sea change is happening, in part, because of the global nature of business, Big Data, increased collaboration, and evolving security threats.

Let’s take a look at some of the other factors that IT leaders say are fueling this transformation:

Competitive Advantage

The survey reports that IT leaders are looking for better cost structures to provide their businesses with competitive advantage — and outsourcing helps them achieve that. Providers have a wealth of IT knowledge and experience in a range of industries that allows businesses to provide reliable, secure, and high-performing IT at a lower cost than their competitors. They can use that advantage to reinvest elsewhere in the business and surpass the competition.

Business Growth

When organizations outsource, they are more likely to see and predict revenue growth for the year than those that don’t outsource. According to the Savvis

report, businesses that have the majority of their IT in colocation (29 percent), in-house private cloud (27 percent), or managed hosting (22 percent) are more represented in the high revenue-growth categories over the next 12 months.

Cost Savings

At the base of the competitive advantage and business growth that outsourcing provides is cost savings. Survey respondents said they’ve saved an average of 11 percent of their annual IT budgets, thanks to outsourcing. And they see savings increase over time, more than doubling in five years. Additionally, because providers can help assume and manage risk, they can help businesses avoid costly IT mistakes.

As organizations begin to see more of the benefits that outsourcing brings, they are more likely to expand the range of applications they are likely to outsource. Respondents told Vanson Bourne, the research-based technology marketing consultancy that conducted the survey for Savvis, that non-mission critical applications, data center facilities, storage, content management applications, and mobility solutions top the list of IT elements that should be outsourced.

What IT applications is your business currently outsourcing? How does your company’s IT strategy compare with the trends reflected in the survey?

Frank Grillo Frank Grillo is vice president of business marketing, responsible for leading the business product and marketing organizations at CenturyLink Business.

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Cloud computing is and will have an extensive impact on the IT infrastructure of companies of all sizes.

I’ve come to this conclusion thanks to my extensive research as a Senior Analyst with the Aberdeen Group. And after a survey of a wide range of companies in January, we’re able to see an even clearer picture of how the public cloud is being used.

The data show that small companies — organizations with up to 100 employees — are, in general, gaining much from using new services based in the cloud, specifically ones they could not afford to purchase and manage on their own. As seen in the chart below, small companies do not find application integration and customization a challenge. Because these tasks are very technical, small businesses don’t even attempt them: They use the cloud services as they are provided, “right from the box.”

Top Cloud Challenges by Enterprise Size

However, it’s a different story for their larger cousins. Midsize companies — those with 100 to 1,000 workers — face some challenges. They struggle to manage IT environments that are as complex and rigid as those of large corporations with more than 1,000 employees. As I show in the chart above, midsize companies particularly struggle with large-enterprise practices such as application customization, integration, and security.

The survey results suggest two strategies for midsize businesses to deal with the challenge of introducing new

Business Cloud Deployment: Does Size Matter?by Dick Csaplar

cloud applications into existing infrastructures with few IT heads.

The first is to outsource part of your portfolio to a cloud provider.

Midsize enterprises have the highest adoption rate for Infrastructure-as-a-Service (IaaS), as the chart below shows. This cloud service allows companies to outsource computing device management. These IT jobs tend to be labor intensive and repetitive, leaving less time for a company’s IT professionals to perform real, value-added tasks. So it makes sense for midsize organizations to consider cloud services such as IaaS and Software-as-a-Service (SaaS) as well.

Cloud Service Adoption Rates

The second strategy I want to call out for midsize businesses to address their challenges is for IT to hire outside experts to help with the cloud. The chart below addresses this:

Sixty-three percent of large enterprises use consultants, and they can afford to hire well-trained and numerous IT professionals. Midsize companies should “rent an expert” to assist them in their cloud strategy and implementation challenges.

Source: Aberdeen Group, January 2013

Source: Aberdeen Group, January 2013

Source: Aberdeen Research Group, 2013

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Dick Csaplar Dick has over 30 years of experience in the IT field working for startups, international companies and in Silicon Valley.

80%

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10%

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Make the move to Managed Services

NUMBER OF EMPLOYEES

These days, midsize companies struggle the most when endeavoring to keep their edge. They require the IT functions of a large enterprise but are supported by IT departments that are shrinking indefinitely.

Yet, midsize companies claim the greatest benefits from using the Cloud. They’ve more widely adopted Cloud storage and have access to industry-leading applications without the requirement of expensive and complex IT infrastructure.

Business SizeUP TO 100Small

100 TO 1,000Midsize

1,000 OR MORELarge

THINK AHEAD DO MORE GO FURTHER

Elevate Your Potential With Managed Services

Companies of all sizes can benefit greatly from employing managed services in their IT infrastructure, but midsize companies stand to gain the most advantages.

Cloud implementation allows midsize businesses to reduce capital budgets and amplify ROI, fostering opportunities for future growth.

Investment in industry-leading applications like SaaS and utilization of Cloud storage helps midsize businesses better meet spikes and variability in demand.

Midsize businesses use the flexible infrastructure of the Cloud to maximize existing resources, helping them remain profitable in the years ahead.

In 2013, The Aberdeen Group asked 126 organizations how they use the cloud in their IT infrastructure. The study revealed that though businesses of every size are under pressure to spend less and accomplish more, midsize businesses are especially challenged—both operationally and financially. Cloud implementation helps alleviate those pressures and pave the way for tomorrow’s success.

52%This may experience lower operational costs from service, power and cooling, as well as reduced management time.

www.CenturyLink.com/business

42%With smaller IT departments, of midsize companies experience escalating IT overhead.

Escalating IT Costs

Inflexibility of Infrastructure

Difficulty Maximizing ROI

Pay-for-Use Model

Reduced Number of Computing Devices

Reduced Capital Budget

Reduced Number of Storage Devices

Better Response to Demand Spikes

DATA PROVIDED BY

MIDSIZE BUSINESSES

© 2014 CenturyLink. All Rights Reserved. The CenturyLink mark, pathways logo, and certain CenturyLink product names are the property of CenturyLink. All other marks are the property of their respective owners.

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

October 2013

Small and Mid-Sized Companies are Gaining Different Benefits from Using the Cloud

In January 2013, Aberdeen surveyed 126 organizations to learn how they use the Cloud as part of their IT infrastructure. This Analyst Insight will focus on both small and mid-sized organizations (see definition in the side bar on this page) to see how each is gaining something different by using computing services in the Cloud.

Pressures to Use the Cloud IT organizations of all sizes are under pressure to spend less and accomplish more. Figure 1 lists the top four pressures survey respondents reported when using the Cloud.

Mid-sized companies are more challenged, both operationally and financially, than their smaller cousins. The mid-sized organization’s most cited pressure is managing the rising cost of IT. When this is combined with their third most popular response, maximizing the ROI of IT investments, it shows there is strong pressure from company management to reduce the overall cost of IT.

Figure 1: Top Pressures to Use the Cloud

Source: Aberdeen Group January 2013

Small companies, however, generally do not see their infrastructure as being inflexible and expensive but are strongly attracted by the “pay for use” financial model of the Cloud. Using the Cloud allows a company to pay for IT capacity on a monthly or per use basis, with payments coming from the

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Maximize5ROI5ofInvestments

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Small MidFSized Large

Analyst Insight

Aberdeen’s Insights provide the analyst perspective of the research as drawn from an aggregated view of the research surveys, interviews, and data analysis.

Definitions

For the purposes of this report, companies are grouped according to the size of their employee headcount:

√ Small — Less than 100 employees.

√ Mid-Sized — Between 100 and 1,000 employees

√ Large — more than 1,000 employees.

Small and Mid-Sized Companies are Gaining Different Benefits from Using the Cloud Page 2

© 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

operating budget (OpEx) rather than having to purchase expensive computing devices using the capital budget (CapEx).

Large enterprises have similar challenges as mid-sized organizations but are less attracted to the “pay-per-use” model, as they have large inventories of servers and storage devices that cannot be easily abandoned until the end of their useful life.

The Challenges of Being an SMB Organization Small and mid-sized (SMBs) companies are in the unenviable position of requiring many of the IT functions of a large enterprise, supported by an infinitely smaller IT department. Small and mid-sized organizations may not need that level of sophistication but still need to perform the same tasks. SMBs must manage their sales force, track their orders, mange the finances and pay their employees just like large companies.

Table 1: Corporate Metrics

Source: Aberdeen Group, January 2013

Again the financial pressure of being a mid-sized company is shown by the fact that they have reduced their IT spending over the last year. Small companies have been able to grow their investment in IT slightly, and large enterprises have increased their IT spending by almost a full percentage point.

What Cloud Services are Companies Using? There are various and differing services offered by Cloud providers (see definitions in the side bar.) Some Cloud services are preferred by large enterprises and several others by small and mid-sized organizations.

Generally small enterprises use Cloud services that help them overcome their handicap of having only a single location. Cloud storage and Cloud recovery allow data to be stored off site in a remote location, so any data center disaster does not destroy important customer and financial records.

Helping those running out of storage space, Mid-sized companies have more widely adopted Cloud storage. Using SaaS applications allows mid-sized companies to use industry leading applications without requiring expensive and complex IT infrastructure, in effect outsourcing some of their expensive infrastructure to the Cloud.

Small Mid-Sized

Large

Approximate average number of IT resources

10 people 20 people 1,830 people

Average percentage change in IT budget 2011 to 2012 0.5% -3.7% 0.9%

Cloud Definitions

For the purposes of this report, the following definitions apply:

√ Cloud is a generic term for services offered by 3rd party hosting companies that rent computing capacity. Public Cloud means anyone can contract with them for services, however those services are very private, with multiple layers of security to ensure all data is kept confidential.

√ SaaS means Software-as-a-Service and describes an application hosted in the cloud for which users pay a monthly or annual fee.

√ Cloud Storage allows for companies to store their data remotely on storage devices own and managed by third parties.

√ IaaS describes Infrastructure-as-a-Service where companies own and manage their software and just rent the servers and storage from a third-party.

√ Cloud Recovery is sometimes referred to Disaster Recovery-as-a-Service or DRaaS. Companies store their data and applications remotely and use them when their primary, onsite platforms go down.

Small and Mid-Sized Companies are Gaining Different Benefits from Using the Cloud Page 3

© 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

Large enterprises, with the tremendous number of applications they are required to support, are most likely to use Cloud SaaS applications. They are least likely to use Cloud recovery, as they can, in times of stress, failover to another company-owned datacenter.

Figure 2: Cloud Adoption Rates

Source: Aberdeen Group January 2013

The average small company using the Cloud has deployed about two of the Cloud services as defined above (SaaS, Cloud storage, IaaS / PaaS, or Cloud recovery), mid-sized businesses have deployed 1.4 services while the average large enterprises has deployed just 1.2. In fact, as we will see in the next section, the benefits increase with the more Cloud services deployed.

Benefits of the Cloud Figure 3 shows the top four benefits companies report receiving from using the Cloud. Again, we see major differences between the different company sizes.

It is the mid-sized companies, with their reportedly inflexible infrastructures, who are claiming the greatest number and degree of benefits from using the Cloud. Fifty two percent (52%) of them said they have reduced the number of storage devices and 34% claimed to have reduced the number of computers. What is not included in these numbers would be the operational benefits from having fewer pieces of hardware in the data center — lower power and cooling costs, reduced time to manage, lower service costs, and ultimately smaller data centers.

It is interesting to note that only 4% of small companies reported reducing the number of computing devices in their datacenter. Most small companies have a very minimal number of servers to begin with. For them the future is

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“Pick a solid Cloud provider.”

~ CEO, Small Telecomm Equipment Manufacturer,

United States

“Ensure that you have an SLA that is measurable and enforceable.”

~ IT Manager, Large University, United States

Small and Mid-Sized Companies are Gaining Different Benefits from Using the Cloud Page 4

© 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

all about adding more services and support, not reducing the already minimal number of their servers.

Figure 3: Top Four SMB Cloud Benefits

Source: Aberdeen Group, January 2013

Aberdeen looked to see if there is a correlation between the number of Cloud services used and the benefits companies receive. Two analysis groups were created. First, Light Cloud Users are those companies who have deployed only one or two of the Cloud services listed in Figure 2. The second group is made up of Heavy Cloud Users, organizations that have deployed three or more services.

Table 2: Cloud Financial Metrics

Source: Aberdeen Group, January 2013

Light Cloud Users reported only minor reductions over the last 12 months of their IT spending and headcounts. Heavy Cloud Users claimed to reduce

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Light Cloud Users

Heavy Cloud Users

What was the percentage change in IT spending change over the last 12 months? + 0.4% - 2.1%

What was the percentage change in IT headcount change over the last 12 months?

- 0.9% - 3.5%

What was the percentage change in IT spending to support applications and servers

over the last 12 months? - 1.1% - 6.6%

What was the percentage change in IT headcount to support applications and

servers over the last 12 months? - 0.7% - 7.6%

Small and Mid-Sized Companies are Gaining Different Benefits from Using the Cloud Page 5

© 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

their IT spending and headcounts both in general, and, specifically, in departments that support application and server deployments. These savings and headcount reductions were quite substantial, demonstrating that financial benefits compound as more IT capabilities are outsourced to the Cloud.

Cloud Futures The market is bright for Cloud providers that have targeted enterprises of all sizes. They report that they will increase their Cloud spending into 2014. Aberdeen asked all respondents to forecast their spending on Cloud services. The spending trend was positive as well, with only 5% of companies overall reporting that they forecast spending less on Cloud computing in the next 12 months.

Table 2: Cloud Futures

Source: Aberdeen Group, January 2013

Summary: Small and Mid-sized Companies Are Gaining Different Benefits from the Cloud Small and mid-sized companies need to provide sophisticated tools to their users while also being able to support them with very limited IT resources. Small companies are using the Cloud to expand their IT services while mid-sized organizations are working to reduce their overall IT spending and tame their inflexible infrastructure.

Fifteen percent (15%) of survey respondents reported that they have been using the Cloud for more than five years. The Cloud is no longer “bleeding edge” technology. Companies of all sizes can help themselves financially and operationally by using Cloud services. However, it is the small and mid-sized company that seems to benefit the most from the business model offered by the Cloud; they are just gaining different types of benefits.

For more information on this or other research topics, please visit www.aberdeen.com.

Small Mid-Sized

Large

How do you expect the budget for Cloud computing to change in the next 12

months? + 8.0% + 12.7% + 5.6%

Survey Respondents

Individuals answering this survey came from diverse geographies, industries, and corporate roles:

Industries:

√ IT Services — 39%

√ Software — 16%

√ Telecomm — 12%

√ Manufacturing — 8%

√ Education — 7%

√ Healthcare / Pharm — 6%

√ Government — 5%

√ Others — 7%

Roles:

√ C-Level — 38%

√ VP / Director / Manager — 43%

√ Others — 19%

Geography:

√ North America: — 57%

√ EMEA — 30%

√ Rest of World — 13%

Size of Enterprise:

√ Small (less than 100 employees) — 48%

√ Mid-sized (between 100 and 1,000 employees) — 28%

√ Large (more than 1,000 employees) — 24%

Small and Mid-Sized Companies are Gaining Different Benefits from Using the Cloud Page 6

© 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897

Related Research

SaaS Data Loss: The Problem You Didn’t Know You Had; January 2013 Why SMBs and Large Enterprises are Adopting Cloud Storage; August 2012 The State of Server Virtualization in Small and Mid-Sized Organizations; January 2012

The Role of Fault-Tolerant Servers in Protecting Virtualized Applications; October 2012 Virtual Private Clouds: Taking Private Clouds to a Higher Level; June 2013 Test & Dev: The Beachhead Application for the Public Cloud; October 2012

Author: Dick Csaplar, Senior Research Analyst, Virtualization and the Cloud Practice (dick.csaplar@aberdeen.com)

For more than two decades, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.5 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500.

As a Harte-Hanks Company, Aberdeen’s research provides insight and analysis to the Harte-Hanks community of local, regional, national and international marketing executives. Combined, we help our customers leverage the power of insight to deliver innovative multichannel marketing programs that drive business-changing results. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 854-5200, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com.

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2013a)

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