Parallels says SMB market is driving business for hosting and cloud service providers

Roy Illsley, Peter Hall & Mile Sapien, Principal Analysts, Ovum IT

At the recent Parallels Summit 2013 in Las Vegas, more than 1,300 attendees heard how the SMB market is driving new business for service providers and hosting companies alike. With headquarters in Seattle, Parallels is a private company that does not disclose its revenues. It has 900 employees worldwide and two-thirds of its business is focused on software solutions (including automation) that enable service providers to rapidly bring to market cloud-based services for the SMB market.

The remaining third of its business is a Mac consumer desktop virtualization business where it holds over 80% of US market share. At the event, Parallels made three new solutions announcements, the most significant of which was a cloud storage solution.

The SMB market is driving growth for the channel and attracting new major service providers

Parallels estimates the total global SMB IT market to be worth $1.1 trillion. Ovum is skeptical about the relevance of the total market size to hosted and cloud services but it is clear that the appetite of SMBs to consume hosted and cloud services is seeing strong growth. Parallels says 6 million new SMB customers began using cloud services in 2012 and that this has helped it to attract some important new customers including tier-1 telcos.

The types of service being used are heavily weighted toward web applications, such as website building, which is three times the size of the traditional web hosting business. Another measure used by Parallels is the average number of services used by SMB customers. In 2009 it was 1.1, but in 2012 it had increased to 4, and it is predicted to reach 7 by 2015. However, these numbers include free services such as Skype and Dropbox, so the challenge is to drive growth in revenue-generating services.

The big growth area is the mobile website market, where, according to Parallels, only 13% of SMBs have a mobile website. It predicts, however, that this will grow to more than 50% by 2015. Ovum considers that this growth is in line with the increased use of B2C and B2B mobile applications and the rise of BYOD.

Parallels continues to focus on the channel to the SMB market

The large enterprise market is already a very significant consumer of hosted and cloud services. Parallels does not, however, see this as a business opportunity because it believes its current focus on the channel for providers of services to SMBs is where its greatest opportunity lies.

It wants to build on its strong position in this market, and believes that diversifying would put this at risk. However, Parallels recognizes that its solutions could be applicable to the enterprise, and that this is an opportunity for an enterprise-focused partnership. Cisco recently announced that it has taken an equity stake in Parallels (the exact amount was not disclosed) and we see this as a sign that Cisco will be working closely with Parallels in enabling the companies’ mutual customers to develop opportunities for SMB cloud services.

Parallels has also worked closely with Cisco in enabling some key channel partners (including America Movil) to offer cloud services. Ovum believes that the equity stake could represent a way for Parallels to enter the enterprise market as a white-labeled solution based on Cisco hardware, such as its vBlock solutions. In addition to Cisco, Parallels claims it has formed 100 additional technology partnerships over the last year with companies including IBM, Microsoft, and Symantec.

Parallels claims its cloud storage solution can improve storage utilization of service providers by 100%

The Parallels virtualization technology has been developed over many years, but has always been focused on improving the CPU utilization of the service provider’s infrastructure. Storage has been neglected. Parallels Cloud Storage represents a solution to enable service providers to optimize their storage utilization. While for Parallels’ service provider customers this is a big announcement, in terms of technological features it is catching up with what enterprise virtualization providers already have deployed.

The Parallels solution uses the Linux FUSE technology. To enable Parallels Cloud Storage to operate effectively, Parallels needed to modify FUSE to get improved performance from it. In addition to these changes, Parallels developed an approach to the file system so that it operates in a strong consistency model that enables service providers to use the Parallels Cloud Storage solution to deliver high availability to their customers.

Because the FUSE technology is open source, Parallels has made the updates available to the Linux kernel and it is expected that these updates will begin to appear in subsequent Linux kernel releases. The modification to the behavior of FUSE in the Linux kernel will also help other solutions on the market that use FUSE and will generally improve the performance of FUSE.

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25 Feb 2013, 11:41 a.m.

From a source “The most recent market forecasts for cloud computing are predicting huge development in the industry, reaching $270 billion by the year 2020, as much as 30%.”

Why not people will adopt the cloud technology? They are getting huge number of facilities from this technology. As, I am small business owner, always I think about reducing TOC. Because I am new here, so I can’t effort huge capital as bigger organization. Cloud helps me to reduce TOC. Not even reducing TOC, it helps me to keep data in secure place, and I have right of entry to protection and property correspondent to much larger organizations.

I was reading somewhere about how to reduce TOC by using cloud computing -