Saturday, June 19, 2010

Cloud Computing: A Catalyst for IT adoption in SMEs/SMBs

What does it take for SMEs / SMBs in fast growing economies to accelerate their growth and make them competitive on the global stage? Perhaps the recession of 2009 will go down as a landmark year that marked the shrinking of US and European economies and the beginning of a new world order. The significant rise of India and China along with a few other countries is noteworthy.

Optional Info: The abbreviation SMBs (small and medium businesses) is used in the USA. SMEs (small and medium enterprises) is used by European Union and international organizations, including the World Bank, the United Nations and the WTO. The definition of SMEs/SMBs varies with respect to the country which is defining it.

According to Wikipedia, the US defines small businesses to include those with fewer than 100 employees and mid-sized businesses to include those with fewer than 250 employees. EU has standardized the threshold at 50 and 250 respectively.

By rough estimates, SMEs/SMBs account globally for 99% of business numbers and 40% to 50% of GDP. In India, and perhaps globally also, only 10% of SMBs / SMEs are exploiting the power of IT!

SMEs/SMBs, unlike their bigger counterparts, cannot afford a big IT budget. This is why they still do business by manually creating hundreds of spreadsheets on a daily basis. They have no efficient process for organizing their data, which results in too much dependency on the people who are managing the data. In most cases they have one executive who will maintain the spreadsheets (of customer addresses, enquiries, quotations, purchase orders etc) based on feedback from the sales or marketing executive. There will be print-outs of the data to serve as back-up, and they will manually stack these neatly in some folder before dumping them somewhere in a closet. In developing countries, the SMBs/SMEs are growing like never before. With the passage of time, the amount of data grows and consequently, the number of folders in the closet becomes too large to manage, or overflows the closet. One fine day, if that particular executive who maintains the data is absent from the office - other employees run from pillar to post to retrieve even simple information like a customer’s phone number.

What does this mean? Your business is dependent on an individual and NOT on a process. A big risk indeed! 

Are SMBs / SMEs staying away from IT?

No, not at all. Speaking to a few of the decision makers of India based SMBs, I came to the conclusion that the assumption of SMBs not embracing IT is incorrect. During last 5 or 6 years almost all of them, particularly the ones located in metros, have been approached by some IT vendors, and have tried some custom made software. But what happened after that? Most of the software projects, so called mini ERP or CRM, were either never completed due to the infinite loop of change requests, or were implemented but performed far below the customer’s expectations.

A few applications which were delivered were too little too late in terms of the ROI. Those who burned their fingers during the first wave of IT implementation are a bit skeptical about future software implementation. Most of the time the process of IT adoption is so complicated, with multiple software and hardware vendors involved, that by the time it gets implemented either the software or hardware is out-of-date and redundant.

Why Cloud Computing is the Road Ahead for SMEs / SMBs…

The requirements for SMBs/SMEs in any verticals are not so complex, but they do have their own set of standards and ways of doing business. For example, much of the time additional negotiations occur at the time of payment: the other party may ask for a discount, even after signing an agreement and sending a purchase order. In this kind of scenario, unlike traditional apps where customization is the key; a true SaaS (Cloud based app) can meet any requirement by simple configuration.

SMEs / SMBs are growing very fast. A few of the business owners I spoke to were unhappy because the application that they were using until now is not supporting the increased number of users or cannot adapt to changing requirements. Here, either the application is rendered useless, or the vendor is charging high prices for adding any features/enhancements based on the changing business needs. SaaS scales extremely well, which is why it is appropriate for growing SMBs / SMEs.

Unlike their bigger counterparts, SMBs/SMEs also have cash flow challenges. In Cloud based apps (SaaS) there are no upfront expenses. Pay as you use.

IT is no longer a luxury, it has become a necessity. SMBs / SMEs must leverage the cloud opportunity to stay ahead of the competition. But before signing a cloud service provider you must be aware of the risks that come with cloud implementation. IMHO, though the gains of cloud computing far outweigh risks; you must be aware of them. A formal risk assessment may be necessary in many cases…

Why are Companies Moving to Cloud Computing Services?

Option Info: Recent research in THE GFI SOFTWARE SME TECHNOLOGY REPORT has the following key findings:

  • Only 10% of senior business decision makers in Small and Medium-sized enterprises (SMEs) claim to fully understand what cloud computing means. 62% have never heard of cloud computing. A further 13% have heard of it but don’t know what it means.
  • Security fears are not the main concern for organizations considering cloud computing. Although security is the second highest perceived disadvantage (after vendor lock-in), only 12% cite it as a main reason for not actually pursuing cloud computing.

Stay tuned to this space…

Cloud Computing Articles at Techno-Pulse


  1. really informative post. two thumbs up for this.

  2. Very nice and informative blog.

  3. Puskar raghwanJune 22, 2010 2:54 PM

    well structured and informative post.Good job..:)

  4. I found a great video on this topic which gives a framework of questions to

    evaluate if you should go to the Cloud and how to assess whether to have a public

    cloud, a private cloud or a hybrid solution [regardless of who is providing the

    cloud i.e. Amazon, SalesForce, Windows Azure]

    “Bridging the Gap from On-Premises to the Cloud” by Yousef Khalidi:


    hope that helps,

  5. I think you should write a book on Cloud computing.

  6. hi
    we have formed a Cloud Security Alliance India Chapter with provisions to have regional chapters as well . would like to get in touch ? mail id OR
    csa plz check our
    M S Prasad

  7. Big budgets and IT resources aside, cloud based rapid web application development and delivery platforms such as WOLF are enabling India SME's to use access sophisticated technology on a pay-per-use basis. Check out some interesting case studies

  8. Interesting post - thanks. We blogged recently about the future of the cloud in SMBs and what opportunities it can afford them, you might be interested in reading it -