This article originally appeared in the Jan. 2012 issue of Cloud Computing.

True or false: Small and medium-sized businesses (SMBs) can leverage cloud-based services to shed costs and IT complexity by implementing enterprise-class services at a price they can afford.

It’s true – cloud is not only meant for larger enterprises. But many businesses are stalling on implementing cloud-based services primarily due to the perceived difficulty involved, yet SMBs are moving faster toward the cloud than many big companies are, according to recent industry research.

Microsoft Corp.’s global “SMB Cloud Adoption Study 2011” investigated how cloud computing will impact small and midsize businesses (SMBs) in the next three years. According to the research, 39 percent of SMBs expect to be paying for one or more cloud services within three years, an increase of 34 percent from the current 29 percent. It also finds that the number of cloud services SMBs pay for will nearly double in most countries over the next three years.

Although cloud adoption among SMBs will be gradual, smaller businesses will continue to operate in a hybrid model with an increasing blend between off-premises and traditional on-premises infrastructure, for the foreseeable future, according to Marco Limena, vice president, Business Channels, Worldwide Communications Sector at Microsoft.

“As cloud computing becomes more ubiquitous and SMBs’ existing IT becomes outdated, adoption will grow rapidly,” Limena said. “Hosting service providers should consider the appropriate sales, delivery and support models to target larger SMB customers that are more likely to pay for cloud services.”

The 2011 study also indicates that in most countries, cloud service adoption is not limited to SMBs that see themselves as fast growers. The study showed little difference in adoption rates between SMBs that expect to grow in the next three years (42 percent) and those solely focused on profitability (40 percent).

Compare this to Gartner’s (News - Alert) findings that say SMBs are adopting the cloud at rates twice as fast as larger corporations, largely because they aren’t as risk-averse or don’t have to worry as much about integration with legacy systems.

Yet let’s consider the other nearly 60 percent of SMBs that do not have plans to pay for cloud services in the next three years. If you ask industry experts and analysts, many of those businesses are misguided based on ignorance by default because they lack IT resources, or the fact that cloud is still so “new” that it’s uncharted territory for most companies this size.

Cost-Savings, Automation…and The Right Vendor

There are many cloud services available to the SMB market today: cloud communications in the form of software-as-a-service, infrastructure-as-a-service, as well as cloud storage and cloud backup, among others.

Consider cloud communications as an example since this is a likely place SMBs would make their foray into cloud services. One of the biggest misperceptions about cloud-based services for small to medium-sized businesses is that cloud communications is not about rebranding old centralized voice services, according to Martin Northend, marketing director for OpenScape Cloud Services at Siemens Enterprise (News - Alert) Communications.

“The biggest misnomer about cloud communications for small to medium-sized businesses is IP Centrex. Voice is a key part of it, but cloud communications is about overlaying integrated Unified Communications (News - Alert) and collaboration capabilities that blend with your existing IT applications and reduce the cost of doing business. Cloud communications is about letting your people access these capabilities from anywhere on any device of their choosing,” says Northend.

For example, cloud communications can allow a sales rep to hold virtual meetings with their clients and prospects using voice conferencing or video, with the ability to create an informal desktop sharing session with as many people required. This allows the reps to make more customer calls with a higher level of intimacy than can be achieved with just a phone call, Northend explains.

But many small to medium-sized companies are under the impression that cloud is only for larger enterprises, according to Louis Hayner (News - Alert), executive vice president of WVT Communications Group, Alteva and USA Datanet.

“What we see is that both small businesses and large enterprises are seeing the benefits, such as scalability, disaster recovery, increased security, and delivering applications seamlessly from the cloud at a lower total cost of ownership,” says Hayner. “The most significant benefits are that the cloud delivers all the same capabilities normally reserved for Fortune 500 companies and brings that down to the small individual business.”

Northend notes some of the most significant benefits cloud services bring to SMBs, citing research recently commissioned by Siemens.

“The results debunked the myth that firms move to cloud communications just because it is cheaper or because they want to avoid capital expenditure,” he says. “While both of these are true statements for cloud communications, the key reasons we identified as to the most significant benefits that SMBs derive from cloud communications are because it is more flexible, it’s faster to implement, it’s feature rich and it enables SMBs to instantly support multiple locations.”

Given that cloud is actually often a more affordable option for SMB communications, ROI results and operational efficiencies are other considerations SMBs need to evaluate, in addition to the ability to leverage applications that were previously limited to large enterprises.

“The great news for SMBs is that the cloud enables them to get on demand access to the same enterprise class communications applications that have previously been the preserve of large organizations,” says Northend. “Key to this is the automation of provisioning because this really tips the economies of scale in favor of the SMB. In a sense the large organizations bore the costs of the sometimes painful lessons of working out how to deploy UCC applications, unified communications and collaboration, in the private cloud and all that knowledge has now been coded into automated provisioning systems, leveling the UCC deployment playing field for SMBs.”

The details of the economic argument for cloud communication adoption are quite complex – but the top line message is clear, he adds.

“Moving to cloud communications will have a positive ROI for almost all SMBs each and every year that they adopt,” says Northend. “Behind this statement is a complex set of maths that tracks the changes in call costs, user productivity improvements and operational investments that occur when an organization moves to the cloud.”

When it comes down to a successful cloud deployment, it’s all about picking the right vendor, according to Hayner.

“Where cloud communications and services are perceived as new, the best practices in selecting vendors have not changed. It’s important for SMBs to research and understand which vendors appeal to their industry and get good recommendations through third parties, such as analyst industry sources,” he says, adding that the current economy has actually enabled cloud communications and cloud services to take off.

“The key questions is, ‘what will happen to the cloud momentum when the economy changes?’ I personally believe that once the SMB community in particular adopts the cloud and sees the benefits, it’s only going to gain further market share,” says Hayner.

For those SMBs already engaged in a cloud deployment, many also fear the idea of having to switch cloud providers if they decide over time that a particular service isn’t right for their organization.

“Although technically there are ways of switching data between one cloud provider and another, few vendors have come up with formalized procedures or guarantees about how they will do it, which is a major concern if customers decide a given service is not right for them,” says Jamie Brenzel, CEO of cloud backup company KineticD.

Sustainability of the vendor is also a critical factor for SMBs – or any size organization, for that matter – in choosing a cloud services provider. Brenzel points out fly-by-night vendors like Backify that offered 512 GB for free and then closed shop overnight.

Backify, a LiveDrive-powered cloud backup and recovery vendor, announced free storage of up to 512 GB with an option to “upgrade” to “unlimited space.” But then soon after, LiveDrive announced that it was blacklisting Backify and withdrawing support because the firm was “a fly-by-night” operation and had not paid the fees due to the parent company, according to LiveDrive’s Andrew Michael.

“A situation like this gives any SMB reason to pause before deciding to engage in a cloud deployment,” says Brenzel. “Do your homework to ensure you are working with a legitimate vendor.”

Security Concerns for SMBs

Security remains one of the most significant concerns held by C-level executives globally (see “Data Security: Barrier or Bridge to the Cloud?,” page XX), and perhaps even more pervasive among smaller organizations since they often don’t have the IT resources found in larger companies.

But a properly implemented cloud communications solution is probably more secure than the on-premise systems that many SMBs currently use, maintains Northend.

“The key for SMBs is to satisfy themselves that the vendor they are considering operates from a TIA level 4 secure data center (this is the highest security level in the commercial sector), is implementing ISO 27001 for the back office IT management systems, that they have ‘hardened’ their servers and that they perform regular penetration testing,” advises Northend. “After that the single biggest risk to security is likely to be an SMB’s own users.”

Siemens Enterprise Communications provides customers with different deployment choices, allowing customers to choose between public cloud services and private cloud solutions.

“Our ‘public’ cloud services are provided from secure commercial data centers at the heart of the internet over multiple public IP and ISDN networks,” explains Northend, which include OpenScape Secure Cloud provides Voice, Unified Communications and Collaboration and Contact Center Services.

OpenScape Secure Cloud is an on-demand service with a modular “functionality packaging” concept and automated provisioning that allows customers to tailor the service to the needs of individual users.

“For customers that prefer to create their own private cloud solution we have packaged our core technology as OpenScape UC Server Express. Using their own data center organizations can have complete control over the deployment and functionality of their own private cloud solution,” adds Northend.

Just because an application runs in your office doesn’t mean it is secure, adds Brenzel, making the point that moving your data and applications to the cloud makes it no more vulnerable there than it is on premise.

“The question is what security measures and controls does the cloud service provider have in place. Is their data center SSAE 16 certified? Is their web portal daily scanned by a seal provider (e.g. McAfee (News - Alert))? How is the data encrypted? Is there a master key? Who has access to this master key? All these are questions technical evaluators should ask when evaluating a cloud service. Chances are that any serious cloud application is substantially more secure than any SMB could afford to implement for an internal solution.”

Security is always a concern when any new technology is introduced into any enterprise, Hayner continues.

“Security is only as good as the underlying infrastructure that is put into place. The cloud could be much more secure because the resources that the service provider has are much greater than the individual small business,” Hayner says. “However, it is critical that the small business takes all of the best practices in place whether it deploys a premise based solution or a cloud based solution. Best practices are best practices when security is taken into account.”

The normal risks that small businesses need to take into account when choosing any vendor apply. SMBs should be asking questions such as:

·         How is that vendor going to support them both today and long term? 
·         What is the vendor’s strategy for making its cloud more relevant? 
·         How long have they been in business? 
·         What is their long-term growth plan and product roadmap?  

“All of this needs to be taken into consideration when selecting a cloud vendor,” Hayner says.

The Future of Cloud for SMBs

Despite growth predictions by Gartner and Microsoft, among other, the market for cloud communications is still very much in what Northend calls the “embryonic stage.”

“In the next 12 months will see a lot of new entrants to the market, and because cloud is a hot topic there will be a degree of confusion as lots of different offerings get given the label ‘cloud’ in an effort to enhance their customer appeal,” predicts Northend.

He also sees cloud communications market offerings falling into a number of different categories, such as point services offering a specific type of application (i.e. web conferencing, video conferencing); integrated services offering a range of applications as an integrated package or packages; basic voice services or IP Centrex services sprinkled with a little cloud stardust to make them more appealing; and hosted/managed on-premise solutions.

“In time these offerings will come to be seen as an alternative service wrap for existing CPE offerings – rather than part of the cloud communications market,” he adds. “Looking beyond the 12-month timeframe we see the emergence of a demand for closer integration between cloud communications services and on site applications, and eventually as more of these applications move to the cloud, integration between different cloud services.

In line with current industry research, Hayner also predicts wider-spread cloud adoption among SMBs.

“We see cloud adoption increasing. However, as that adoption continues, so does confusion. One of the major challenges in the cloud, like any new technology, is education as well as standardization. What does the cloud mean and how can it best impact my business?