SMBs move to Cloud Services

Cloud services make inroads into larger SMBs - Part 2

Wednesday, September 21, 2011 | Dan Blacharski

Incumbent and start-up companies are both offering cloud-based solutions in record number, driven by several factors - or start-ups, the incentive is the lure of launching a business with significantly lower capital requirements that might otherwise be required, while capitalising on a growing demand. Of course, start-ups often enter into the market with new, innovative ideas long before the incumbents take that risk, and this serves to invigorate the market even more. Incumbents however, face another set of drivers, which involve more the need to remain competitive by rolling out cloud-based tools - often cloud versions of their existing products - so as to avoid losing their existing customer base.
Within that framework, the end user comes out decidedly ahead, with more cloud products to choose from, at a lower price point. Several factors are pushing SMBs to the cloud, not the least of which is simple market acceptance. The cloud is increasingly seen as a secure and viable alternative. The other factor of course, from the end user perspective, is cost - especially among potentially cash-strapped SMBs, the cloud offers an opportunity to gain access to a higher-end set of services without having to invest in on-premise equipment and software licences or in-house administrative staff.
The cloud isn't going away, and that's because it's not just simply a technology, it is a business model that is bringing about fundamental changes in how SMBs go about their daily business. According to an Edge Strategies report, SMBs who pay for cloud services will be using 3.3 apps or workloads within three years, and for a wide variety of purposes. The study showed that at present, paid cloud services encompass tasks such as accounting and payroll, CRM, web conferencing and collaboration, file sharing, file/data storage and backup, data archiving and compliance, and business-class email.  Gartner further projects that cloud services will go to $150 billion by 2013, mostly in public cloud-based applications available by subscription.
The problem for the end user is no longer in accessibility - the applications are there, and in abundance; and bandwidth is cheap enough to provide a robust connection with minimal latency. The question however, lies in selecting a provider. As mentioned, there are a glut of both incumbents and newcomers in the cloud market, and this will lead to an inevitable shakeout in the industry as incumbents either fail to remain competitive and go out of business completely, or get purchased by larger incumbent players. The advantage of going with a start-up cloud provider may be increased accessibility and responsiveness and newer, more innovative applications, but the larger incumbents do have a distinct advantage. To be sure, new cloud providers will come and go. Eric Pelander, partner at Waterstone Management Group LLC, notes "That is a risk, and one of the very key levers that incumbents can use. I do think you'll have shakeout amongst the ranks.  Business customers really don't want to take risks with key parts of their business, and incumbents can use that." Pelander likens the incumbent cloud proposition as a "journey over time," in which each client takes the cloud at a measured pace, replacing different pieces of functionality over time. "You don't want to go all-in during your first year, replacing mission-critical pieces of functionality with SaaS from potentially unproven or unsustainable companies."
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