Is Cloud Already Killing the Small Business Server Market?

Is Cloud Already Killing the Small Business Server Market?

As 2010 wraps up, one quote about cloud computing and the small business market stands out most in my mind. It comes from Karl Palachuk, CEO of KPEnterprises Business Consulting Inc. During the SMB Nation Fall conference, Palachuk told attendees, "Ninety percent of your clients have bought their last server, and they're moving to the cloud with you or without you." Redmond Channel Partner captured the quote. For small business VARs and MSPs, I believe Palachuk's statement should be the shot heard round the world.

Consider this: KPEnterprises is a Microsoft Certified Small Business Specialist in Sacramento, Calif. Palachuk has made a living helping small business owners with on-premise Microsoft solutions. Now, he's hosting  discussions on the Cloud Services Roundtable, and he's telling listeners that the future is the cloud.

Palachuk isn't the only person sounding the alarm for small business VARs that sell servers. Rackspace is making a living with a simple marketing phrase: No More Servers. And traditional software companies and hardware makers are adjusting their on-premises strategies to embrace the cloud.

Three prime examples:

1. Microsoft continues to polish Small Business Server Aurora, an on-premise upgrade that will also include cloud-enabled hooks to the Internet. Level Platforms, a remote monitoring and management platform, has voiced support for SBS Aurora. And I suspect a range of online backup and SaaS security providers will endorse SBS Aurora.

2. Intel is preparing the so-called Intel Hybrid Cloud server. According to TalkinCloud's sister site, MSPmentor, Intel has lined up at least five partners to work on the hybrid cloud server -- including:

3. Lenovo. As mentioned, the company is promoting an MSP-centric server for channel partners that want to remotely manage on-premise customer systems.

Best Case Scenario

How much of the small business server market will shift to the cloud? TalkinCloud has spoken with a major global distributor that expects 10 percent of on-premise hardware sales to disappear over the next three to five years. When it comes to small business servers I think the shift to cloud will occur even faster.

I speak from experience. From 2006 to 2007, I worked for a small Long Island media company -- roughly 15 people, most of whom worked in a central office. I remember walking by the file server closet and frequently wondering: Why do we have that? Especially since so many file sharing services had shifted to the cloud.

Fast forward to 2010 and my current employer: Nine Lives Media Inc. We're roughly 15 people but we don't have a central office. We're all working from home. The only hardware we've ever purchased involves some at-home network connectivity and our desktops, laptops and printers. Everything else is hosted in the cloud.

Nine Lives Media Inc. has never purchased a server. And I suspect we never will.

So let's go back to the beginning of this blog: Palachuk is warning VARs that 90 percent of their small business customers have purchased their last server. Even if Palachuk is only half-right, that means 45 percent of the traditional small business server market is set to disappear forever.

Are you ready for that new reality? My belief: It's already here.

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