Cloud: The Great Equalizer for Small and Midsize Businesses

Fifteen years ago I joined an Internet startup that had raised $8 million in investment capital and needed every penny for the infrastructure investments it had to make. There were two big servers to deploy, an Exchange mail server, about $500 worth of software for each desktop and a content management system that cost nearly $1 million when fully configured.

Today, we’d do it all in the cloud for a fraction of the cost.

The cloud has become a no-brainer for startups on a shoestring, but the message apparently hasn’t trickled down to the majority of small and midsize business (SMB) owners. The 2014 IDG Enterprise Cloud Adoption survey documents a surprisingly low adoption level among SMBs for infrastructure as a service (IaaS) and platform as a service (PaaS) compared to enterprises. Just 43% of SMBs said they are using or plan to adopt IaaS within the next 12 months, compared to 59% of enterprises. The percentage of SMBs that have no plans to adopt IaaS outnumber enterprises by a 3-to-2 margin.

The findings are consistent with a similar survey of 500 U.S. small business owners commissioned by Microsoft last year. It revealed that 70% don’t use any cloud solutions, even though the vast majority believe technology is important to business success.

Why the disconnect? I think the reason lies in another data point from the IDG study. It showed that small businesses are much less likely than enterprises to see the cloud as an opportunity to improve IT-business collaboration, develop new IT skills or reduce technology spending. Basically, small businesses don’t see the upside that their larger counterparts do.

Ironically, though, SMBs are the biggest potential winners in the cloud. These companies have historically gotten the short end of the technology stick. Full-featured applications in areas like enterprise resource planning (ERP), human resources and customer relationship management (CRM) were limited to the enterprise customers that could afford to pay for them. Everyone else had to use hobbled “small business editions.” That’s fine for many companies, but what about those business owners that have the expertise to use rich analytics and reporting but can’t swallow the cost?

Cloud has leveled that playing field. In the infrastructure arena, small businesses can now get the same access to the latest server technology, speedy flash storage and development tools as their enterprise counterparts. In the software as a service (SaaS) domain, SMBs are even bigger winners. The full functionality of practically every enterprise-grade application is now available to anyone with a credit card.

Nowhere is the leveling more apparent than in big data and analytics, where the massive scale and storage requirements that were once the sole domain of the Fortune 1000 are now available to anyone. What’s more, specialized industry data that once could be purchased only by big companies are increasingly available by the drink as well. In fact, I would argue that the cloud has created an unnatural advantage for small businesses. They’ve always had the agility and market knowledge to move faster than big corporations. Now they have the tools as well.

“We’re seeing a democratization of the ability to create competitive advantage with IT,” said Frank Gens, senior vice president and chief analyst at International Data Corp., in a CIO Executive Viewpoint. “We’re seeing companies of all sizes—not just the big guys—being able to digitize every bit of value they create and then bring that value to the marketplace.”

Executives at enterprise companies should hope that small businesses continue to remain in the dark about the benefits of cloud. Once they catch on, they’ll be a potent force to contend with.