Technology Vision: Cloud for SMB, but what about for me?
March 20, 2010, 1:12 pm
Filed under: Uncategorized

By: Brandon Harvey

In many circles, it’s becoming accepted wisdom that small- and medium-size businesses will be strong adopters of cloud computing (or SaaS, which in this case generally amounts to the same thing).  According to a recent study from Microsoft, 65 per cent of SMBs use at least some form of hosted software already. Of those who are still on the sidelines, about three-quarters of them have at least considered it.  Based on numbers like these, as well as anecdotal evidence, startups and SMBs do indeed seem to be leading the charge into the cloud.

What is the affinity between small business and cloud computing?  It boils down to three factors:

  1. Being up and running.  Cloud computing providers may not have 100% uptime, but they probably achieve better reliability than small shops can manage on their own.
  2. Being nimble.  Small businesses need to be able to turn on a dime (and then pick up the dime).  Example: Flickr, the photo sharing site, actually started as an attempt to build a content support system for video game development.  Forecasts are generally wrong, so rather than tie up capital based on forecasts, with cloud you buy for what’s actually happening.
  3. Being timely.  One of the most precious commodities for a small company is the time of its employees.  Time not spent choosing, buying, configuring, and babying technology is time that can be devoted to building value.

For reasons like these, most small businesses are already used to buying hosted software. Almost no small business would run their own email server, for example.  There have been plenty of hosted options available for some time.  What’s changing now is that the software-as-service model is making headway in software markets that have traditionally been more, well, traditional: in every category you might think of — from patient outreach for doctors’ offices, to helping college athletics scouts manage their recruiting process – new SaaS applications are springing up to take the place of client-server systems.

Some larger enterprises who have no plans to hurry into cloud computing may say that what happens in the SMB market is all well and good, but what does it matter for them?  Sometimes when IT practices or platforms sharply diverge, there is in fact little effect.  Look at the late 1990s, when the educational market was almost universally Mac OS-based, while business was equivalently dominated by the Wintel platform.  As it turned out, the generation of young people who entered the workforce during that period didn’t have a particularly difficult time making the transition from Mac to Windows (as was sometimes speculated), and life simply went on.

But the business/education relationship is, for the most part, simply a hiring pipeline.  The relationship between small and large business is much more involved.  Firstly, small business is actually fairly large: SMBs employ around 40% of the workforce in the United States.  So if this sector goes one way, nearly half the workforce is along for the ride.  Secondly, hiring can happen in either direction, from small to large and from large to small, senior or junior people.  So skill diffusion is a bigger factor.  Thirdly, there’s another kind of pipeline into large companies: acquisition.  Here, the acquirer has to deal very directly with the data and applications of the acquired – even if they don’t match “how we do things around here”.

All this means that before too long, even the most cloud-proof enterprises will probably be home to people with cloud experience and cloud skills, and who are used to buying software on a SaaS basis.  When these folks do a skunkworks project or a proof-of-concept, make a purchasing decision, or reach for a tool to fill a gap in a business process, expect them to reach for the technologies they know and like.  It’s not Mac vs. Windows, where there is a capital investment in place which enforces one kind of platform.  The infrastructure (the web browser and the nice fat network pipes) is already in place. 

So in those cases, rather than drifting in from the top down, cloud computing may creep into the enterprise from the bottom up?

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1 Comment so far
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Cloud Computing is definately the wave of the future with software technology out pacing the capabilities of computers and the loleraning curves of the systems to get them up and running, fixing bugs and jumping through (yes) firey hoops to get and keep them running efficiently.

Comment by Kurt

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