Why small business has its head in the cloud

Five years ago, the online monolith that is Facebook was born as a modest networking website for American high school students.

Small business cloudHalf a decade later, there are 500 million users worldwide. Eight million are Australian. It may come as a surprise to hear that six million of them are adults, and that the fastest growing group of users is over 55.

Facebook is the most spectacular example of what’s known as “cloud computing” – where software applications, storage and services are hosted remotely (“in the cloud”) rather than on a desktop PC.

Online email accounts such as Hotmail or Yahoo email have been in the cloud for years.

With the availability of fast reliable broadband, business software is now being hosted in the cloud.

It works quite simply: A customer buys software or storage on a per user basis without expensive, up-front licensing or ongoing management costs.

They use as much or as little space or software as they need and much of the computing work is done on a server located somewhere else, rather than on their own premises.

This is important for Australian small businesses, many of which are constantly on-the-go and often work away from their home base.

One industry analysis recently estimated Australian business is already spending about $A450m a year on cloud computing.

According to a recent report from analysts Gartner, the global market will be worth $A171 billion within four years.

That’s roughly equivalent to the total of Australia’s combined export earnings last year, only slightly less than the GDP of the Philippines or Romania[i] and about 13 times the current estimated value of Facebook.

Australia’s share in four years would be about $A1.8b.

So five years ago who would have thought this local charge towards the cloud would have been led, not  by corporate giants like Commonwealth Bank, Woolworths or Fosters but by an army of small businesses like hairdressers, mobile plumbing services and pizza shops?

[Next: General Fasteners – a case study]

If you’re dubious that this is the case, consider Telstra’s own figures for uptake of cloud computing.

More than half the user subscriptions (or seats) established through our platform, T-suite, have been for businesses with five or fewer employees.

They are using services as diverse as customer relationship management tools, human resources contract software, data storage, security software and shared email platforms for dramatically lower overheads than if they’d bought them outright.

Sydney-based screw and bolt supplier General Fasteners is a prime example of a small business achieving big things by going to the cloud.

With just seven employees but expanding to Perth and Brisbane in a six-month period of growth, General Fasteners saw cloud computing as the way to cost-effectively manage its burgeoning I.T. requirements.

Using Telstra’s T-Suite service to automatically back-up data and manage its workforce has saved the company about 10 hours and at least $500 a month, according to managing director Anthony Rosier.  General Fasteners now has a growth strategy of adding three staff a year and moving from number-three in their market to top position.

There are good reasons why Australian small businesses are heading to the cloud faster than their bigger counterparts.

Small business is more nimble and not so set in its ways. It’s quick to seize an opportunity if it sees benefits like improved cash flow, time-saving, better work-life balance or access to expertise or systems it doesn’t have.

It just needs to know that adopting change won’t be time-consuming or complicated.

While many large companies need to be convinced that cloud computing won’t compromise control or security of their data, most also have established software contracts or in-house I.T. departments whose existence at least partly depends on them developing solutions rather than buying “off the shelf”.

Of course buying in bulk doesn’t guarantee a lower unit price or more efficiency, but smaller vendors can be much more responsive to a business’ needs.

The cloud creates a marketplace for those vendors to thrive – and for companies of any size to seek them out.

Telstra’s research shows mobility and choice of when to do business are strong drivers of cloud computing uptake.

The lesson for providers is that they need to think like social media and make accessing the products in the cloud as simple as joining Facebook or Flickr.

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