Why are smaller companies late to the cloud?

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A recent survey shows that SMEs are slow to adopt the cloud; only 28% of the 400 SME respondents have implemented cloud solutions for their businesses.

These data roughly track with the findings from a previous Oxford Economics survey of SMEs; as you can see in the chart below, we found that 35% of SMEs worldwide were using the cloud last year, which will increase to 48% by 2016.

SMECloud

Yet SMEs could reap a lot of potential benefits from moving to the cloud. Our survey found that technology is key to a SME’s business transformation; cloud’s scalability and low cost allow companies to roll out social, mobile, and analytic innovations more efficiently, all of which drive customer engagement and improve product and service development.

Our survey found that the top barriers for cloud adoption were security concerns, closely followed by a lack of understanding of the benefits of the cloud, and a lack of skills.

SecuritySME

Our latest cloud survey—the core of the Path to Value program—shows that some of these issues are still hindering cloud adoption. More details on that soon.

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SMEs value agility over cost-cutting in the cloud

Last Monday, we brought up the cloud’s appeal to small businesses for the scalability and flexibility it provides. While cost efficiency is a natural concern for decision-makers, new research from Techaisle shows that SMEs are less focused on cost-cutting than in previous years. Instead, businesses are more focused on the opportunity to reach new markets and customers and developing new capabilities. Increased interest in business agility and performance doesn’t mean companies are ignoring budgets—process costs remain a top concern, especially among mid-market businesses with 100–999 employees.

We’ll be digging deeper into companies’ motivations for migrating to the cloud, as well as the related challenges, in our survey and series of executive interviews—stay tuned for results.

SMEs and cloud migration

When you stop to think about it, the most enthusiastic adopters of cloud computing and the easiest companies to sell it to should be small and medium-sized enterprises.

We agree with this analysis by Ireland-based technology journalist Billy MacInnes: The cloud should be especially appealing to SMEs. “Larger organisations have substantial legacy infrastructure and bespoke systems they are unwilling or unable to quickly move into the cloud, but many smaller organisations have no such entrenched, complex IT to protect and preserve. By rights, they should be far more open to the concept of cloud computing.”

And once these companies have made successful early forays into the cloud, they can use it to support other key technologies, including mobile and analytics, in a scalable and affordable fashion.

But as we saw in a recent global research project on SMEs, many smaller firms are slower to adopt cloud computing than one might expect. A couple big hurdles: Lack of understanding of the benefits, and trouble determining ROI.  Meanwhile, willingness to relinquish control of IT systems turns out to be a minor issue.

Note that the earlier research was global in scope and focused on a broader set of issues than the current, US-oriented program we are chronicling here. Still, it sets up some of the key questions we’ll be pursuing over the next few months.