Cloud

Do small businesses make more money with the cloud? New study says yes

A new study by Exact and Pb7 Research suggests that small businesses that embrace the cloud can up their efficiency and profitability. Here are key takeaways.

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Image: iStockphoto/BernardaSv

If you've been avoiding the cloud for your small business, you could be leaving money on the table.

New findings from business software company Exact and Pb7 Research suggest that small businesses that have made the move to the cloud doubled their profits and achieved 25% additional revenue growth compared to their cloudless contemporaries.

The findings were published on August 19, 2015 in the Small Business Cloud Barometer 2015 report. A total of 750 interviews were conducted with small businesses in the US through a web-based panel between February and March 2015. All of the participating companies had fewer than 50 employees.

Compared to separate data collected by Exact on European companies, small businesses in the US were the heaviest cloud users, with 51% of respondents claiming to use at least some kind of cloud software in their business. Nearly 30% of US small businesses use three or more cloud applications to get work done. The UK had the second strongest cloud use among small businesses with 47% using cloud software and 27% using at least three cloud applications, if not more.

When asked why they chose to implement cloud software, the responses were varied, but the top five were listed as follows:

  1. Security - 32%
  2. Lower IT costs - 26%
  3. Low maintenance requirements/no systems - 23%
  4. Easy mobile access - 23%
  5. More productivity/efficiency for end-users - 21%

When it comes to security taking the top spot, it's not something that Kae Williams, general manager of Exact, was expecting to see.

"That surprised me a little bit, honestly," Williams said. "That's something where, when we talk to some customers, that's a concern."

However, Williams said, it was a pleasant surprise that security was the top reason. She said security is one of the big conversations around cloud right now, and she believes it is often painted as not secure.

While those may be the top reasons that the surveyed businesses made the switch to the cloud, the actual benefits experienced by the organizations were slightly different. Benefits were ranked from 1-5, with "1" indicating no benefit to the organization and "5" indicating a major improvement. The top five benefits experienced with their average responses were as follows:

  1. Easy to use - 4.0
  2. It's easier to find information - 4.0
  3. Easier to share information - 3.9
  4. Increased productivity - 3.9
  5. Easier to add/remove users - 3.8

Industry challenges

The report went in-depth on cloud usage patterns relative to three industries: small wholesale distributors, small manufacturers, and small accountants.

For small wholesalers, maintaining proper delivery times is a major challenge. According to the research, 12% of wholesalers reported regularly dealing with suppliers not having the proper levels of inventory, and almost half of the wholesalers said that inventory issues had led to late deliveries.

Of the wholesaler respondents, a mere 17% receive alerts for low stock, and only 28% could view stock levels and delivery times. Cloud software could help give wholesalers the insights they need into the data that drives their business. Additionally, IoT and the connected workplace could returns dividends on its investments in terms of tracking deliveries and leveraging distribution data.

Manufacturers who responded to the survey listed cost reduction as their main challenge in their business, with 53% putting it at the forefront. Additionally, they listed finding new customers as their second biggest challenge and cost control as the third. The reasons that manufacturers listed for choosing cloud software were to lower IT costs, improve security, and enhance productivity and efficiency for end users.

Much like wholesalers, cloud solutions give manufacturers better insight into key data points within their workflow. Additionally, cloud technology has enabled new levels of automation across the manufacturing industry, and IoT is poised to improve manufacturing processes as well.

Finally, the top challenge faced by the small accounting firms was cost control. For accountants who are moving to the cloud, the top reasons they gave were lowering IT costs, improving security, and reducing technology system maintenance.

The cloud gives these accountants similar insights into business data, but it also helps to make some of the standard small business processes more efficient, freeing up time for the employees to take on more clients or be more productive.

Overall, Williams said, it's efficiency brought about by a full cloud system that is bringing greater profitability for small businesses. When companies look beyond single point systems, such as ERPs or CRMs, they are able to make the whole business more productive, she said.

While half of the surveyed businesses may be using cloud software, that still leaves a remaining half that aren't engaging it. Some of that has to do with lack of need to replace existing solutions, Williams said, but another reason could be the same one that draws small businesses to the cloud.

"It's almost counter to what the survey said, but I think there's still a number of people who view the cloud as not secure, or they're unfamiliar with it," Williams said.

Forrester's angle

Similar research conducted by Forrester Research in its Demand Insights: The SMB Software Market 2015 report published on April 7, 2015 shows a slightly different angle on cloud adoption by focusing on SMBs as a whole, not just small businesses.

The Forrester report suggests that SMBs have actually been slow to adopt cloud software, but very small businesses (VSBs), or business with fewer than 20 employees, have adopted cloud far more quickly. Because these VSBs typically don't carry the weight of years of legacy systems, they can more easily adopt and deploy cloud systems.

According to the Forrester report, VSBs cloud adoption rates are similar to those seen in enterprise companies. In making new technology investments, the Forrester report said, many VSBs go straight to the cloud, with 44% of VSBs deploying SaaS collaboration software, compared to 38% of large enterprises implementing a collaboration SaaS solution or using SaaS to complement an existing, on-premises collaboration tool.

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About

Conner Forrest is News Editor for TechRepublic. He covers startups and enterprise technology and is passionate about the convergence of tech and culture.

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