Costs and benefits of moving to the cloud

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Is this the right place for your business?

Spending on cloud computing is on the increase, not least in the small to midsized business sector where it topped $45bn globally in 2012 and is predicted to rise to $95bn by 2015, according to a study by cloud hosting company Parallels.

The technology can benefit many SMBs, shaving costs and increasing efficiency, but it is not suitable for all. Cloud is like any piece of IT which has to fit the particular business to work, says David Bradshaw, Research Manager, European SaaS and Cloud Services at analyst firm IDC.

"Properly used, cloud takes away hassle," Bradshaw adds. "You have no software updates and you don't have to make sure the server is working. There are lots of hidden costs to internal IT that SMBs often don't consider."

Cutting costs

Cloud can be cheaper than existing IT - but not always. Chris Pallett, Managing Director at Bespoke Computing, warns: "The two biggest mistakes that an SMB can make are to not look at total cost of ownership over the lifetime of what they are doing. People are being drawn into cloud without looking at the cost over the long term."

Bradshaw agrees: "If you are paying for a subscription your outgoings will be more in some cases."

But SMBs can obtain benefits from the cloud, says Rob Keenan, Head of UK Portfolio Management, DRM Marketing, Siemens Enterprise Communications.

"It can be expensive per month for cloud but look at your internal costs," he says. "A lot of the expense is people and even the cost of running the servers. Cloud has a cost benefit over the long term."

Used correctly, cloud can provide SMBs with capabilities that they would not otherwise afford.

Bradshaw says: "SMBs may find they want to step up what they are doing and look at different types of cloud. Are there apps out there that are specific to what you do? It allows smaller players to address areas that they might not have been able to before."

Cloud services also provide an opportunity for SMBs to get powerful functionality for a low or free price, agrees Andy Chou, Co-founder and CTO at development testing company Coverity.

He adds: "One of the advantages of cloud based systems is that updates can be rolled out very quickly - within hours or even minutes in some cases. This rapid turnaround helps cloud services adapt quickly when they see issues, and you don't need to do anything manual to upgrade at your end."

Increased mobility

Mobility is an additional benefit, especially for firms that already have people in the field. "With cloud you can pick and choose the service and usually it is easy to deploy wherever you are," Keenan says. "Remote workers can access the cloud anywhere."

At the same time, with new 4G networks the ability to work in the cloud increases, experts agree. "People can work wherever they are, they don't need a big laptop or Wi-Fi connection," he adds.

Many businesses have been slow to adopt cloud because of fears around security. However, experts say cloud can potentially be more secure, as most reputable vendors will guarantee the data's integrity.

SMBs must first look at their own IT security, urges Bradshaw: "A lot of the security fears is hyperbole from cloud critics. SMBs should look at vendors' security - you don't have any guarantees. But how good is your own security? Can someone else do a better job? In some cases yes."

Chou agrees: "The reality is that cloud based systems are not necessarily less secure. Because cloud services can be updated on the fly, known security issues can be fixed rapidly. In addition, major cloud service providers constantly monitor their systems and have strong notification policies when there's a breach."

"A lot of SMBs believe they are secure but they are not," agrees Keenan, adding: "You can't live in an ivory tower. You need to have your wits about you and understand security; you need to follow good practice."

Shop around

Any SMB looking at moving applications to cloud should ideally go to a consultant first. Pallett says: "People aren't always getting professional advice. SMBs can go to any decent IT companies to get advice but they do need to watch for credibility.

"You have to weigh it up properly and go to a good trusted company."

It's also a good idea to shop around, as consultants are often paid by cloud vendors to push their services.

"You should ask the consultant what the revenue model is," advises Bradshaw. "Ask, do you get a referral fee from vendors? They might get a fee from several vendors which is obviously better."

There is also the ability to try before you buy, a major benefit for those cautious about adopting the technology. Keenan advises: "It is a good idea for SMBs to look at a mixed strategy. Keep some applications on-premise and others in the cloud."

Cloud technology is growing and when implemented correctly its capabilities can be far reaching for SMBs. Ultimately, businesses must assess their individual needs, rather than simply following a trend.

Bradshaw concludes: "If you are doing things with on-premise software, is there any reason to move? But if there are constraints, then SMBs should consider cloud."