The small cloud: How cloud impacts SMEs
As I’ve been looking at the cloud economy, an issue has been in the back of my mind–how is the cloud affecting small-to-medium enterprises (SMEs)? While most discussions on cloud-based business focus on the big guys (think Salesforce) there is actually an interesting story to tell looking at smaller businesses. After all, SMEs account for about 45% of the GDP in the US, and that share is even larger in European countries.
I won’t be able to provide a research style analysis like those publications I linked to above, so instead I contacted a few SMEs I know here in Australia and interviewed them. One of them is Jobpac, a provider of software solutions in the construction industry. About four years ago, they decided that they needed to modernize their application portfolio, which was a System i-based application. We helped them with this project, and they used the Rocket Legasuite product suite to provide a Web front end for their green screen apps.
Getting into cloud
To quote Jobpac CTO Allan Haywood, “Four years ago we saw a need to make a step change [moving from a green screen UI to a web based UI]. It was more a decision on the technical side than the business side [of product management].” However an interesting transformation occurred. “Along the way we learned more what the market wanted…We looked at what else we could bring to the market and we looked at the delivery method, and that’s where cloud became the ideal solution.”
This turned out to be a major decision. At that moment Jobpac realized they could not just deliver a part of their application portfolio; instead, it only made sense if they bundled all of it and offered it as a SaaS solution.
“It has always been a constant learning process”
Allan further explained that “While there are some big companies among our customers, there are many the small to medium enterprises that use our solutions…What we are finding is that those are the customers that are looking for a simple, one vendor, one payment and pricing model that adapts to their usage.”
Competitive pressures shape technology adoption
SMEs are working in a highly competitive market. The construction industry is project-based, which for SMEs means their receivables vary significantly over time as contracts come and go. Having the ability to pay for their software based on actual usage has a significant impact on cash flow management by matching expenditure with revenue. So even while the construction industry is highly conservative and quite resistant to change, the benefits offered by a SaaS solution are so obvious and numerous to make the switch so tempting. Allan told me “what was quite dramatic–and what we didn’t expect–was the take up rate of our existing [customer site installed application] customer base that wanted to move to a cloud.”
SMEs care about business benefit
And it’s not just the payment side that benefits SMEs. The SaaS solution is entirely about the delivery of a corporate business functionality. It is about the simplicity of the solution, not having to manage local installation, administer servers, the usage, maintenance and upgrades. And all that being managed by one single fee structure.
[box]HTML is the preferred deployment technology for cloud solutions. But it’s important to note that there are alternatives–an example is eTrack, an SME that sells practice management software. Many of their clients are small architecture firms, using Apple Macintosh computers. As eTrack was originally written to run on PCs, the company decided to provide desktop virtualization, where the application runs in a PC virtual machine in the cloud and the user sees the desktop via a client installed on their local computer, independent of whether it’s a PC or a Mac. eTrack enjoys a similar response as Jobpac, as clients appreciate having their deployment costs reduced to a minimum, mostly dealing with data migration from their existing legacy applications.[/box]
A further driver for cloud adoption was the opening application access to other, more mobile devices. The construction industry works to a large part on site, where there is usually little IT infrastructure. Tablets and fast mobile networking now provides access to more job roles that are not office-bound, broadening the base of users.
A consequence of this broadening has, however, provided another insight. A mobile user not only interacts differently with an application (no mouse but touch) but also tends to have modified business processes. This is because, when on site, he or she is more focused on solving problems quickly, rather than bundling them up and dealing with them the next day at the office. This provides opportunities to improve user interface design that did not exist before. Hence, Jobpac has also developed native mobile applications that offer subsets of the full functionality, optimized for the mobile user.
Difference in selling
Even though Jobpac still uses the traditional sales process with sales staff going out to visit prospects, there is an increase in non-traditional sales–often self-service sales. More often, leads come from former users that move from one organization to the next. Because of the pricing structure and the lower effort to deploy cloud services, these users find it easier to introduce Jobpac SaaS services to their new employers as compared to introducing a license-based product.
Adoption also moves into much younger companies, which normally have small staffs when starting out. The founder now has the ability to access the full product and just pay for the one or two users that make up that company.
SaaS is attractive to non-technologist clients
The construction industry is generally very risk averse when it comes to adoption of new technology. The success of Jobpac’s new cloud offering may appear somewhat surprising, at least until one considers that it allows businesses to actually remove a whole layer of technological involvement for their customers. Cloud-based services means they can use a bigger portion of their staff and resources to get on with their core business, and less on administering infrastructure for their business; it’s mobile phones all over again.
This is well demonstrated when it comes to upgrades. Jobpac CTO Allan Haywood told me “We found that when we tried to upgrade customers in the old system they were reluctant, worrying about the effort for regression testing and support if something goes wrong during the upgrade. With the cloud that doesn’t happen, as they get the latest version automatically…That is a big change for the old customers, whereas for new customers that’s just something that is expected.”
Going to the future
Cloud computing and SaaS is still evolving. When asked what they see as future requirements Jobpac responds that mobility and the need for ubiquitous connectivity is becoming a key need. Applications should simply be available anywhere and anytime, without the user having to worry about technicalities. That will have a big impact on workflow, with users being able to respond quicker to incoming needs and requests right on-site.
The other big venue opening up now is the opportunity for SME-sized SaaS providers to cooperate with one another, offering complementary services in a single package. Cloud implementation will allow for easier partnering where vendors’ services interface with each other in the cloud, but present a unified experience at the user end. This way SMEs can leverage one another, suddenly offering the ability to scale out functionality that previously was the domain of larger companies with deep pockets to fund product enhancement.
Takeaways: how cloud benefits SMEs
- Cloud computing benefits both SME providers as well as SME customers, with the latter making up a large part of the customers of the former.
- Cloud does not mean having to rewrite applications from the ground up. End users care about functionality delivered, not so much about what technology is used in the back.
- Outsourcing IT management to the SaaS provider provides proportionally larger benefits for SMEs than for bigger companies.
- The ability to match expenditure with revenue reduces the risk of cash squeezes.
- SaaS expenditure model is ideal for startups, which may have only one or two staff yet need access to the full functionality.
- Upgrades are easier to deploy, reducing the cost of the provider of maintaining multiple versions.
- Cloud offers a bigger customer base by including users who traditionally could not benefit from desktop applications.
- Self-service sales improves reach both by demographic and geographic means, at a fraction of the cost of the traditional sales staff led model.
- Mobility of staff between companies offers opportunity for the vendor, as cloud-based application ecosystems can move with staff.
- Cloud can enable new business models for SMEs partnering up delivering complementary business ecosystems, delivering a functional scale out that was previously reserved to large software companies.