Maximizing the Value of Cloud for Small-Medium Enterprises : Cloud Adoption Benefits for the SME and Business Case

 

Introduction to Cloud Computing

Cloud computing is becoming a game changer for Small-Medium Enterprises (SMEs) by offering scalable infrastructure and capabilities available as services. It is a paradigm where computing resources are available when needed, and you pay for their use in much the same way as for household utilities.

Cloud is a shift in the consumption and delivery of IT with the goal of simplifying to manage complexity more effectively. Cloud represents the industrialization of delivery for IT-supported services. Cloud models are delivering on the promise to help businesses work smarter by providing flexible, cost-effective access to technology and information.

A basic Cloud computing model is shown in Figure 2. Servers, storage, applications, and services are accessed via a common network. They are shared between organizations, and accessed by users. The users may be members of the organizations working on-premise, remote workers, customers, or members of the general public.

The Basic Cloud Computing Model

The Basic Cloud Computing Model

Cloud computing resources can be rapidly provisioned and released with minimal management effort or service provider interaction. This means that an organization can use more or fewer servers, stores, applications, or services, and can configure the ones it uses to meet its requirements, as and when it wishes to do so, and without major effort.

Cloud computing has five essential characteristics, as depicted in Error! Reference source not found.. They are:

  • On-demand self-service
  • Broad network access
  • Resource pooling
  • Rapid elasticity
  • Measured service

These features distinguish Cloud from other computing models.

Essential Characteristics of Cloud

Essential Characteristics of Cloud

Cloud computing provides a new business paradigm for resources. It enables organizations to create and use IT and business services on-demand from optimal sources to maximize utilization and cost-effectiveness. This can be between enterprises or within a single enterprise.

New Resourcing Paradigm

New Resourcing Paradigm

Cloud computing enables businesses to think and act beyond the “four walls” of the company through exchange of services. They can access marketplace best practice solutions, and select effective IT services from multiple sources to meet business user needs faster and at lower cost. In an enterprise that has complex and expensive IT systems to support its business processes, Cloud provides an attractive alternative by which you could pay on-demand to get IT services without being concerned with the details of how it is done.

IT planning should begin with an understanding of the overall business strategy. From experience, many businesses, irrespective of their size, lack business-IT alignment; hence IT planning becomes a matter of trying to hit a moving target. When IT planning, as the cornerstone of Plan, Build, and Run, is inadequately developed, IT organizations provision and operate IT assets that are of questionable value to the business. To make matters worse, small businesses struggle with a lack of skilled IT personnel, operational insufficiencies, and poor IT management. As a result, IT organizations often fail to demonstrate satisfactory business outcomes, such as improved financial performance.

Cloud computing won’t be the answer to all of the above. But it can help simplify IT so that SMEs stay business-focused.

Cloud has become a hot topic in IT and it seems that all vendors are branding their offering with the term “Cloud”. How should small business owners distinguish between real Cloud offerings and rebranded traditional offerings? Actually it is not the rebranding that is of concern, but the Cloud characteristics that are probably missing. The question to be asked is: can the adoption of Cloud computing help SMEs in growing revenue, reducing long-term IT cost, attracting new customers, improving cash flow, maintaining profitability, and, increasingly importantly, reacting to ever-changing market conditions? In other words, is the adoption of Cloud computing something that SMEs should consider when developing strategic IT plans?

Business Idea

The business idea is rather radical. Why? Because traditionally IT organizations have planned, built, and operated IT reactively. To illustrate this a little bit more, IT organizations have traditionally been waiting for the business to ask IT for various IT capabilities driven by the business’s perceived needs. IT organizations then typically have gone through the cycle of gathering requirements, building services based on agreed specifications, and then operating as per defined SLAs (Service Level Agreements). The whole notion of waiting for the business to request something, gathering detailed requirements, and building the corresponding IT capabilities is reactive.

What if IT were to become proactive? Instead of waiting for the business to articulate required IT capabilities, IT organizations could offer to the business a predefined and agreed service catalog. The service catalog is aligned with the business (the keyword here is IT planning), actionable in the sense that consumers can order services from the service catalog, and serve as the system-of-record so that IT organizations can manage the entire service lifecycle, from managing customer demand to ensuring service-level compliance and from driving process efficiencies to tracking costs.

An important characteristic of a service catalog is that services are available within a reasonable time period, say somewhere between immediately to a few days. In other words, the services requested don’t have to be built anymore. All that needs to be done is they have to be provisioned. In other words, IT organizations are ready to deploy the services once requested from the consumers. The notion of having built IT capabilities in the form of services before they are requested by the consumers is proactive.

IT organizations of SMEs are normally rather small in terms of budget and staff. The question then is how can such small IT organizations have IT services on a shelf, waiting to be requested and consumed? It requires an upfront investment of money and time. This is where the adoption of Cloud becomes interesting. Instead of internally building these services upfront, why not source these services from somewhere else; i.e., from another service provider? The service provider can work with an economy-of-scale effect not available at the individual SME level and serve hundreds of SMEs. In this scenario the IT organization becomes an IT service broker, sourcing services from outside and then providing services internally to the consumers.

In summary, IT organizations of SMEs should consider the idea of becoming an IT service broker where services are provided to consumers through a pay-per-use arrangement and an as-needed business model while sourced from outside from Cloud service providers.

Cloud Value Proposition/Benefits

As asked earlier, can the adoption of Cloud computing help SMEs in growing revenue, reducing long-term IT cost, attracting new customers, improving cash flow, maintaining profitability, and, increasingly importantly, reacting to ever-changing market conditions?

Let’s take a closer look at helping SMEs to grow revenue. Whether SMEs enter into new markets and therefore need related IT capabilities to support the business or SMEs acquire business lines or entire businesses and therefore need to deploy their standard application stack, IT organizations can, due to the adoption of Cloud services, support the business by instantly provisioning related IT services.

This increased agility helps the business with rapid time-to-market and, as a result, attracts new customers in a timely fashion. The reduced time-to-market not only gains new customers who otherwise would have gone to competitors, it prevents those competitors from becoming stronger and therefore enhances the SME’s competitive strength in the market. Furthermore, IT organizations help SMEs to stay nimble as IT services can be provisioned in a timely way, on-demand, and with the illusion of unlimited capacity. The adoption of Cloud computing, and with it the shift from traditional IT provisioning (in-house) to sourcing IT services from Cloud service providers, clearly demonstrates multi-dimensional benefits.

An additional dimension is represented by the fact that IT organizations shift from CapEx (Capital Expenditures) to OpEx (Operational Expenditures). IT organizations don’t have to invest in IT assets anymore, but instead “rent” them from Cloud service providers. But only as long as they are needed by the consumers. Once consumers don’t need the IT service anymore, IT organizations simply decommission the service with the Cloud service provider. Reducing and/or optimizing costs is the keyword here, and the adoption of Cloud computing can support this objective.

Last, but not least, as mobility becomes more and more important and the ecosystems of SMEs are scattered around the world, access from anywhere is crucial. Cloud computing can be an enabler here as well, as one of the Cloud characteristics is service delivery over the Internet.

The value proposition of adopting Cloud computing can be summarized as helping SMEs to stay business-focused while IT organizations provision IT services on-demand without taking money away in the form of big upfront investments for building IT capabilities but to become IT service brokers that serve SMEs adequately.

Market Indicators

IT organizations of SMEs might ask themselves: who else is adopting the Cloud, are Cloud offerings mature enough, and are there real use-cases?

Even though all the providers are talking about the Cloud and related services, the penetration of Cloud services in the SME marketplace has only just begun. One reason is that SMEs have, for the most part, only a basic knowledge of Cloud services; hence it is difficult to trigger such a conversation for Cloud providers. A recent study done by Microsoft [1] surveyed more than 3,000 SMEs across 16 countries with the objective of understanding whether SMEs have an appetite for adopting Cloud computing. One of the findings was that within three years: “… 43% of workloads will become paid Cloud services …”.

Another data point comes from Gartner [2]. Gartner’s prediction is that 20% of businesses will own no IT assets anymore, and this by 2012. Note that this prediction doesn’t distinguish between SMEs and LEs. The Western Europe Cloud services market is: “… set to grow at a CAGR (Compound Annual Growth Rate) of 12.6% between now and 2015”.

Risk Assessment

IT organizations of SMEs need to assess the security position when considering adopting Cloud computing. When selecting Cloud service providers, IT organizations of SMEs need to develop proper security policies and procedures and they need to utilize these guidelines when evaluating Cloud service providers. Following is a list of key areas that can help.

Security and Privacy

  • Is the Cloud service provider operating a legitimate business that is in it for the long haul? In other words, what if the Cloud service provider goes out of business or is acquired by another company?
  • Will data remain available after such an event? In this context, what if IT organizations decide to decommission the Cloud services?
  • How will data be transferred from the Cloud service provider back in-house or to another service provider?
  • Who has access to sensitive data?
  • What are the personnel’s qualifications and how does oversight of privileged personnel work?
  • Where does the SME’s data physically reside? Is the location of data something that is of importance?
  • Are there specific jurisdictions that are preferred for data location or that have to be avoided?
  • How about regulatory compliance? SMEs are responsible for security and data integrity, but are the Cloud providers willing to undergo external audits and certifications?
  • Is data being segregated appropriately?

Service Management

Besides the security-related concerns, service management is key to provider evaluation and selection. Key risk assessment areas are:

  • What are the provider’s service management principles and does the strategy integrate with SME policies and principles?
  • How do Cloud service providers provide back-up and recovery services?
  • Are there specific Recovery Time Objectives (RTOs) and Recovery Point Objectives (RPOs)?
  • Are Service-Level Agreements (SLAs) and Service-Level Objectives (SLOs) acceptable?

Other

Other risk assessment areas include:

  • Maturity of Cloud services that are offered by providers
  • The ability to implement Cloud solutions with existing software stacks (in-house)
  • The viability of selected Cloud providers

 

 

 

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