Should your small business virtualize?

Virtualization is one of the hottest IT topics today. Everyone's talking about it, but few are really doing it -- and there's a big gulf between enterprise and small business adoption, even though many of the benefits are the same. Small business is one of my favorite technology segments, because of its diversity, unique needs, large size, yet small IT footprint. When working as an analyst during the mid-Noughties I launched JupiterResearch's SMB practice. I've been remiss by not writing more about small business tech at BetaNews.

There is much confusion about what is a small business -- how official statisticians and high-tech vendors segment sizes. Small businesses account for 97 percent of employee firms, according to US government agencies. But that segmentation counts firms with fewer than 500 employees as small business -- large by my measure -- and ignores the enormous number of operations with non-payroll employees. This segment is often overlooked by high-tech vendors, many of which count them as consumers. By the US Census Bureau's reckoning, there are nearly 27.3 million small businesses, but only 5.9 million have payrolls and 3.62 million employ fewer than five people. So there are 21.4 million businesses employing less than 5 people -- that's 78 percent of them.

Integrated Approach

For JupiterResearch, I segmented small businesses differently. Small is small. Companies with less than 50 employees counted as small businesses, those with fewer than 10 employees as very small businesses and those with no payroll employees were sole proprietorships. It's typical for business owners in this segment to run their establishments on the side or to have more than one operation. I am surprised to see how few high-tech firms address the unique needs of very small businesses or sole proprietorships.

Among PC manufacturers, HP and Dell stand out for their small business offerings, for no other reason than size, being No. 1 and No. 2 in global shipments, according to Gartner and IDC. But both vendors are going through dramatic realignments. Earlier this summer, HP announced plans to either sell off or spin off its PC division, separating it from valuable services necessary to support business needs of all sizes. Today, HP made the decision to keep its PC division.

Dell's changes are different, as the company makes the cloud, virtualization and supporting services priorities. Dell's emphasis is integration -- one place for software, hardware and services. IBM also is good at vertical integration but Big Blue sold its PC business to Lenovo years ago. Meanwhile IBM defines small businesses by the thousands of employees, which to most other vendors would qualify as enterprises. HP also is big on services, but uncertainty about the future of its PC business (including x86 servers) and recent CEO changes create competitive opportunities.

Dell, which has long had strong small business offerings, is trying to seize the opportunity and also take its renewed integration focus to mid-size and large organizations. Forrester analyst Richard Fichera says the company is "really trying to change its image. Old Dell was boxes, discounts and low-cost supply chain. New Dell is applications, solution, cloud (now there's a surprise!) and investments in software and integration. OK, good image, but what's the reality? All in all, I think they are telling the truth about their intentions, and their investments continue to be aligned with these intentions".

Virtualization Interest

The "new Dell", as Fichera calls it, has been hot pushing cloud computing and virtualization solutions to small businesses. While writing this post I wondered why? The cloud is plain as day, but virtualizaton? Cisco, Microsoft and VMWare are among the many other vendors looking at this segment, too. But is that small business by that 499 employees, lesser number or something really small? Do the smallest of the lot even need virtualization?

There surely is interest. In August, Symantec published the "Small Business Virtualization Poll". The security firm surveyed 658 small businesses with 5 to 249 employees in 28 countries. Symantec found that "70 percent of the small businesses surveyed are considering virtualization", but only "10 percent have deployed virtualized servers, and another 17 percent are now doing so. This leaves 43 percent in technology trials or discussions". Thirty-percent aren't considering virtualization at all.

Top-three applications being virtualized: Web, database management and email/calendaring. Who does the work for the small business, whether those with dedicated IT organizations or small shops where the business owner oversees tech? For 58 percent of small businesses, its the "hardware or software vendor's professional services organization", which makes lots of sense of Dell and other PC manufacturers focusing more on providing small businesses with vertically integrated hardware, software and services.

Small businesses' top two reasons for virtualizing are about money: "reduce capital expense" (70 percent) and "reduce operating expense" (68 percent), which doesn't surprise given economic crises in Europe and North America. No 3: "Use less servers for the same amount of applications". Surely server consolidation matters more to companies with larger numbers of employees than those with fewer. But Symantec didn't provide the important granular view -- priorities of businesses with 5 employees versus 249.

The Mobile Problem

Small businesses all share two common problems not revealed by Symantec's poll, which offers too many enterprise-like reasons to small businesses to choose from: Proliferation of mobile devices and the mixing of personal and corporate data. Virtualization can help solve both these problems, which I'd argue are more pronounced in the smallest businesses -- the ones not represented at all by Symnatec's survey or as strong sales segment focuses by many vendors selling hardware, software or services (if not all three).

In my experience as an analyst and journalist, non-payroll operations typically use the same devices for personal and professional purposes -- there is tremendous overlap of data and behavior. This situation is pervasive among very small businesses, too, with tight tech budgets being one reason. Perhaps an employee uses a personal laptop for work purposes or the small business lets the worker use the official-issue notebook personally. Personal and professional data also commingles on smartphones and tablets. Larger operations share similar problems, but more because of so-called "consumerization of IT", where workers bring in personal devices like tablets. Stronger IT management mitigates the extent compared to smaller shops where there is no dedicated IT person or someone else, often the small business owner, wears two hats.

Businesses of all sizes suffer from the larger mobility problem -- data leaving the safe confines of the firewall on all kinds portable devices -- laptops, smartphones and tablets, among them. These devices can become infected with malware or be lost or stolen -- creating unnecessary privacy and security risks. Cloud services and virtualization can help small businesses keep precious data where it belongs and mitigate the risks when devices are lost or stolen.

Server virtualization has led the way for providing this kind of service, but some vendors are adding client virtuatization and privately hosted web services to the mix. For example, Intel is taking this approach for its IT infrastructure, because employees want to use a broader range of devices, "including personally owned smartphones and tablets". Obviously, Intel is no small business but its approach to virtualization as a solution to the two aforementioned problems could be applied on smaller scale. You can download the white paper here.

Circling back to the question: Should your small business virtualize? Probably yes. For the smallest of businesses, that could be in tandem with setting up a private cloud or outsourcing purely cloud services like Office 365 and Salesforce.com. The smallest businesses get something they also probably don't have now -- centralized IT management. The case for operations with 10 or more employees is stronger, whether to consolidate servers, better manage applications, reduce costs, provide employees anytime, anywhere access or separate personal and professional workspaces on the same devices.

Charts: Symantec

Photo Credit: Angela Waye/Shutterstock