How Can Small Businesses Practically Benefit from Cloud Computing - Research Paper Example

 Table of Contents Executive Summary 2 Introduction 3 Cloud Computing – How can small businesses practically benefit from cloud computing 4 Conclusion 10 Recommendations 11 Bibliography 13 Appendice 14 Executive Summary The advent of cloud computing has taken the IT world by storm. Although the popularity of Gmail and Yahoo mail has been the most common face of cloud computing, now bigger companies are stepping into the arena and more complex solutions are being offered. Cloud computing is the provision of services through the internet where data and software are stored not on the desktop but third party servers. Cloud computing applications such as Google Apps have gained popularity and can be used for an annual fee of $50 per user per year as compared to Microsoft Office which costs a company hundreds of dollars for a single license. Thus cloud computing solutions promise to save companies millions of dollars in licensing fees and installation and support costs. Companies can switch services or use more complex software and platforms without incurring any capital expenditure. This arena has special implications for small businesses as they have the most to gain from it. The decrease in costs helps small businesses and start- ups to access and use applications that they could not afford before. It also enables them to share data and communicate easily with remote locations. Cloud computing is not dependant on any system except internet and thus things can be done faster and more efficiently. New applications can be launched and implemented without incurring high costs. Cloud computing systems can provide smaller companies the same level of software as large companies at lower costs. Cloud computing systems have better security systems and are better at managing and processing data. They can accommodate the company’s needs during peak seasons and reduce operating costs during low seasons. The pay as you go method decreases wastage of resources and finances and helps in trimming the IT budget. The around the clock availability of data helps in increasing productivity. Thus, smaller companies face numerous benefits from cloud computing. The issues of privacy and security should however be considered. The cloud service provider can retain and use information about the business and is not held responsible for data security. Many instances of servers crashing have been noted causing many companies losing their data or being unable to access their files. Small businesses should always conduct thorough research and read the fine print before committing to cloud applications. Business needs should be kept in mind and a reliable vendor should be chosen. Cloud applications that provide substantial cost and productivity benefits should be chosen and implemented. Cloud computing expenditure in small companies is increasing due to its role in decreasing costs and the ease of sharing and communication. Introduction The new ‘it’ term in the world of computer systems and applications is cloud computing. Cloud computing is simply using the internet to retain data and applications. The users do not have to purchase and install software and can use applications through any medium that has internet. Services and storage are provided through the internet. This technology is more efficient as it centralizes memory and processing. Basic examples of cloud computing include email services provided by Yahoo and Google. Unlike Microsoft outlook, which needs to be purchased and installed on the computer; Gmail just requires an internet connection. Anti-virus software that automatically updates itself is another example of cloud computing. Thus cloud computing saves on licensing and installation costs and also the risk of you computer crashing. In cloud computing, the server and applications are on the cloud and managed by the service provider. The user only gets to use the services without any of the management. Although many large businesses have adopted cloud computing as well, it holds special implications for small businesses. Cloud computing provides a new way for small businesses to make use of technology and software without incurring licensing costs. However, there may be some drawbacks such as privacy and operational costs. Nevertheless, cloud computing is a major development affecting information systems and business models across the sectors. This report analyzes the benefits that small businesses may realize by opting for cloud computing. It includes the practical results that may be gained from cloud applications as well its pitfalls. It considers all aspects that small businesses should consider and how cloud computing affects them. Cloud Computing – How can small businesses practically benefit from cloud computing The three segments of cloud computing are; applications, platforms and infrastructure. Cloud applications (SaaS) basically provide the use of application software over the internet without the need of installation on the client’s computer. Cloud platforms allow users to access and use applications from centralized servers. They offer a set of applications and software components to provide solutions to companies. The infrastructure segment may prove to be the most important in the future. It involves allowing clients to build applications or outsource them through the internet. Instead of purchasing equipment, resources are purchased. Cloud computing has reached beyond email and anti-virus services and into telecommunications (Skype), finance, marketing and other areas. This has special implications for smaller companies as they face high licensing costs per unit. Larger companies are better placed to negotiate for lower licensing fees and installation costs. Their costs are also absorbed in higher sales and revenues whereas smaller companies have lower revenues and fewer employees, so they need to buy a new license every time a new employee is hired. The number of licenses they purchase are fewer and thus may have to pay a higher price. Due to the advent of cloud computing, smaller companies can now take advantage of complex applications without incurring high capital expenditure. They can make use of processing, budgeting, accounting and other applications online at a regular operational fee and without any large investment in hardware, software or installation charges. Although there has been much hype about cloud computing and its importance in the future, only 2% of small businesses are currently using cloud computing (Quittner) and two thirds of small businesses had not heard of cloud computing (Urquhart). However, aside from the hype and the surveys; cloud computing promises to provide many practical benefits to all organizations. Cloud applications are suitable for companies facing uncertainty and economic pressures as they need to pay as they use the applications. Many applications now cater specifically to small businesses; they include Zoho, Google Apps, Echosign and Freshbooks. Smaller companies stand to benefit more as they gain access to high tech applications at a lower total cost, for example Google Apps charges $50 per user annually. If a small company buys Microsoft Office 2010 Home and Business online, it will have to pay $199; if it buys a boxed version the cost is $279. Google Docs, on the other hand is free. (A.Martin) Thus, the most important benefit for a small company is the reduction in cost. Companies have to pay a small annual fee rather than a onetime license fee with costly upgrades and annual purchases of desktop applications. Smaller companies with less than 100 employees usually are more sensitive to cost increases due to their lower total revenues as compared to larger companies. They cannot afford to spend hundreds of dollars on single licenses and cloud computing provides a cheaper and more efficient alternative. For example, Qiigo in Atlanta decided to move from Microsoft Office to Google Apps when the CEO Rick Batchelor realized it was a waste to spend so much money on licenses when cheaper services were available. According to him, Google Apps provides all the functions and much more and was easy for employees to get used to. He claims the company has saved $1000 per year per employee due to the decrease in licensing and support costs. (Schiff) Another benefit for small companies is the simplicity of the software applications in clouds. Many cloud computing providers offer a simple and focused application without frills and fancies. As users often do not use many of the features available on the programs their aim is to provide applications that are limited but get the job done. These simple applications are often free as well. This benefits the smaller companies as they don’t need to pay for in built features that they don’t require. Compared to desktop applications they are simpler and more limited. Karl Schmeider of MessagingLab switched to Google Docs as he found newer versions of Microsoft word to be loaded with unnecessary features which posed unnecessary complication when creating a simple document. (Schiff) Although this can prove to be a disadvantage as well if customization is required. Many cloud applications may not have all the features required and they may not be suitable to the firm’s needs. Cloud computing is neutral when it comes to platforms and works well over Windows, Apple and other operating systems. Thus it benefits small companies that have a combination of platforms and systems such as MessagingLab which provides marketing communications to healthcare companies. Microsoft and Apple systems although claim to be free of cross platform issues but companies lose formatting when working with both (Schiff). Due to this neutrality, cloud computing makes it easier for employees in different areas to work on the same applications and access data thus increasing data portability. It also makes it easier to share data and documents. This decreases dependency on computer systems and the time it takes to disperse information. Small companies thus are not dependant on computer systems as cloud computing systems can be used easily from any system. These applications can also be used easily from mobile phones and tablets, thus the ease of communication and data management increases multifold. As cloud computing systems are based on centralized servers and not on the company’s system, they are accessible at all times. Applications can be used anywhere and anytime. Even if the user is offline, applications can be used in an offline mode and then synced later. Cloud computing decreases the time lag between creating and sharing data. Cloud applications such as Skype reduces costs of communications and are available around the clock. Video conferencing and international call costs have plummeted for companies using Skype. Services like SugarSync provide access to one’s desktop from anywhere and at any time. Desktop applications are not available unless the specific computer is at hand, but cloud applications are just dependent on internet access and any pc, mac, laptop, mobile or tablet. This leads to an increase in productivity and ease of communication. (Quittner) A major benefit of cloud computing’s independence from computer systems is that if the company’s system crashes then data is safe and secure due to it being stored on the cloud rather than on the local system. Although, there are concerns about privacy and security of data in cloud computing and the company has less control over the data the third party storage of data also protects it from being lost due to system crashes. According to an article in USA Today, eight desktops stolen from a small business owner did not prevent the business from being up and running due to cloud computing. If the business was using desktop applications it would have had to either file a claim or purchase new licenses; however due to cloud computing the business was saved from these costs and delays. Many companies no longer have to face time delays when their email server crashes or their system is stolen. However, cloud servers may be down at times as well and thus it is necessary to use cloud providers that are reliable and secure. (Acohido) A concern regarding cloud applications is of data security. Many users are wary of the security of their data when it is stored on cloud servers. However, there is another side to this issue. Cloud providers are often capable of providing and implementing better security measures than a small company can usually afford. Cloud computing providers such as Google, IBM and others are more qualified at providing data security. Although it is vital that companies peruse security and privacy details before choosing a vendor as the vendor is not responsible for the security of the company’s data. Small businesses that are uneasy with cloud computing can opt for a combination of internal data storage of sensitive information and cloud computing applications for other uses. Access to varied applications at minimal cost is another big advantage for small companies. Cloud applications allow small companies to compete with large businesses in ways they never could before. Small businesses usually used basic applications and thus their speed, communication and processing skills were inferior compared to their larger counterparts. However, the development of cloud applications such as Speakeasy, Avalara and Concur breeze that manage expense and travel accounting, tax calculations and payments and internet phone servers allow small companies to take advantage of software that they couldn’t afford before. These services are managed and updated, providing the small businesses with up-to-date services. Cloud computing providers now provide all sorts of services from basic features that are usually free to premium options that include a mix of services at an inexpensive rate. For instance, Google Apps provides a central point where users can read and find out about applications. Google Apps itself provides email, calendar and clerical programs in its premier edition whereas Google Apps Marketplace provides access to software from other sources that tie into Google Apps thus providing businesses with a complete mix of solutions at low cost. (Acohido) This approach helps businesses achieve more efficiency and keep their information systems up to date without investing large amounts of money. Outsourcing their information needs to cloud systems provide them with an IT edge in order to enter markets they could not have before. Another practical benefit that small companies gain from cloud computing is the ease of implementation, which decreases installation and support costs. Cloud computing can be easily adopted throughout the organization with no installation costs or hardware costs. It is easy to access and implement as all the company needs is its present computer system and a fast and reliable internet connection. Since most software is available on a trial basis, small companies do not need to make drastic, immediate changes but can undergo a trial run. Mighty Brand’s Ryan Waggoner switched to Google Apps; and claims that it was easy to set up and employees were already familiar with Google. Rick Batchelor of Qiigo, also claims it has been easier to set up and employees learned very quickly (Schiff). According to Laurie McCabe, its ease of set up and free services makes cloud computing the better option for small companies and start ups (McCabe). According to Forrestor Research, there are five major benefits to small companies of switching to cloud computing. Cloud platforms allow the user to develop and implement new applications in real time. The company does not need to acquire, install and configure the traditional platform rather it can build new applications on existing cloud platforms thus decreasing the time taken to develop and implement new applications from three to four months to weeks. Another major benefit according to this study is that it brings IT budgets in line with usage. Many companies purchase software and applications as well as premium features that are not regularly used. In the case of cloud computing, the company has to pay for the resources it uses and when they are used. This eliminates wastage of resources and trims the IT budget enabling the whole system to become more efficient. (Deans) Another benefit of cloud computing is that it can help the company have room for demand peaks and also sustain the dips. As the company’s system in not based on internal networks, an increase in demand can be accommodated due to cloud platform. They can use increased resources and get larger storage in peak season. In the case of low seasons, the company can decrease storage and usage of resources on the cloud platform. Det Ansinn and friends developed an application called Xbox Live friends that enable people to play Xbox games with their friends online and on their phones. Their immediate success as more and more people logged on to play their off-site server slowed causing disruptions. When there was less traffic they were paying $100 extra a day. Their switch to Google Apps just costs them $15 a day and accommodates the traffic highs and lows that the application faces thus helping the company become feasible again. (Quittner) Another advantage that a small business gains is that it can introduce new applications without an increase in cost. Operating expenses will be incurred rather than large capital investment when new applications are used through cloud computing. Another benefit according to this research is that sharing data through cloud applications is safer for small businesses as it does not endanger the data center. Data that needs to be shared can be hosted on public clouds rather than giving access to the internal data center to the company. Thus, it enables the company to protect their internal data. (Deans) Robert Whiteside, head of Google Enterprise UK, Ireland and Benelux has discussed many benefits of cloud computing for small businesses. He states that users are familiar with websites and internet applications and thus it will be easier to learn and adjust to similar applications at work which will increase productivity. Furthermore, they will be able to access data and work from home thus increasing efficiency. He also discusses the fact that cloud computing leads to greater collaboration as employees work with and access the same document, increased sharing leads to decreased need of bulky emails and no need to wait for the other person to go online to respond, thus sharing and communication is done in real time. According to economic conditions and needs as well as business requirements the business can increase and decrease its usage and cost and it can also reach diverse employees and clients. Cloud computing is something teenagers today excel at due to Twitter, Facebook and MySpace . When they enter work environments they will be used to performing in a similar vein and thus be more productive through cloud computing. Businesses operating on clouds can achieve 97% greater IT reliability according to IDC, due to several data centers working at the same time information is available around the clock. Cloud computing affords more choices to the user. Businesses can switch service providers easily as there are no costs involved. Thus, they can search and look around for software better suited to their needs which can be implemented at minimal cost. (Humphries) The performance and durability of cloud servers is usually better than what a small company can usually implement and the response time is faster as well. Big names such as Google, Amazon, IBM, Yahoo, Salesforce and Microsoft can manage and protect a small businesses data better. These vendors are skilled and reliable and a small business can benefit from their expertise in this industry. They are the developers of new technology and software and their clouds would be up to date with a lower threat of crashing or inaccessibility. Greater data storage options are provided to small companies from the use of cloud computing. As the multiple data centers the cloud uses can hold and process immense amounts of information, small businesses can make use of this facility to their advantage. Small businesses can achieve economies of scale by increasing productivity while utilizing fewer resources. Small businesses can also reach out globally through clouds as it enables worldwide access. They can acquire clients from anywhere in the world as well as hire employees from anywhere provided they have an internet connection. Although there are great benefits for small businesses in switching to cloud computing there are many important issues that should be considered before making a move. The issue of privacy is in the forefront as the cloud application providers could be keeping and using information about the company. The question of availability also arises, as cloud computing claims to be available and accessible around the clock but the cloud servers can go down and data can be lost. Also, if the company decides to switch cloud services, they might not get all their data and records back. Companies may not always be able to share data over different cloud providers. Cloud applications also lack the customization and other features that are embedded in desktop based applications. However, for most small businesses it is advisable to research and experiment before switching to cloud computing. Conclusion Cloud computing is not a new concept although the popularity the term has gained recently may give that impression. For years, millions of users have been using email services on the internet that are a part of cloud applications. Recently, cloud computing has become a point of focus for enterprises as cloud companies develop more services and provide more benefits. Cloud computing benefits all sorts of businesses through its decrease in costs and maintenance and how it leads to better data mobility and increased productivity. Small businesses can achieve great benefits from cloud computing. To switch their software needs from internal systems that require buying hardware, software and licensing fees as well as installation and support costs to cloud solutions that charge a small annual or monthly fee seems a wise move. Cloud software is usually ‘pay as you go’ meaning the company just has to pay for the services it uses and when it uses them rather than installing software that is left idle most of the time. Cloud solutions are also more efficient as they have centralized systems and multiple data centers they can process and store greater amounts of data as well as make sure information is available at all times. They are easy to set up and install and easy to use. Many simple applications are free of cost and focus on getting the task done. Cloud computing servers provide more security than a small business can afford and it is always safer for the small business if data is stored somewhere else in case the in-house server crashes and data is lost. Cloud computing evens the playing field for smaller businesses by allowing them access and usage of new and improved software applications. Small businesses cannot usually afford to invest in upgrades and cloud computing servers keep improving their services and showcasing new applications. Thus, small companies can compete with larger companies on this basis. Cloud systems have peak load capacities and seasons of high and low demand can be easily borne by the server, with the cost for the business adjusting to the amount of resources it uses. Small business can completely move into cloud computing by using email services, security, storage, backup, business applications, on demand processing and productivity. Data can easily be shared among users located far away from each other and communication and editing can take place in real time. Through usage of cloud computing small businesses can expand into new areas and gather new clients and they are not dependant on specific operating systems. Small businesses can increase information efficiency and productivity and decrease infrastructure and licensing costs. Cloud computing raises a few issues for concern such as privacy, security and functionality. Privacy concerns from companies are that the server can keep and use information about the company without consent. External users may be able to access some private information although cloud servers usually have measures in place. Cloud service providers are not responsible for the security of the company’s data. Cloud systems may suffer outages and crashes and may not be up and running 24/7 thus limiting access to the company’s documents while data may be lost as well. Recommendations Cloud computing has become a hot topic for companies and IT giants such as Microsoft and IBM are stepping into the market. Cloud computing is now being flagged as the biggest thing after the internet and companies are interested in it. Notwithstanding the major benefits that cloud computing offers small businesses there are pitfalls that should be recognized before switching the company’s systems and software to cloud applications. Firstly, the business should research vendors and choose a vendor that is reliable and caters to the needs of the business. Customer reviews and ratings of the vendor should be read. Secondly, the up time of the vendor should be considered, that is how many times the server goes down and how good is the performance. Cloud computing results in lower support costs but the business should ensure that the vendor provides support in case anything goes wrong. The business should make sure that cloud computing solutions integrate well with other systems in the company and with the culture of the organization. The vendor chosen should be flexible and accommodating depending on the number of users of applications. As cloud applications are usually more basic than desktop applications, the business must make sure that cloud applications would satisfy its software needs. When a company moves into cloud computing it should consult and engage with its IT and strategic teams in order to align it with the company’s goals. Though cloud computing has proven benefits it might not be suitable for companies with sensitive information or those that require immediate software updates. Most small businesses will greatly benefit from the advantages that cloud services provide, however they should start small and preferably use the trial options before making a commitment. The business should also read the agreements closely especially with regards to privacy and data security as well as the vendor’s liability. Many cloud services should be tried and tested to find the one that suits the business needs best and in many cases it may be better to switch some IT needs to clouds through free and inexpensive services rather than switching the entire system. Bibliography A.Martin, James. "Should You Move Your Small Business to the Cloud?" 13 1 2010. Business Centre: PC world. 28 12 2010 . Acohido, Byron. "Software-as-a-service gives small business powerful tools." USA Today 11 5 2010. Chappel, David. A SHORT INTRODUCTION TO CLOUD PLATFORMS: An enterprise oriented view. http://www.davidchappell.com/CloudPlatforms--Chappell.pdf. Microsoft: Chappel & Associates, n.d. Deans, David. "Five Proven Benefits of Cloud Services." 21 12 2009. Cloud Computing Journal. 28 12 2010 . Humphries, Jodie. "Does cloud computing benefit small businesses?" 28 12 2010 . McCabe, Laurie. Have you adopted small business cloud computing? Chris Crum. http://www.smallbusinessnewz.com/topnews/2009/02/04/have-you-adopted-small-business-cloud-computing 04 2009. McCue, TJ. "Small Business Guide to Cloud Computing." 15 11 2010. Small Business trends. 28 12 2010 . O'Neill, Leslie T. "Cloud Computing Lets Small Businesses Focus on Their Business, Not IT." 11 10 2010. Cisco News. 28 12 2010 . Quittner, Jeremy. "How Cloud Computing Can Help Small Businesses." 7 9 2009. Bloomberg Business Week. 28 12 2010 . Schiff, Jennifer L. "Small Businesses Find Silver Lining in Cloud Computing." 4 5 2009. Small business Computing. 28 12 2010 . Urquhart, James. "Small business: A cloud-computing opportunity?" 2 2 2009. Cnet News. 28 12 2010 . Williams, Alex. "http://www.pcworld.com/businesscenter/article/188173/should_you_move_your_small_business_to_the_cloud.html." 7 4 2010. 28 12 2010 . Appendice Q28 and 32. What proportion of its total IT budget does/will your company spend on hosted or subscription technology services – now; in 2 years' time? Source:Cisco Internet Business Solutions Group, Sept. 2009 Read More