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SMBs Seed the Cloud

One of the biggest problems with leading-edge technology is its limited accessibility to small and midsized businesses (SMBs). In the supply chain, the biggest complaints about ERP and MRP platforms and systems are their prohibitive cost; their systems requirements; and ease (or lack thereof) of implementation. Any technology, tool, or platform that provides a cost-effective alternative garners immediate attention.

The cloud is one of those technologies/tools/platforms. A recent study commissioned by {complink 2470|IBM Corp.} found growing adoption of cloud computing among midsized firms, with two-thirds either planning or currently deploying cloud-based technologies to improve IT systems management while lowering costs.

IBM — Big Blue itself — has mainly played in the realm of big enterprises. A few years ago, it began offering Internet security solutions that were priced for SMBs and developed a partner channel targeted at supporting this market segment. Cloud computing is also a means for SMBs to scale costs. Here are some findings from the report:

    Top business benefits of implementing cloud computing
    (percentage of respondents)

      — Cost reduction 73
      — Cost/manageability 70
      — Redundancy 68
      — Uptime/availability 67
      — Rapid provisioning 66
      — Remote access 66
      — Flexible pricing 66
      — Resources scalability 66

Rather than one server-to-application architecture, midsized businesses realize they need to take advantage of virtualized, shared architectures to make the most of their IT investments while quickly provisioning the IT resources their end users and customers need, the report notes.

Cloud computing continues to take hold in this regard. Whether for computer resources, business continuity provisions, applications software as a service, or harnessing business analytic capabilities, the cloud is considered a viable alternative versus traditional one-to-one architectures.

The study also shows that SMBs are turning a corner in 2011, with more than half showing confidence that the recovering economy will support their plans to increase IT budgets to help them focus on growth and customer value, while continuing to improve operational efficiencies. At a worldwide level, 53 percent expect to increase their IT budgets in 2011, versus only 20 percent in 2009. Another 31 percent expect no change, and only 16 percent are planning for a decrease. In fact, of those that expect to increase their budgets, nearly half expect an increase of 10 percent or more versus their 2009 IT spends.

The study also reveals that companies in growth market countries (69 percent) are even more likely than more mature market countries (51 percent) to increase their budgets in 2011. In countries such as China, Brazil, India, Korea, and Singapore, more than 7 in 10 midsized businesses are planning for a budget increase next year.

11 comments on “SMBs Seed the Cloud

  1. AnalyzeThis
    January 14, 2011

    This isn't a surprise to me, most SMBs have no need for a massive, expensive ERP system… it's far, far easier and less expensive to find an existing cloud-based solution.

    Yes, like the report indicates, cost is the main reason for this, but I believe the rapid provisioning and scalability is just as important: SaaS (in general) can be quickly deployed, and even if your company experiences tremendous growth, that solution is very likely to grow with you. Yes, these are obvious facts, but the impact this has on IT is just tremendous (and it reduces their stress levels as well).

    Now on the opposite end of the spectrum, the existing big players in ERP are going to need to (and already have, somewhat) adopt a new strategy here or else they may lose a good chunk of their “smaller” (mid-sized) customers to cheaper cloud alternatives. I think the next 4-5 years will be very interesting here.

  2. Barbara Jorgensen
    January 14, 2011

    You have a great point about the folks such as SAP that rely on developing and selling ERP/MRP platforms. They are participating in efforts such as GCommerce's SuperSpec which helps users integrate EDI protocols into a common language. They don't want to miss whatever opportunties there are in SMBs, but I haven't heard much beyond what IBM is doing to reach these folks. (That's not a criticism of them–it's that I don't read as much about IT as I should)

  3. SP
    January 14, 2011

    I thought everyone uses SAP or any other ERP package. What exactly is cloud computing?

  4. prabhakar_deosthali
    January 15, 2011

    SP,   not everyone affords to use SAP as it involves a major investment in IT. In cloud computing all the resources required to manage a company's business systems such as the supply-chain management, Accounting, CRM, HRM are available over the internet.  The required applications are run on the servers connected on the net and the end user does not have to own either the hardware ( Servers, the network etc) or the software ( database, ERP). The end user accesses these services using internet and pays only for the use of the services. That is why all these resources are supposed to be somewhere in the cloud and using such services is called Cloud Computing.

     

     

  5. DataCrunch
    January 15, 2011

    I don’t see the “cloud” as an all or nothing solution, but more like a hybrid.   Cloud computing can make a lot of sense for SMBs, but things start to become complicated when automation and material handling equipment is involved, which can be common when it comes to the supply chain.  When you are dealing with Finance or HR systems, it is easier to migrate or change over these systems to cloud offerings.  But with supply chain systems, specifically in manufacturing, warehousing and distribution things can get tricky because companies have to deal with the physical, such as conveyors, robotics, PLCs, carousels, packaging equipment, labeling equipment and printers, barcode scanners, etc. 

    In many cases, these systems within the supply chain will most likely need to be close to the actual equipment.  But for companies that require no automation, the cloud may be viable option, assuming they don’t expect to expand or plan on outsourcing their manufacturing and distribution.

    What I can see becoming more popular within the supply chain would be certain functionality can be moved to the cloud, like EDI as Barbara mentions.

  6. t.alex
    January 16, 2011

    I am just curious  – what kind of clouding computing technology can SMB adopt? 

  7. bolaji ojo
    January 16, 2011

    The service of Cloud Computing gives small and medium size businesses the opportunity to benefit from on-demand applications. Instead of having to buy all the applications they need and hosting them on a central server controlled and managed by in-house technicians, a company can have all these and more hosted by service providers.

    The other advantage cloud computing has for many companies is also the ability to access corporate data and applications from any location in the world, via the Internet. Cloud computing gives companies a chance to lower their operating costs overall and still use the applications they would have had to support internally.

  8. Ashu001
    January 17, 2011

    Barbara,

    As someone who specifically focusses and deals with SMBs on a regular basis,I can tell you for sure that atleast in India and China,SMBs are not exactly flush with cash(to expand as this article so clearly elaborates).

    Sure Credit is plentiful as Banks in both these Fast growing Giants have turned on the liquidity flow Big-time but larger and larger chunks of their Budgets are going to pay Increasing salaries to Employees (or they leave as Salaries just not keeping up with Food and Transport Inflation)as well as to cover Higher Input Costs.The Basic cost of doing Business has gone up by more than 10% (in both China and India);because of Double-Digit Inflation-Thanks primarily to QE2 from the US Federal Reserve.

    So coming back to my original question-Which SMBs does this study cover???

    As for in the West,American SMBs are still extremely unsure(as per latest Small business surveys) about Demand.As for Western Europe-The situation is an absolute nightmare because of Govt.Budget cuts/austerity.So where is the Demand going to come from???

    “The study also reveals that companies in growth market countries (69 percent) are even more likely than more mature market countries (51 percent) to increase their budgets in 2011. In countries such as China, Brazil, India, Korea, and Singapore, more than 7 in 10 midsized businesses are planning for a budget increase next year.”

  9. mfbertozzi
    January 17, 2011

    Although on-demand model as per cloud architecture really makes sense especially for connections or apps for personal productivity, it is not easy to setup ERP on-demand especially for manufacturing market. Across the globle we are still living in financial & economics rules and criteria strictly related to regions. Have you heard stories of success in terms of ERP “on-demand” in worldwide scale?

  10. Ashu001
    January 17, 2011

    mfbertozzi,

     

    Your sceptism is entirely valid and relevant to the times we are in today.We don't want customers jumping into a technology before they have seen successful case studies as well as the Cost Benefit analysis.

    Ultimately as you so rightly point out, the Ondemand model has to be tailored to individual requirements across various regulatory regimes and various Legal and other barriers(like Language).Unfortunately we are not entirely there yet,But some of the leading Suppliers are working very aggressively towards that Goal.We will be there soon(most probably by the time 2012 is over).

    Regards

    Ashish.

  11. Barbara Jorgensen
    January 18, 2011

    Here are the categories covered by the study on mid-size companies and the cloud:

    The survey of 2,112 business and information technology decision makers at midsize businesses (100-1000 employees) spanned a variety of industries, including banking, retail, consumer products, wholesale, transportation, industrial products, and insurance. Participants hailed from the United States , Canada , the United Kingdom , the Nordics (Denmark , Finland , Norway , Sweden ), Germany , France , Italy , Belgium , Luxembourg , Netherlands , Spain , Japan , China , Brazil , India , Russia , Australia , Mexico , Korea, Singapore , South Africa , Poland , New Zealand and the Czech Republic . The study was conducted in the fourth quarter of 2010 to capture current and upcoming business and IT priorities and investment direction.

    I think the point of the study was yes, you have to spend, but you can spend much less if you consider cloud computing as your platform.

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