Benefits of Cloud Computing for SMMEs':

A view from the ITWEB executive forum held in Johannesburg

Certainly, cloud computing offers many attractive benefits to enterprises. The cloud model moves IT infrastructure from an upfront capital expense to an operational one. Companies can use the cloud for large batch-oriented tasks — those involving large spikes in requirements for processing power — that otherwise would be out of reach or require huge investment.

Cloud computing shifts the IT burden and associated risks to the vendor, who can spread variations over many customers. Organizations can use the cloud to rapidly scale up or down; they can also buy or release IT resources as needed on a pay-as-you-go model.

In 2013 a South African research house Ovum conducted a study on the key benefits of cloud computing amongst South African SMEs'.

The study revealed the following benefits about cloud:

• Greater flexibility: A major selling point for cloud services has been their flexibility and cost-effectiveness versus more traditional ICT approaches.

• Cost reduction: Moving services to the cloud is akin to outsourcing and reduces capex. Just as it does on a global basis, outsourcing also allows South African enterprises to increase redundancy.

• Power cost and reliability: A growing concern among South African enterprises has been the growing unreliability and high cost of power from the national provider Eskom. Companies running their own Data Center have reported that as much as 40% of the overall cost of running the service goes towards power provisioning. This high cost and unreliability of power has prompted more businesses to consider cloud services as an alternative.

• Skills shortage: Cloud services also allow South African enterprises to quickly close the skills shortage gap, as services become centralized and key support functions are outsourced offshore.

• Mobile broadband: The massive growth of mobile broadband in South Africa, where smartphones are expected to out-ship feature phones by the end of 2013, has prompted a rapid increase in the uptake and use of mobile content, with users expected to look to public cloud solutions for storage of multimedia content and processing power that does not reside on the device. Thus enterprises in South Africa are expected to drive the uptake of cloud services as enterprise mobility begins to gain traction.

• Big Data: Data growth and the need to manage large amounts of data, such as transactions records and multimedia, are also driving the uptake of cloud services, with the cost of storage decreasing rapidly. Often there is a misconception among enterprises that data storage and hosting are synonymous with cloud services.

• Lower barrier to entry: The annuity-based pricing and the opex model make it possible for more companies to afford cloud services that they may not have the resources to provide themselves. Many local service providers cite this as the reason the SME sector is leading the market in terms of cloud uptake: cloud services allow SMEs to cut their costs and gain an immediate competitive advantage

In April 2014, I was fortunate to attend an ITWEB executive forum in partnership with Microsoft held in Monte Casino Johannesburg.  The topic of discussion was looking at the economic impact of cloud computing on SMMEs' in South Africa, with special emphasis on the benefits of cloud. The forum highlighted various benefits and challenges making reference to academic literature.  The forum refered to Madisha and Van Belle who reported on research into software-as-a-service (SaaS) readiness and adoption in South Africa (Madisha & Van Belle, 2009), with the intention of informing prospective SaaS adopters about the challenges of adoption and the mitigation thereof. Madisha and Van Belle carried out an extensive literature review and arrived at the following as the characteristic benefits and challenges associated with SaaS (which we find generally apply to the broader field of cloud computing):

Osterman Research published a further white paper in November 2012 (Osterman Research, 2012) which, in our opinion, is an example of how SMME decision-makers can be confused by the proliferation of “data” available on the topic of cloud computing and also demonstrates the tendentiousness of vendor-driven research. 

The paper claims that the three primary benefits of the cloud for small businesses are:

• the cloud can significantly reduce the costs of providing email, voice, fax, real-time and other forms of communication compared to managing these services using internally deployed and managed infrastructure.

• the cloud can improve communications by eliminating the impact of electricity or Internet outages, and it can minimize the impact of slow Internet connections.

• the cloud enables the deployment of unified communications systems and the improved business efficiency that accompany the use of this technology.

Another publication in early 2012 was The Open Group’s “Maximising the value of cloud for small-medium enterprises” (Isom, et al., 2012) – a guide aimed at executives in SMEs. The Open Group Guide explains the principles and elements of cloud computing and suggests that SMEs can benefit from adopting cloud computing in the following ways:

• Quick provisioning of IT services supports rapid time-to-market, thus improving competitiveness;
• The shift from Capex to Opex and scaling of cloud services according to need reduces costs and improves cash flow;
• Cloud computing enables mobility of the workforce

From the literature reviewed above, there is general acceptance among the authors that cloud computing does offer benefits for SME’s, offering the potential for a cost-effective access to the ICT tools that enable businesses to be more efficient, more productive and more competitive. However it is also worth highlighting some of the notable challenges around this technology.

Summing up , following are the my point of view after attending ITWEB forum:

• What are the views and perceptions of the economic value of cloud services by SMME owners and managers? 

SMME owners and managers who understand the cloud computing concept see the potential value, and those who have made the move have generally experienced the actual value of the technology. The primary hindrance to wider adoption seems to be the gap between the vendors’ terminology and the users’ view. Many SMMEs are already using cloud computing in one form or another without realising it.

• What has been the economic impact of the use and provision of cloud services by South African SMMEs?

The economic impact to be largely felt in the simplification of IT issues for SMMEs. Correctly implemented and applied, cloud computing allows the small business owner or manager to focus on their production and their clients, rather than on the technology that supports their administration. Mobility of the workforce and speed of response are enhanced and the risks of loss from systems failure significantly reduced.

• What are the experiences of SMMEs in South Africa with issues related to privacy and security? 

Although there are serious concerns about the potential damage that can result from failure to protect important data, these concerns are more driven by the publicity that surrounds them than the actual experience of SMMEs. For the most part, SMME decision-makers will expect the service providers to minimize any risk of failure in this respect.

• What are the policy implications of SMME experiences, views and concerns with cloud computing so far?

With the exception of the bandwidth issue dealt with in the next question, there are very few policy implications related to cloud computing. The need to comply with the various laws that govern companies, accounting, tax, communications and employment exists, regardless of cloud or any other computing environment. In the minority of cases where (for example) data may not be stored outside of the country’s borders, the enterprise can elect to use a private cloud or local service provider.