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Microsoft’s General Manager of worldwide software and services for the communications sector, John Zanni, got the chance at the Parallels Summit in Miami to set out some straight forward rules for hosting service providers looking to exploit the burgeoning small business sector.

The figures show this to be a significant opportunity, as Zanni pointed out. “Gartner says SMBs make up 95% or more of the businesses in any country,” he said, “while Forester Research suggests that 50% of the SMBs are now targets for Cloud services.”

Building profitable services for the hosting community that target this opportunity come from generating not only good revenue streams but also higher margins on those revenues, and they come from offering more complex services. In essence, the basic model shows that domain and shared hosting services are low margin operations, hosting email and applications service are better, and providing customers with fully managed services generates the best revenues and margins.

But that growth path does not happen by itself or by accident. To make it happen hosting service providers do need to be equipped to up-sell the services to customers. That means not only having the service capability available but also understanding the aspirations of the customers and what they want. For the small business community these generally fall into the four following  categories: business agility without complexity; new services that help them stay competitive; the ability to enter new markets quickly; and do more with less so that they can be more efficient and productive.

Zanni’s recipe is for hosters helping small businesses and generating profits from the process is pretty straight forward. The first step he suggests is for the hoster to be well aware of its strengths and weaknesses and to try not to be everything for everybody – you won’t succeed. “Even Microsoft focuses on specific targets,” he said, “so identify your own  differentiator, your own value-add proposition and focus on that. Also, of course, you need to focus on reducing operating costs.”

Focussing on strengths does create a potential problem in that some customers will also need services that are part of the hosting company’s weakness. The trick here is to be ready and willing to partner with others that do provide the services that are part of your weak spot. Zanni feels strongly that partnerships amongst the hosting community are an excellent way of providing customers with a full package of services without any one hosting company having to try and do it all.

This in turn allows every hosting company to leverage its existing investments. “Wherever possible, however, target partners that look like being around for a while and, wherever possible, use existing technologies,” he said.

As a specific example Zanni pointed to the need for hosters to select the right platform, and suggested that it will be an unsual company that attempted to create its own. “For example, Parallels is always enhancing their platform so you don’t have to do it.”

One of the key sales messages of the Cloud is the flexibility it offers customers, particularly in terms of scalability. But Zanni stressed the importance of hosting companies being equally open to and ready for the need to scale both up or down quickly as business changes. “The early service providers that survived the dotcom crash were the ones that were able to scale down rapidly,” he said, “so be ready to scale down, particularly in the current economic climate. This does mean you need to make sure that you’ve got the speed of service development and deployment right.”

Keys to the Cloud

There are three keys to delivering Cloud, according to Zanni, agile infrastructure, skilled people and partnering.

Agile infrastructures must be flexible, modular, with replicable processes and have a quick time to market. The question to ask is whether you have an infrastructure that allows you to build services that are right for the user. And can you accommodate your own or your customers’ expansion plans by replicating existing processes. This, he suggested, is all-important because the pace of change is getting faster. Risking one direct product plug, Zanni suggested that hosters could enable agility using Microsoft’s Dynamic Data Center Toolkit, or work with Parallels and other partners that can provide specific solutions.

 When it comes to skilled people the equation is simple - the more you have the more services you can offer. The ultimate goal is for hosting staff to become trusted advisors for customers. Most importantly, he suggested that hosters take every opportunity to exploit available training services and resources.

Partnering is, according to Zanni, the way to win and grow. “You can’t do everything, especially if you are a small business yourself, so know your strengths and be willing to identify partners that do have those strengths,” he advised.

The goal for every hosting service provider has to be to extend their reach, he said. “The basic road map has to be sell, integrate, customise, consult, and finally the move to managed services. You must aim to become that trusted advisor, for apart from anything else that produces real stickiness. Your objective is to offer customers a real value-add, and you won’t do it alone, so look to build appropriate alliances and partnerships.”