Cloud computing: The future of small business IT

"The recession took away offices and didn't put them back," announces Parallels president Birger Steen as I walk into the Essex Room at the Marriott, Regent's Park. "The cloud lets business operate under a flexible model. You can take on consultants when you need them. Starbucks as a meeting room is now acceptable."

Of course, Steen is preaching to the choir. The room is packed with cloud evangelists. Along with Parallels' Steen, there is Daniel Germain, head of hosting at Outsourcery, Soren von Varchmin from e.pages and Joost Pisters, portfolio manager of webhosting & SaaS at Dutch telco KPN.

These technology evangelists are meeting to discuss what the cloud means to small business, and how to switch more SMEs on to virtualization.

Steen has one cast-iron reason. The Parallels president only recently returned from Silicon Valley where he witnessed firsthand the power of the cloud. "In Silicon Valley, if a company says it's building its own IT infrastructure, they don't get funding," he says. "Venture capitalists just aren't interested in seeing their money burnt through on servers and systems. Not when there are so many cheap and effective solutions already out there."

This is great news for Parallels, which provides part of the infrastructure for delivering cloud services. With this kind of validation from the venture community, what's halting the spread of the cloud?

"SMEs have two main concerns," says Seth Nesbitt, VP of marketing at Parallels. "Cost and ease of use. And in fact, cloud solutions are almost always the cheapest and you can be up and running instantly. People always talk about the security issue, but in fact that's not very high up on the list of priorities."

Germain agrees. "Exchange servers on the premises are often much less protected than data centres," he says. "The biggest thing to overcome is the 'feeling'. We call business owners who refuse to give up their IT in the basement 'server huggers' in the industry."

But what are the other benefits to small businesses? Flexibility, of course. Cloud services allow you to scale up or scale down as the need arises. There's less "pain", as Steen calls it: no faffing with servers and email and websites. This allows SMEs to concentrate instead on their core competencies.

Germain fleshes out this last point with an example. "Have you heard of Vibrant Media?" he asks. "It's an in-text advertising company. Vibrant hosts all its IT in the cloud. This means it can focus on infrastructure and delivery. It grew from 40 to 250 headcount in a couple of years and made $100m in revenue in 2009. The secret of its growth was that it didn't need to bother with the day-to-day running of its IT. Cloud services level the playing field."

And this theory applies to micro-businesses too. When he's not masterminding service delivery at KPN, Joost Pisters is an entrepreneur. "When I started my last business, I spent about $23 a month on a cloud 'business in a box' account. I started with nothing, and in a year had 1,300 customers with nobody else working for me. As I grew, I upgraded my plan. I didn't invest one euro. "

So the cloud model is great news for start-ups, it seems. "The cloud is accelerating formation of start-ups," says Steen. "Zero investment is necessary. It's a pay as you go model." A pay-as-you-go contract removes the need for up-front investment, which has traditionally been a real barrier to entry for start-ups.

Von Varchmin believes this will give rise to a new breed of entrepreneur.  "There will be many more transient businesses," he says. "Like pop-up shops, there will be pop up companies. These businesses will collaborate online for a single objective, then disband."

It's an extremely exciting vision. But, in order for the cloud to reach full penetration, many more mega data centres, much like the ones Google is building, will have to be built. The environmental impact of such growth is considerable. Especially as decommissioned servers are almost impossible to recycle.

But that is a topic for another roundtable.






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