The cloud computing model represents an important change in how information technology works. Just as the major changes that happened first with the client-server application model and then with the Internet, the drivers of this new revolution are accessibility and cost – how can computing infrastructure, platforms and applications have more widespread usage and how can they be made cheaper. In fact, price and accessibility go hand-in-hand: the cheaper technology becomes, the more people will use it.

These two drivers are especially valuable for small businesses. By making technology cheaper, the cloud allows more small businesses to adopt IT solutions – from simple e-mail and applications to more complex projects – leading to leaner and more profitable companies. The cloud has also brought a proliferation of service providers, and this gives businesses more options when choosing their vendors.

The advantages of pay-as-you-go for SMBs

The cloud computing model is furthering the shift from products to services that started in IT some years ago. The end-product of this is the pay-as-you-go model for everything, from infrastructure and servers to software applications. In this model, the user only has to pay for the resources used over the course of a given period, such as a month. This means, for instance, that a small business can pay for storage as their storage needs grow, instead of having to buy storage based on growth projections. The same thing goes for processing power, server instances and even application licenses.

This is important for small businesses for several different reasons. First, for a lot of them, making any kind of projections about how their IT needs will grow over time is usually very hard. Even large companies have trouble managing their operations, as evidenced by Wal-Mart’s recent troubles. For smaller companies, predicting future needs is even more difficult. A sudden growth in popularity due to word-of-mouth advertising may bring so many visitors to a small business’s web site that it becomes unresponsive, generating frustration amongst potential customers and having a negative result, instead of a positive one. With the elastic, pay-as-you-go model of the cloud, any small business can have access to easily (or even automatically) scalable computing platforms, reducing the risks of downtime and the need for accurate projections.

Another major advantage of the pay-as-you-go model is that it transforms expenditures in IT from investments into expenses. This means that companies no longer have to buy a new server. They can, instead, pay for a cloud server instance on a monthly basis. This greatly reduces the costs of going into business. As an added benefit, some of the major cloud providers have “free tiers”, focused on small usage scenarios, which means that recently started businesses can have access to top-level providers for free.

Finally, this model solves a major problem of small businesses: the fact that a lot of them fail. If a small company makes an investment in software and hardware and then goes out of business for any reason, it has no way of recovering that investment, since there isn’t much of a market for used servers, desktops or software licenses. By adopting cloud solutions, however, a company can shut down its operations and cancel software licenses at the click of a button. This means, in addition to having to make no investment in the first place, no leftovers if the company goes under.

A deluge of data

An important side effect of the shift to the cloud is the proliferation of data that has become available for anyone to access. Not only are cloud services massive producers of data, usually about their availability, uptime and so on, but more and more services are opening up their data for consumption by others. It is possible today for even small companies to leverage data from several sources, such as Facebook and Google analytics, to improve their offerings and better reach their customers.

Although information is the lifeblood of any business, big or small, Big Data can have a much larger impact for small businesses and startups. By making use of this data, companies can better segment their customers and create more focused marketing campaigns, improving the return on investments. For companies with a more limited marketing budget, having a better response rate to advertisement can make all the difference in the world.

If companies had to depend on traditional data analysis tools to utilize the generated data, costs would be untenable. Fortunately, there are also cloud tools and services that allow anyone to process, make sense of, and extract knowledge from Big Data. With these services, small companies can improve their processes and even have better profits over time.

If I were opening a small business today…

I would definitely jump on the cloud bandwagon. The simple reduction in costs that can be achieved by using cloud-based solutions can make a huge difference in the budget of a new company. If we add this to the fact that by using cloud solutions companies are able to start operating much more quickly, and add it to the possibility to scale operations as needed, it becomes obvious that cloud is the way to go.

The cares that must be taken when hiring cloud services are the same that would need to be taken with any regular IT provider: make sure you need what you are buying, that you are getting a good price, and that your expectations match the service level offered. Information about different providers is only a Google search away, so do some research. In terms of costs vs. benefits, however, there is no other way to go.