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SMEs now investing in cloud computing

Small and medium-sized enterprises (SMEs) are increasingly recognising the potential of cloud computing and hosted services.

As with most emerging IT trends, it is the large corporations - those with the greatest financial clout - which have been quickest to adopt cloud computing.

Understandably, it is often easier for a company to pilot new technologies when they have millions in the bank and the ability to run pilot schemes within individual departments prior to a full rollout. But as the benefits of hosted services have become clear and more companies have moved to revamp their IT infrastructures, the cloud market has naturally become more competitive. Consequently, hosted solutions have become more accessible to small and medium-sized enterprises (SMEs) and new services have been launched geared at this segment of the market.

In 2011, cloud computing is being utilised by large and small companies alike, helping to level the playing field for many local SMEs. Small companies are able to access advanced software and hardware tools which would previously have been beyond their reach. This enables them to run highly professional, digitally-minded companies on a shoestring budget. With IT playing an integral role in modern society, SMEs realise the importance of operating online and using IT to maximise efficiencies. As such, the number of small businesses moving to the cloud is continuing to increase.

A recent Microsoft report indicated that almost four in ten UK SMEs will be using one or more cloud service within the next three years. The software giant surveyed a total of 3,258 companies with between two and 250 employees across 16 countries. Some 39 per cent of respondents said they had formed cloud computing strategies. At present, 29 per cent of the SMEs surveyed are currently using hosted services to access IT tools over the internet, with this proportion forecast to rise significantly in the near future.

The report indicated that SMEs are most likely to embrace cloud computing in a hybrid environment, meaning they will retain in-house control over some hardware. Cloud computing will most likely be used for workloads such as email, accounting and payroll, and employee collaboration, Microsoft stated. The firm said the number of hosted services paid for by the average SME will also increase over the next three years, from under two to 3.3. In many cases, small firms may test cloud services for one particular task, monitor the benefits of the delivery model and potentially commit to a wider rollout further along the line.

Marco Limena, vice-president of business channels at Microsoft, noted that cloud adoption will be gradual, as small companies test the waters with outsourced IT. Commenting on the survey results, he stated: "SMEs will continue to operate using a hybrid model with an increasing blend between off-premises and traditional on-premises infrastructure, for the foreseeable future. As cloud computing becomes more ubiquitous and SMEs' existing IT becomes outdated, adoption will grow rapidly."

A variety of other commentators have highlighted the growing importance of cloud computing to UK SMEs in recent times, echoing the findings of the Microsoft study. Among these is Neil Cross, managing director of Advanced 365, who claimed that rapid innovation within the cloud sector is encouraging SMEs to overhaul their IT infrastructures. He noted that small businesses have an increasing range of applications to choose from, which can help them operate more effectively, and they have been buoyed by this greater choice.

"Providing organisations choose applications that are designed, deployed and operated in line with their business requirements they can gain a number of benefits by moving to cloud computing," Mr Cross stated. "These include reduced costs and improved operational efficiency as the cloud removes many of the overheads typical of in-house IT management."

Speaking in February, Gerry McLaughlin of suggested that 2011 will be the year SMEs start to derive real benefits from the IT outsourcing industry. He predicted that an increasing number of companies would investigate the possibility of delegating responsibility for their in-house hardware to third-party specialists, conscious of the need to reduce costs and free up management time to focus on other areas.

Alan Patricof, founder and managing director of Greycroft, went a step further, claiming that the advent of cloud computing has actually encouraged more people to create their own companies. He proposed that the start-up business market is the most vibrant he has witnessed in 40 years, and web-based technology is playing a key role in driving innovation. Mr Patricof said that, as a result of hosted services, entrepreneurial individuals have gained the confidence to enter self-employment, safe in the knowledge that they can start a company without tens of thousands in the bank.

Assuming this analysis of the start-up market has merit, then cloud computing is proving to be even more influential than previously thought. As a means of empowering small companies with advanced IT tools, the cloud is undoubtedly a highly valuable innovation. But as a catalyst for company formation, it has the potential to offer immediate, unexpected benefits to the national economy as a whole.