The Wall Street Journal
by EMILY MALTBY
December 29, 2010
A growing number of small-business owners are expected to try cloud computing services next year, hoping to trim costs and stay up and running if disaster strikes.
Cloud computing refers to any service that operates over an Internet connection, allowing immediate access from any computer or mobile device with Web access. Business owners can access software or store information-such as customer contacts, accounting data and presentations-and leave the technical maintenance to the cloud provider.
As of April 2010, only about 7% of small-business owners were using cloud services, but that number is expected to grow to more than 10% by mid-2011, according to a survey by technology-research firm IDC. "Moving the trend forward in the smallest companies is the affordability and flexibility," says Raymond Boggs, vice president of small and mid-sized business research at IDC.
Software that is accessed through the cloud is often free or pay-per-use-a more affordable model than paying big, upfront licensing fees. Half of small firms that use "the cloud" say it has improved their bottom line, according to a survey this fall by Microsoft Corp., which provides cloud services.
A number of surveys show that some business owners are hesitant to try cloud computing because they don't want to stray from familiar systems or invest in new ones. Some owners that have made the switch, however, say it has been a boon to their cash-strapped firms.
Garey Willbanks, owner of Boiler Management Ltd. in Houston, says he pays about $600 a month to store information in the cloud. He estimates that is less than a tenth of what he would pay if he hired technology personnel to run an in-house storage server.
Mr. Willbanks made the switch to cloud computing after Hurricane Ike cut power to his area in late 2008. At the time, he had in-house servers to channel and store vital information about the water-heating systems his firm had installed. Without access to the servers, his business was at a standstill. "We had no connectivity in our office for 24 hours," he says. "I said, 'We can't be this vulnerable.' "
Mr. Willbanks hired Rackspace Hosting Inc., a San Antonio cloud provider, which assumed responsibility for the storage of Boiler Management's information-from the heater monitoring to email contacts. Since then, Mr. Willbanks hasn't needed anyone to trouble-shoot server issues, and he is connected all the time, accessing information from his BlackBerry, iPad, or laptop.
Some owners, like Mr. Willbanks, use the cloud simply to back up information. Others use it to access software programs through the Web, known as "software as a service," rather than from a local computer.
Cloud services often make expensive software affordable to small firms, says Rob Enderle, technology consultant and founder of Enderle Group Inc., in San Jose, Calif.
In June, Michael Tracy, a private law practitioner in Irvine, Calif., decided to try Nextpoint, a cloud-based program for attorneys. He had previously spent $10,000 to $12,000 a year licensing software that would organize materials before a trial. The problem was he needed it just a few times a year. By contrast, Mr. Tracy pays for Nextpoint only when he uses it, and he anticipates spending just $4,000 to $6,000 a year on the service.
The actual savings of using the cloud will vary, says Mr. Enderle. Cloud software is inexpensive upfront and can cut costs by streamlining processes. For example, accounting software helps business owners manage finances. But when that software is in the cloud, the business owner's accountant may also access it. By seeing those finances in real time, the accountant can trouble-shoot cash-flow issues before they arise and can more easily file tax returns.
"If you already have tight control over your company, your expenses may drop 10% to 20%," says Mr. Enderle. Companies that use cloud services to improve inefficiencies might see an even greater return, he says.
Despite the savings, there are risks. Security breaches, for instance, can happen if the cloud provider isn't reliable. "If they make money directly from you, then they will want to secure [your information]," Mr. Enderle says. "If they make it through advertising," they may be more likely to sell the information to advertisers, he says.
And while in-house software can often be customized, cloud software often can't. Mr. Tracy says that when he uses Nextpoint, "some of the documents are case-specific," and he can't use a general software program like Nextpoint to organize and search them.
Others fear that they might lose their information, or have to spend a lot of time transferring data, if they want out. Kirby Allison, founder of Hanger Project LLC, a garment-hanger company in Dallas, has been using a cloud-based marketing software, Campaigner, for two years. "We'd lose access to so much information if we stop using Campaigner," says Mr. Allison, referring to historical data, such as reams of marketing analytics, which he says would require "several days' worth of work" to transfer to another system.
"As with any information you gather over time, if you are relying on the provider to store it then it can be very painful to move it over," says Melanie Attia, project marketing manager at Campaigner. "So make sure it's the right provider and that you're ready to be in it for the long haul."
Mr. Allison plans to continue using Campaigner, as he estimates that the $25 a month he pays to send email promotions to thousands of customers is a fraction of what he'd pay a marketing firm. "It really isn't much money at all," he says. "And it works great."
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