Ray Boggs Vice President SMB Research Now is the Time to Build a Successful Cloud Services Business in SMB! Emerging Opportunities for Microsoft Partners

What an incredible opportunity SMB represents for IT companies Which core business concerns SMBs How to frame cloud sales to address the SMB mindset

5 Year Incremental Growth $152.6 Billion $2.80 Trillion 5 Year Total Upper Mid Market Lower Mid Market Small Business Distribution of IT Spending 2011 – 2015

% of companies% SMB IT spending Asia/Pacific 33% 16% Latin America 17% 7% CEMA 16% 9% Worldwide Worldwide Perspective North America 13% 28% Japan 6% 8% Western Europe 14% 32%

Developing Regions 36% SMB Totals Developing Regions 60% Total Growth

Small BusinessEnterprise Needs Protecting Data Increasing Productivity Growing Customer Base Server Functionality Capabilities/Investments IT Skills Dedicated IT Resources Server Usage

While IT spending grows slowly in the next 12 months cloud spending doubles in just 4 years 2x Growth in 4 years

Small Business Mid-Sized Business Grow company revenues 67.6%60.4% Manage costs better 48.1%52.9% Improve efficiency/productivity 45.1%59.0% Add new customers/expand geographically 51.0%47.9% Increase revenue from existing customers 49.7%42.8% Manage cash flow better 48.0%43.7% Identify new partnering opportunities 28.4%28.2% Expand routes to market/distribution channels 21.6%16.2% Source: IDC’s SMB Survey, 2010 Note multiple response

Small Business Mid-Sized Business Upgrade PC operating systems 45.6%46.0% Upgrade network operating systems 23.6%39.3% Increase storage capacity/Improve storage management 17.1%23.9% Improve network security/Security mgt 18.6%33.7% Implement/upgrade wireless connectivity 12.2%20.9% Implement “Green IT” initiatives 9.1%13.5% Expand use of GoogleApps, other free resources 13.5%10.0% Increase use of online/off-prem resources 6.2%12.5% Source: IDC’s SMB Survey, 2010 Goal: Strengthening the basics. Note multiple response

Small Business Mid-Sized Business Currently use Cloud/SaaS13.4%35.9% Plan to Use in Next 12 Months13.5%31.5% Interested, but No Plans40.6%13.9% Not Interested15.9%10.3% Don’t know/No answer16.6% 8.4% Source: IDC’s SMB Survey Preliminary Plans actually fulfilled to large extent from previous survey (not always the case)

Internal focus especially noteworthy as companies grow Source: IDC’s SMB Survey 2011 for Microsoft Inflection points 1-4 Business Dynamics 5-9 Collaboration and Competitive Intelligence and Collaboration Multi Site Coordination

Cloud extends flexibility, interoperability % of respondents 3,4, 5 on a 5-point “current/planned usage” rating scale Source: IDC Enterprise Panel, 3Q09 (SMBs and large businesses) Web hosting, /collaboration: Data storage and leverage: Business/productivity apps: Cloud broadens reach and value proposition of storage, enabling new add-on capabilities around backup, archiving and distribution, analytics Cloud enhances accessibility and enables consumption-based purchasing

Encourage Use of Software as a Service Discourage Use of Software-as-a-Service Pay for capabilities as needed Ability to integrate in current apps. environment Ability to add new users without difficulty Ability to bring capabilities in- house if needed Remote management that eases IT staff workload Easier to support branch / remote offices Use services along with on-premises resources Concern about data security Concern about recurring cost of ownership Concern about not “owning” software Concern about service reliability (including availability & backup) Loss of control of IT dept. over applications Prefer S/W and data remain onsite Factors Most Likely to…

Be the key resource for your SMB prospects. Focus on the problems and “pain relief,” not on technology. Leverage new SMB focus on productivity in your portfolio. Be incremental, affordable, impactful will be the year to push the envelope as SMBs reinvent themselves. Make “Social, mobile, virtual” part of your approach in how you operate and what you offer!

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