Transforming Small Business in the Cloud

Cloud services are changing the very essence of what it means to be a small business today, according to a new report from Inuit and Emergent Research.

“We’re seeing a set of major forces converging and leading to change,” said Steve King, partner and principal researcher at Emergent Research during a teleconference. These forces include shifts in socioeconomics, changing customer needs and behavior, new platforms and ecosystems like the sharing economy.

And to that list you can add technologies like cloud computing that let small businesses better adapt and compete. “When you see trends converge you see high levels of change,” added King.

Feeling at Home in the Cloud

To better navigate these and other changes in the marketplace, small businesses will flock to cloud computing. “The future of the small business is in the cloud,” said King.

This year, just 37 percent of small businesses (those with fewer than 50 employees) have adapted to the cloud, estimates Emergent Research. King’s group forecasts that by 2020, however, “almost 8 in 10 small businesses [78 percent] will be comfortable and confident in the cloud.”

The transition is already underway, reported Intuit’s Terry Hicks, vice president of global product strategy and management for QuickBooks. A quick examination of his company’s customer base indicates that the industry is not just “starting to see more and more small businesses shift to the cloud,” but that it has likely already reached a tipping point.

“Now, for the first time this year, [we are] acquiring more customers on the cloud versus the desktop product,” he said, referring to QuickBooks Online and its on-premises counterpart. At last count, Inuit’s cloud serves 624,000 customers, he said.

And it’s not just the U.S. that’s fueling demand. Hicks described increased cloud adoption by small businesses as “a worldwide trend.”

Small in Headcount Only

Today’s small businesses are no longer “baby” versions of large enterprises, thanks, in large part to the cloud.

“The cloud really does democratize information technology,” said King. It gives “small businesses capabilities they’ve never seen before,” fundamentally changing how they operate due to their newfound access to enterprise-grade tools at non-enterprise prices.

Cloud services also let businesses adopt a variable-cost structure for their IT operations and avoid ongoing fixed costs. In the past, small businesses were forced to fork over loads of money for servers and software licenses upfront and hope that the investment worked out.

Now, with usage-based and per-user-per-month pricing models—common among cloud providers—organizations can pay as they grow or rein in IT costs when demand slacks or headcounts shrink. Bottom line, the cloud “reduces small business risks,” said King, which can have a “huge impact on small businesses.”

These capabilities are helping to lay the groundwork for a new economy. Entrepreneurs can now start and scale their businesses easier, faster and without breaking the bank. Once up and running, small businesses can provide customer service and support that rivals bigger firms. Finally, the cloud provides a foundation for participatory networks and ecosystems where nobody gets banished to the kid’s table.

New Economy, New Players

The cloud lets entrepreneurs tear up the small business rule book and find success on their own terms. King categorizes these entrepreneurs into four distinct groups.

“Plug-in players” leverage cloud services to hook into the platforms and services of other firms. This lets them “easily plug into new business opportunities,” said King. For example, firms like Airbnb and Uber allow property owners and drivers to participate in the sharing economy and capitalize on the time when they’re not using their homes and vehicles, respectively.

“Portfolioists” wear many hats in their professional careers. “We think of them having a portfolio of jobs, some of these are passion-based and some of these are needs-based,” said King. Whether making ends meet or capitalizing on their varied talents or interests—he used the example of a hairdresser, SEO consultant, and bartender he met on the road—the cloud “has allowed these people to do these things efficiently [and] to organize their lives,” he said.

“Hives” use the cloud’s inherent flexibility to pool resources to meet business objectives. King likens hives to the “Hollywood model,” in which movies get made by forming a team, creating a product and ultimately disbanding. His own business subscribes to that model. “Emergent Research is very much a hive organization,” he said.

Finally, there are the “head-to-headers.” These small businesses compete directly with big companies and “serve markets that have been traditionally closed to them,” said King.

In recent years, he has noticed a surge in the growth of “small pharma.” Instead of setting up labs, researchers are running their simulations on the cloud at much lower cost. It’s not just drug makers feeling the effects, said King. All industries are feeling the disruptive effects of cloud-empowered entrepreneurs.

Pedro Hernandez is a contributing editor at Small Business Computing. Follow him on Twitter @ecoINSITE.

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