HITT – Private Cloud Strategies for SMBs and Mid Market Businesses

Today, we have Chad Muckenfuss, VP of Cloud at Telarus, to shed some light on private cloud strategies for SMBs and mid market. Chad, thanks again for being here, and I’m gonna go ahead and hand it over to you.

Great. Thanks, Cassandra. Well, welcome, everyone. Coming to you live from Las Vegas.

So, again, all of you that are joining from Vegas here, welcome. Those that are not, good for you. I guess that’s the easiest way to put it. There’s upon meeting upon meeting out here as any of you that have attended this show can see or know about.

It’s it’s a very intensive few days here in Vegas for channel partners. But I wanted to step away and really kind of talk about what is happening in the SMB and mid market for cloud. And I know a lot of you already know that that’s a focus for me this year in our cloud practice. And if we wanna go to the next slide here, what we wanted to look at specifically is the hidden cost advantage.

What I am seeing time and time again is TAs are slowly beginning to realize that the cloud conversation, while it used to just encompass UCaaS and and phones sitting in the cloud and some cloud management of maybe network and that type of thing with SD WAN, it’s spreading into what companies utilize on a daily basis to manage their employees, to manage their workloads, to do all kinds of different things. And I’m gonna I’m gonna set the stage here in a moment about cloud overall, looking at last year, looking into this year, and then break it down for SMB, and then break it down for mid market, and utilize some examples, and then wrap up my time here with giving you some questions to utilize with your customers that’ll help drive a very basic conversation in and around cloud.

And that’s what we want is to just push your toe through the door, have some basic questions. And the key to leveraging the the Telarus powerhouse that is the SE team here is just that. Get the door open, introduce the solutions engineering team here at Telarus, and let them drive the technical conversation alongside of you. They’re your resource.

They’re here to help you, and they want to see you win deals together. So, again, those resources are here, and you’re gonna hear me time and time again this morning talk about how those are very important for you to to leverage and to utilize. So as we move into the next slide here, we’re gonna look at specifically what does cloud look like coming out of last year. And I titled this cloud by the numbers because we wanna look at that.

Cloud is a big umbrella that a lot of things sit underneath of, and I wanna give some perspective on what that looks like. So last year, overall twenty twenty five cloud spend was seven hundred and eighty one billion dollars. And what we’re looking at in moving into twenty twenty six is that’s gonna continue to grow. And you can see here from from the breakdown of the numbers.

But the one thing that I wanna highlight, and I’m gonna highlight it again on the next slide as we discuss the SMB space, is forty four percent of traditional small businesses, so that’s fifty employees or less, use cloud infrastructure or hosting services at some level.

That’s important to know because that means that, you know, fifty plus percent of SMB is not leveraging cloud in any way. And that’s a huge opportunity for you to begin to take advantage of this seven hundred and eighty one billion dollar market from last year, and it’s gonna be pushing into the nine hundred plus billion as we go into this year. So looking at that number, twenty percent year over year overall cloud growth over the past three years. That means every year, it’s been twenty plus percent growth year over year over year.

The bit about time and time again are AWS, Microsoft Azure, and Google Cloud. And Google has been a slow roll. They have used the long game in the public cloud sector, meaning that they wanted to come out of the gate originally and be a direct competition to Microsoft. And they learned very quickly that that is not an easy task. So as they have pivoted and decided to take a different tact in what they’re doing, Google has done what I consider the long game. So my children, I have a son and a daughter, they were issued in kindergarten and first grade Google Chromebooks.

And guess what they’ve used through their entire schooling career has been Google, Google Workspace, Google Classroom. Everything is Google for them. And as they transition out and go to college and then from college into the workplace, they wanna utilize Google. And Google has a a a very unique situation now where they have hundreds of thousands of kids that have used Google Classroom and the Google Cloud that are now transitioning into college and out of college and into the workplace that they wanna begin or they wanna continue using the Google Cloud and all of the Google Workspace.

So that is a huge marketplace that is growing. Traditionally, we would only see Google and GCP in a lot of nonprofits, leverage that from a cost perspective or the education space. Now it’s it’s proliferating into what what is being utilized in overall workspace in the SMB, again, because it’s cost effective. The mid market is adopting it because some of the tools are a little bit more robust than what Microsoft offers.

And, again, moving into, the the enterprise space, there are some enterprises that are embracing it because of the ability to easily customize some of the things. So don’t rule out the Google Cloud space, I guess, is an easy way of saying that as we kind of begin this conversation in and around. And I think one of the key things that that is that is happening here is just staying on top of some of the key things that that are happening in the cloud space from a public cloud perspective, meaning the big three, AWS, Microsoft, and Google Cloud. Then I see a lot of you commenting in the in the chat.

I wanna encourage you. Make this interactive. Please put questions in the chat. I’m happy to answer them as we go through this here over the next, fifteen, twenty minutes, and we move forward here.

So the next bullet point that I wanted to touch on, actually go back, Chandler, if you don’t mind. All three public cloud companies account for year over year growth, specifically in the public cloud of twenty nine percent. And the last one is one that just blew my mind as I as I put these numbers together and and update them throughout the year.

The cloud spend in North America, specifically in the US, was four point four percent of our gross domestic product in last year. That is a massive, massive number. I think it’s one of the things that that really kind of got my attention to say, wow. Things are really transitioning into cloud, and this is where things are going.

And we need to help you, from a Telarus perspective, help the TAs have a better conversation in and around this. So moving to the next slide, we’ll look at the SMB space. And, again, highlighting what is here, forty four percent of traditional small businesses, again, use cloud infrastructure hosting services at some level or any level. And that’s information coming from IDC.

And what that means is, again, not only are is SMB embracing, and it’s continuing to grow, and we’ll go through those numbers here in a moment. But what it means is that those numbers are key factor in they want the ability to leverage cloud. They they see the benefits for it. They see what’s going on and what’s happening here.

So sixty one percent of small businesses now run more than forty percent of their core workloads in the cloud. That’s that’s an increase of fifty four percent from last year. So, again, you know, that that’s continuing double digit growth year over year for their core workloads. Now we’re gonna get into a little bit of the nuances and what that means here in just a few minutes.

But SaaS applications, software as a service, a lot of that is embraced heavily, and there’s some key factors that you can utilize to use that SaaS utilization that’s happening in the SMP to to, again, push that door open to have a broader conversation and to begin leveraging some some cloud conversations that will drive business for you and will definitely help your customers in the SMB space. Seventy two percent of businesses with fewer than fifty employees rely platforms as their primary IT environment because of the fragmented workforce and part time or no time in offices any longer. You

have a very mobile workforce a lot of times, especially in a very flexible part of the market in the SMB space. You have ownership that is typically bouncing around all over the place, whether it’s it’s overall travel or in and out of their customers’ locations, etcetera. But it’s a very mobile workforce now. And leveraging SaaS applications to run the business makes that way more accessible and a way better experience, not only from a day to day perspective, also from an overall staying on top and growing their business from fifty employees to a hundred to a hundred and fifty, etcetera.

So the mindset there is key. Fifty percent of of SMB technology budgets are projected to be allocated to cloud services in last year. Guess what that number is now this year? It’s it’s sixty plus percent.

So, again, the budgets continue to grow in the SMB space. And when we talk about mid market here shortly, what we do is we end up looking at overall what is happening out there and leveraging the growth and the ability to open that door. And I understand I see I see your comment there, Wes. We’re pulling numbers from a couple of different sources, and I can address that specifically with you when you wanna chat about it.

Eighty two percent of SMBs that adopted cloud technology reported reduced costs, and that’s key. We wanna look at how we can help your customers reduce costs and reduce spend, and and seventy percent reinvest those savings back into the business. That right there is the key statement. Seventy percent reinvest those savings back into their business.

SMB is about growth. It’s about reinvestment into their business and how we can leverage that. And then five percent of the companies of any size intend to revert to on premise infrastructure. That’s an interesting thing.

There’s so we do see a lot of cloud repatriation, which means a jump to the public cloud and then cost overruns drive them back to the private cloud. And the private cloud is a fixed cost. And I’m gonna touch on some examples here as we move to, the next slide with mid market, and we’ll go through those numbers here. But as we look overall at at where SMB and mid market play, let me give you some real world examples and step away from some facts and figures here.

So I’m just finishing working on a VMware, and most of you know that VMware is near and dear to my heart because I’ve been talking about it for three plus years now. But there’s a VMware migration. The customer did not want to move from VMware to Nutanix or or Hyper V. They really needed something that was gonna be customized for them.

And they were not looking at public cloud whatsoever. Whatsoever. So AWS and Azure and GCP were out of the mix for handling any of those workloads. What we did was we leveraged a company that’s in our portfolio called Steel Dome and their StrataServe program.

The their StrataServe is very customizable.

It is extremely cost effective. And the customer not only moved their hundred and fifty VMs that they had specifically in VMware, with the help of the SteelDome and StrataServe team, they did the migration. So SteelDome, StrataServe did the migration over. They handled all of that transition for the customer because they didn’t have the staff. And the customer ended up saving a little over forty percent of their spend that they had with VMware. Now they saved about forty two percent and are investing into some software as a service applications, a whole disaster backup and recovery solution that will be tested, on the Steel Dome product set as well. So there’s a lot of opportunity to have a conversation not just in and around the public clouds that are easy and everybody likes to talk about them, but some of the key factors that are here and in the Telarus portfolio that are here to help your customers make good transitions and look at all of that.

So one of the things that I wanna put out to you as I as I go through the the mid market conversation here and look at these numbers, and then we’re gonna go into some practical application of how you can drive these conversations forward, is tell me about some of the things you’re running into in the chat here. Let’s let’s have a an open conversation. So throw back to me some of the conversations that you have with some of your customers in this space to say, hey. Is there confusion? Is there some some misunderstandings about either public cloud or private cloud and how that can be leveraged to help your customers save some money?

And then we’ll go again, put that in the chat as I go through the in the mid market. So the mid market is the fastest growing cloud adoption bar none in the overall cloud marketplace on a global scale. Mid market makes decisions quickly. They don’t have a board of directors typically that they have to run things through. There is one or two people that are the key decision makers in the mid market space.

Typically, they run very, very lean IT teams. So a company that may have five hundred employees typically will only have one to three IT people on staff to support all of those people. So this is a great way for you as a TA to begin that conversation and say, hey.

What’s your cloud spend look like? Have you considered looking at leveraging key workloads where they need to be? And maybe that’s private cloud. And I can help you take a look at that with my engineering staff that I have available to to come alongside and help with that conversation.

I do again, as we go through this, I do wanna highlight that the mid market for us here at Telarus is is our largest market. So the majority of the business that we write from a Telarus perspective is in the mid market space. And defining that is interesting because, typically, what we look at as mid market or what we classify as mid market in Telarus is two hundred and fifty employees to about fifteen hundred employees is mid market. And then, again, the enterprise space kind of give and take on on that a little bit there, and SMB is up to that point.

So zero or one employee up to two hundred and fifty, two hundred forty nine technically. So so what we have here and, John, that’s a great question. So twenty to thirty percent average reduction I reported after cloud migration. Meaning that when a customer is migrating from public cloud down to private cloud, and I probably should have worded that a little better.

I’m gonna blame my my lack of sleep out in Vegas here on that. But what we look at here is is again, one of the key things is that cloud repatriation. And you’re gonna hear it from me time and time and time again is the moving from the unfixed cost in the public cloud, the the cost overruns that can happen very easily in the public cloud, and putting key applications in private cloud where it’s a fixed cost, where we can help them through the process and understanding, okay. Maybe this doesn’t run as as, well as it should necessarily.

We have some optimization that can happen in a private cloud model versus a public cloud model, and that works very, very well. But, John, to answer your question directly, the ROI happens very easily in that twelve to eighteen month from public cloud to private cloud on the bottom bullet point there. But I’ll start at the top, and we’ll do nineteen percent year over year, the highest year over year growth rate of any business segment.

Again, the mid market is where it’s at, and and that two hundred and fifty employee and up is really, really key for you all to potentially begin to look at and see what you can uncover out there. Sixty three percent of mid market workloads and sixty two percent of mid market data are now hosted in public cloud environments. That surpasses the majority threshold, meaning that, you know, more than half is is up in the public cloud. But what’s happening with that public cloud move is cost overruns, and that’s the key factor that we’ll touch on moving forward here in the next slide when we transition shortly.

Eighty three percent of midsized businesses are cloud based ERP or CRM systems as a core operational infrastructure. So the ERP conversation is happening time and time again with us here at Telarus, and I’m sure you’re running it running into it too. The overarching, ERP conversation that handles inventory and invoicing and all the things that a that a customer utilizes in this mid market space to be able to manage their day to day operations is huge. And we have some outstanding support and suppliers that work in that ERP space as well as many that we’re interviewing now to add to the portfolio because we’ve heard it loud and clear from you as the TAs that we need more options in and around that ERP space.

And the CRM systems, again, most businesses can’t operate. And you have everything from the basic stuff of, like, sugar CRM and Pipedrive and all that type of thing all the way up to the big guys like Salesforce and all of that. And we have implementation companies and all of that to help, again, not only the the migrations for that from one to another, but also the ongoing support with those small and lean IT teams that happen in the mid market space.

Seventy three percent of mid market org organizations have adopted a hybrid cloud approach. And, again, I’m going to to preach this from the mountaintops is hybrid cloud is key for the mid market to operate as efficiently as possible. The blending of public and private cloud for flexibility and specifically driving forward security, which we’re gonna hear about from from our our new supplier sponsor here shortly shortly, Drata.

The focus on security is paramount for the mid market space. The SMB is understanding of of the need for it, but the mid market really, really needs to drive that that conversation in and around security home, and they need to have a core understanding of it. So what does all of this mean? These are a lot of facts and figures, and Wes is gonna argue with me after the call here about the numbers being off and and what am I talking about, which is fine.

But with that being said, let’s have some questions. Let’s have some conversation in and around that. So let’s go to the next slide and look at what we can do to how you can start a conversation about cloud, about having some confidence in asking and knowing that there are solutions here, and I’m gonna give some real world examples as we step through this conversation. So first and foremost, and I and I use this in all of my speaking engagements here is, this is the key question, right at the top.

Does your company use Microsoft three sixty five? And ninety percent of your customer base will say, yes. We do. And the immediate follow-up question is, how do you back up all of your data in Microsoft three sixty five?

And the quote, again, nine times out of ten is, well, that’s a part of my Microsoft licensing. That’s a part of my Microsoft agreement. And the key for your response is, no. It’s not.

Microsoft has a retention policy. They do not offer a an included backup or anything in and around that. So that means not only is it just email, and Teams, Teams chat, that type of thing, but it’s SharePoint. It’s OneDrive.

It’s all the documentation for all the employees. And this begins to drive home a an moment for your SMB customers. Mid market too, but mid market is typically more aware of this. This is more of an SMB conversation.

And understanding that this part right here of, oh, that information isn’t backed up. So my employees that are scattered around the country that are working in my small business here, I don’t have a backup copy of of what’s going on.

That begins the entree for you all to say, let me help you with that. We have a very easy solution for that. And one of the key ones that has been on this is, I think we have a a solution for you. Let me introduce you to and we have multiple companies, but I’m gonna highlight one is Sky Data Vault.

We’ve talked about them. I’ve had them on the call here. They’re a part of a lot of our things. Sky Data Vault has specifically started a solution in and around the software as a service backup.

So they can come in and do Microsoft three sixty five. They can come in and offer, and it’s and it’s a super easy to use and a and a very understandable for you and your customer to go through process of how many users do you have. It’s all based on user count. How many users do you have?

What do what aspects of this do you need backed up?

And not only does it do Microsoft three sixty five, but it does Salesforce. Because this same conversation that I started here with Microsoft three sixty five is also the same conversation in and around most of the big software as a service players. Think Salesforce. Think Box dot com. Think some of the other ones that don’t have they just offer retention policies. They don’t have actual backups on it. So this is a huge door opener for you all to leverage.

Carson, great question. SAP. SAP does have some backup. It tends if you purchase it through SAP, tends to be extremely expensive. We have plenty of alternatives for that that can work very, very well. Happy to have that conversation with you.

But you’re right, Carson. You’re right along the the the correct mindset there is think of all these software as a service applications that your customers are using and begin a backup conversation in and around that.

So, yes, Zach, we do. So Zach asked, do you have any stories or examples of customers who had a failure and needed to use their backup with these services? Absolutely. So we had a customer specifically in and around Microsoft three sixty five, and and I’m happy to share the the Winwire with us as well.

They were leveraging Sky Data Vault. They had a they had a breach through via email through Microsoft three sixty five with one of their employees, and it began to proliferate through their overall SharePoint and some of the other things. What was able to happen was Sky Data Vault saw it, flagged it, was able to remove the the ransomware and and all of that and be go back to the clean the the most recent clean version and spin them right back up again. And that all happened within a little less than ninety minutes.

So the company saw the issue, remediated the issue, and came back online with extremely minimal loss in data. You know, that ninety minutes that was there, a majority of it was was not necessary. They were able to just pick back up and start business again.

The Brent, great question. How does the testing of the backups for recovery? So that’s done based around what your customer and yourself deem as necessary. Is that monthly?

Is it quarterly? Is it biannually? What does that look like? And then we get into conversations in and around backup, and disaster recovery in putting a plan in place that will that will happen and be able to utilize, a whole broader discussion.

Again, leveraging the, the SE team here to help you with that and put a plan in place for that.

Moving forward, again, just having a a little bit of a broader conversation here, like, what other SaaS products or licensing do you subscribe to? So, you’ve taught you started with Microsoft three sixty five.

What else are you utilizing in your technology stack and and having this conversation with your customer? And then writing the answers down and then putting together a a a whole solution for this, not just bits and pieces, but an entire solution that can not only handle the backup and recovery, but also make sense potentially from the cloud conversation and leveraging both public cloud and private cloud to help them with some of these SaaS applications.

Do you have servers on premise? This is a key one right now because I’m not sure how many of you know, but the shortages that are happening right now with RAM memory and and memory and chipsets overall is extremely dramatic. And some of you may have heard, but I’m gonna I’m gonna tell the the the example again here, is I specifically worked on a project was the beginning of last year, q one of twenty twenty five. It is a three phase technology stack refresh with a customer.

They had three data centers across the US. They wanted to start last year and do a hardware refresh on their entire stack. It was only one rack, not anything major in in the scheme of things as far as, like, a a large uplift or anything like that, but it was time to refresh. They were between five and seven year old servers across the board and time to begin that three phase refresh.

Three roughly three hundred and eighty thousand dollars in refresh costs for hardware in q one of twenty twenty five.

Let’s fast forward. Just finishing up q one of twenty twenty six, phase two in the in the middle of the country for this customer was was to happen.

One point two three million dollars for that same exact refresh on hardware. That was a huge eye opener not only for me, but also for the partner and their customer. It is a massive problem right now that’s out there. So even if you order and you have the ability to buy hardware and chipsets and everything now, you’re not gonna even be able to physically see them or hold them or touch them until midyear twenty twenty seven.

So the delays in not only the shipping and all that type of thing, but the cost overruns are tremendous. This is where the conversation, specifically in the mid market, begins to open up to say, do you really wanna manage that yourself, or can we leverage some of our key factors that we can bring to the table in a private cloud solution? So can we bring an expedient, an eleven eleven? Like, all of these that specialize in that mid market space that can help that customer transition.

And a lot of it is is going extremely well from a migration traditionally that was on prem to a private cloud model that has a fixed cost, and they don’t have to worry about those huge increases in hardware and availability of that hardware space.

Yes. Rick, to your point, a majority of the stock in memory is all going to AI companies. Companies. That is driving the cost up across the board, not only from a hardware perspective and a memory perspective, but also from an electricity, a colocation. All of these different things, the cost continue to rise because of AI, unfortunately.

The delivery timeline has expanded, Eduardo, because, again, all of the inventory was gobbled up be from primarily from AI corporations that are buying it. So we can blame our friends at Amazon and Microsoft, sure. But there’s more to it than that, I would say. But the reality is the the inventory is short. Those that have the inventory are charging a premium, to put it nicely. And I think it’s a situation that is not going to change in the very near future.