The past two years have packed in a decade's worth of business, economic and societal disruption and accelerated many existing trends, notably the move of business applications from on-premises infrastructure to cloud services. However, the shift, which I detailed last March, has been inconsistent across industries and organizations. As the saying goes, "the future is not very evenly distributed."
When surveying cloud adoption, nowhere is the distinction so stark as between large enterprises (those with more than 500 or 1,000 employees) and SMBs (those with fewer than 500 employees). With AWS re:Invent upon us, expect to see this dichotomy on full display, but a measure of AWS's maturity and search for new markets will be if it highlights services targeting smaller organizations for whom a 200-service, exceptionally customizable cloud portfolio is overwhelming.
Look no further than the companies AWS features on its case studies site to see its target customer.
- Pinterest: revenue, $2.4 billion (trailing twelve months, TTM)
- Capital One: revenue, $29.6 billion (TTM)
- Moderna: revenue, $11.8 billion (TTM)
Indeed, at $200 million, the smallest of these pulls in more revenue than most mid-market companies do in a year. Of course, plenty of smaller operations are AWS customers, but these are often tech-savvy, cloud-native startups that rent everything — infrastructure, office furniture, accounting services — and know that they can scale workloads as needed on AWS should their business strike a chord and thrive.
Like its parent retailing company, a service as wide and deep as AWS has something for everything, which explains why it is the preferred cloud of SMBs (and every other business category. However, that doesn't mean AWS is optimal for SMBs and herein lies an opportunity. A persistent critique at re:Invent, where there are so many product announcements and updates that AWS needs a categorized summary blog to list them all, is the creeping-featur-itis and complexity of the AWS platform. Although the company keeps introducing better management and automation tools, it primarily leaves the problem of taming complexity for inexperienced cloud customers to partners. Doing so leaves AWS open to second-tier cloud providers like Digital Ocean, Kamatera and Linode that target smaller companies and developers.
A closer look at SMB cloud usage and needs
The many surveys and estimates about cloud usage reveals a striking dichotomy about SMBs: they are more aggressive adopters of cloud services, but their usage tends to be more basic and superficial. For example, the long-standing and comprehensive Flexera State of the Cloud survey, which I most recently detailed here, shows that SMBs have a significantly higher share of their workloads and data on a public cloud service than enterprises and are much more concentrated on AWS (72% adoption, 24 points higher than Azure) than enterprises which now adopt AWS and Azure at roughly the same rate (77% versus 73% respectively). Indeed, a separate DigitalOcean Currents survey focused on SMB cloud usage found that the share of smaller companies, which were hit especially hard by the 2020 lockdowns and ˜restrictions, significantly increasing their cloud usage this year is higher than the percentage of large enterprises, which are easing back after a substantial cloud push last year.
Perhaps due to vast differences in their cloud usage, SMBs are more sanguine about the challenges of cloud adoption than their enterprise counterparts, with fewer reporting concerns with security, spending, governance, migration and every other category cataloged by Flexera. Indeed, when asked about their particular technology challenges, DigitalOcean found that the cost of services is the only area traditional SMBs (in contrast to tech-focused cited at higher rates than enterprises.
A need for simplicity over features
The most striking thing about the SMB cloud experience is how little they rely on IT specialists and cloud experts. Indeed, the DIgitalOcean survey found that the person most likely responsible for managing cloud service is the owner or CEO, not a CIO or cloud department manager. Unsurprisingly, tending to their cloud environment and every other IT service, isn't their top priority.
Worse still, 43% of traditional SMBs have no full-time IT staff making it impossible for many SMBs to follow the ins and outs of new AWS products and service options. Likewise, when it comes to running SaaS products, most SMBs delegate the task to someone in the department or workgroup using the product, not an IT expert, which is the definition of 'shadow IT' in larger organizations.
The lack of cloud expertise — almost half of traditional SMBs are unfamiliar with the term "cloud native" — and limited personnel shows up in their usage of cloud services. The Currents survey found only 9% of traditional SMBs using containers and only 44% running basic compute instances, with most using packed PaaS products like Google App Engine, Salesforce Heroku and Azure App Service. Similarly, as the table below summarizes from Flexera's cloud report, SMBs adopt cloud automation and infrastructure-as-code software at a significantly lower rate (about 13 points lower) than large enterprises. No wonder that only 46% of non-tech SMBs (versus two-thirds of large enterprises) find their infrastructure "easy to maintain and modify." Indeed, Techaisle’s global survey found the top IT challenge for SMBs to be "maintaining current infrastructure."
Cloud services are tailor-made for SMBs that are chronically short of all resources, not just IT expertise. Unfortunately, aside from SaaS products, cloud vendors don't make it easy on small operations. Most know that they need to modernize and digitize their business processes and applications — Techaisle's SMB research showed "migrating to modern IT" to be the number-three IT priority — but they need help in the form of packaged services that address common business needs that are easy to use and manage.
As the surveys show, PaaS products address some SMB needs, but AWS needs to make products like Systems Manager, Quicksight, Pinpoint, Connect SageMaker and other packaged applications more accessible to SMBs. While AWS does a decent job of summarizing its relevant products in its SMB sub-site, it still leaves non-experts like the founders and CEOs responsible for their company's cloud environment unclear on the products they need for a particular business process and how the pieces fit together. Cloud consulting partners like those featured at the AWS Partner Summit concurrent with re:Invent can help, but shouldn't be used by the big cloud vendors as an excuse for not introducing simplified, packaged products targeting small, cloud-naive organizations. Here's hoping that amidst its various outreach efforts, AWS uses re:Invent to better address the needs of SMBs.