Described by many as the latest trend in the IT world, cloud computing is simply an evolutionary approach to how IT resources are provisioned, consumed, managed and paid for.
SMEs can save between 23 per cent and 55 per cent by moving to cloud services- Nick Tonna
In traditional IT, procurement follows a ‘use-for-what-you-pay’ philosophy. Companies often purchase hardware and software that eventually get under-used and then try their best, in most cases unsuccessfully, to maximise their return on investment.
In the cloud computing era, however, companies do not need to acquire physical ICT assets but rather can provision and consume IT resources as a service – a cloud service – instantaneously and on-demand, paying only for the resources that they use, when they use them much in the same way as they do with other utility services.
With cloud services, IT is effectively delivered as a service and the procurement model is switched to ‘pay-for-what-you-use’. Companies are now empowered to use IT services – servers, data storage, software applications – as the need arises.
Services can be provisioned and de-provisioned, scaled upward or downward according to needs at a specific point in time. Charges apply for the resources consumed and for the time they were consumed. This means that at any point in time, the investment in IT is reflective of actual needs of the business.
SMEs are probably the biggest beneficiaries in the cloud services world. For starters, the different procurement model allows them to avoid the capital expenditure related to the procurement of hardware and software or implementation and maintenance services required to set up and operate complex IT infrastructures.
This is a far more cash-flow-friendlier approach than the traditional upfront investment model to IT which either requires SMEs to commit considerable portions of their already limited financial resources or discourages the investment altogether, limiting them of the ability to benefit from latest IT innovations.
An SME no longer needs to be discouraged by the cost of adoption. This is broken into much smaller periodic subscription fees. If the service turns out to be unsuitable for their needs, they can simply terminate it and their exposure is minimised.
Another benefit is the ability to reduce IT operational costs. This is primarily as a result of the delivery model associated with the cloud in which the underlying IT infrastructure is managed by the cloud services provider and the associated management costs are shared across the provider’s customers. Cost comparisons based on market pricing in Malta show that SMEs can save between 23 per cent and 55 per cent by moving to cloud services.
Additionally SMEs do not have to worry about the complexity of managing the technology because they can rely on the expertise of the service provider to ensure that the service is secure, well-maintained and kept upgraded. Those without in-house IT experts do not need to pay extra.
Those with an internal IT capability can realise even greater benefits by moving some of the more mundane services to the cloud they can focus their efforts on delivering more value added solutions to the business.
In addition to the rationalised investment model and the cost savings associated with cloud services, SMEs are now able to make use of enterprise-class IT services which until recently were only accessible to organisations with large IT budgets. This gives SMEs access to the best IT tools around, enabling them to benefit from the latest innovations without the need of making heavy upfront investments or incurring any major investment risk.
Take data back-up as an example. With research showing that over 89 per cent of computer users have experienced some form of data loss, every business is concerned with losing its data. Implementing a back-up solution requires investment in back-up software, media and possibly additional IT equipment which can easily run into the thousands of euros and may become prohibitive for an SME. Today, an SME can subscribe to a cloud backup service which offers similar capabilities, addressing their data loss concerns while paying only a few euros a month.
The cloud is an exciting innovation for the entire IT industry, but is an especially significant one for SMEs. It enables SMEs to increase their business agility by facilitating the adoption of innovative technology while benefiting from a new set of economics to their IT investment.
Nick Tonna is chief commercial officer at BMIT Ltd.