Small and medium-sized businesses (SMBs) face something of a quandary where IT is concerned. Fully aware of the benefits of technology, in terms of driving revenue and managing costs, business leaders are eager to use IT to improve their operations. But they are also conscious of competing cost pressures, and aware of the need to spread limited funds across a range of functions. IT can add significant value to organisations, but the technology solutions SMBs need rarely come for free.
Traditionally, few SMBs - particularly micro businesses - have been able to afford the high-end, market-leading IT solutions used by larger companies. And as such, they have found it difficult to compete in many business sectors. But thanks to the advent of cloud computing, companies no longer need a state-of-the-art on-premise IT infrastructure to carry out information technology functions. With hosted services at their fingertips, advanced IT solutions have become more accessible to the UK's smallest companies.
Paying for IT on a subscription basis
Rather than having to spend many thousands on hardware, software, constructing a network and building up server capacity, companies can now simply 'rent' IT services through an outsourcer. The advent of software, infrastructure and platform-as-a-service means companies can utilise top-end solutions without taking ownership. Providing they have a fast and reliable broadband connection, SMBs can simply access IT services online over the internet. This eliminates the major capital expenditure associated with developing an in-house IT function.
As a consequence, IT has become more affordable for small businesses. They are able to sign up for the technology services they require, and use them on demand as and when there is a need. There is no need to invest large sums buying servers and software outright, meaning there is far less risk involved for SMBs. This helps from a financial management perspective, as the company is under less pressure to derive a strong return on investment. They do not have to venture into the red in order to get started with IT.
The inherent flexibility of cloud computing is another major benefit for the UK's smallest companies. While they may be required to commit to a certain amount of expenditure each month, depending on the terms of their cloud subscription contract, SMBs can generally scale their usage up or down according to demand. So during certain periods, the company may wish to pay for additional IT services, but then reduce their usage at a later date.
Crucially for the SMB, they are not committed to pay out large sums over an extended period of time. If the company experiences a cashflow crisis, one way of reducing expenditure may be simply to stop using particular IT services. If servers and software have been purchased outright, the company does not have this option. It is immediately left with a deficit - due to investment in physical IT assets - which can only be reduced by deriving operational value from IT.
So will more SMBS embrace the cloud in 2012?
UK small business leaders are aware of the various benefits of cloud computing for their organisations. They realise that hosted services increase their access to advanced IT, while giving employees greater flexibility and reducing operational and maintenance costs. SMB leaders are also conscious of the improvements made to cloud security in recent years, and as a consequence, more willing to overhaul their IT. As companies with limited in-house IT operations, they are the firms which stand to gain the most from cloud computing. The service delivery model can instantly transform their fortunes, allowing them to tap into the world of ecommerce and online business. The cloud can help them compete effectively with much bigger rivals with far greater budgets.
According to research conducted by Cisco recently, SMB leaders are making it their purpose to investigate cloud computing and assess its benefits for themselves. Of those company bosses surveyed by the networking firm, 44 per cent said they had a full understanding of the cloud, its operations and potential benefits. When asked the same question in 2009, just 20 per cent of SMB leaders were confident in their appreciation of the cloud. This alone suggests progress is being made within the small business community.
Some 45 per cent of those SMBs surveyed by Cisco said they are already using at least one cloud service to their advantage. And respondents indicated a desire and intention to spend more in this area over the coming months and years. During 2012, half of UK small companies plan to spend at least a third of their IT budgets on cloud and managed services in 2012, Cisco claimed.
According to Cisco's Jeff Beckham, cloud investments help SMBs reduce risk when investing in new technology. And this is a crucial point. As small businesses are not required to commit large amounts of their budget to cloud services - but still gain access to advanced solutions - there is relatively little that can go wrong. He suggested that lures such as minimal investment in IT, easier installations, access to more robust applications, greater agility to respond to changes in the marketplace and the ability to try software before they buy will encourage more SMBs to adopt cloud computing this year.
"You are able to adopt a new technology without a large up-front investment, making it all the more appealing," Mr Beckham added. And this is why up to three-quarters of UK firms are now using hosted services in some form or other. The IT landscape has changed, quickly and decidedly. But not only this, innovation has been to small businesses' advantage. They can now match the IT capabilities of far bigger rivals, enabling them to compete more effectively and broaden their horizons.