Cloud brings new tech to SMBs, along with pitfalls

For small and midsize businesses (SMBs) with budget constraints and limited skills, cloud-based services provide a cost-effective means to access new technology that would otherwise be unattainable.

But, Chris Morris, director of Asia-Pacific services at IDC, noted that SMBs should look at the feasibility of what is being offered and whether this suits their business needs.

"There are some attractive cloud services available out there, but unless you do a good match, you're probably going to end up not getting what you want," Morris said in a phone interview with ZDNet Asia.

"Some cloud services can be quite limited because they standardize around a limited area of functionality... It always pays to check that what you buy meets your requirements."

Another thing is the viability of the supplier, said Morris. "The entry barriers to the cloud market are pretty low and there will be a lot of startups moving into the market. You might contract services from them and, within a couple of years, they would have disappeared."

Michael Barnes, vice president of software and Asia-Pacific research at Springboard Research, suggested that SMBs define service level agreements (SLAs) with cloud-based providers so that performance and reliability match the agreed service levels.

Alvin Lim, Microsoft's senior regional director of hosting and software services Asia, concurred, noting that SLAs are critical in any online service-based delivery, and typical terms include backup and recovery.

"SMBs should ensure that SLAs committed by service providers are clearly documented in service agreements and meet their needs," Lim said in an e-mail interview. "In addition, when SMBs choose to have specialized cloud applications, they should also consider how these specialized applications will be delivered to them as a service."

Barnes said pricing is another major issue to consider. Similar to software-as-a-service (SaaS), cloud-based offerings are typically subscription-based and pricing will vary based on the number of users and the nature of usage, he said.

Lim noted that if the service provider offers subscription on a utility-based model, SMBs do not have to buy software licenses but can adjust the number of users to access each application as needed.

"This is the promise of utility-based computing, a concept that lets SMBs' software, storage and processing reside on a server farm somewhere out in the Internet. Because the applications are delivered over the Internet, they can be accessed from anywhere such as in the office, a home office or using a Netbook," he said.

However, Morris said the initial pricing of the SaaS model "always looks attractive" because the SMB is paying for only the amount of the service it consumes, either on a per-month or per-user basis. "But, unless you really understand the pricing model, you can get tripped up later by hidden charges for upgrading," he warned.

Over time, when all additional charges are included, SMBs may end up paying more for the cloud-based service than installing and managing the application in-house, he said.

Alvin Kok, SingTel's chief of Alatum, said SMBs also have to consider factors such as corporate and government regulations, security and flexibility, before choosing the right platform and applications for business. A joint partnership between SingTel and Hewlett-Packard, Alatum is Singapore's first commercial grid computing service.

Laws preventing the sharing of data across national borders could hamper the benefits of cloud computing, Kok said. SMBs should also consider flexible and scalable cloud offerings to meet their growing demands.

Morris suggested that SMBs take a "one-stop shop" approach by getting all the applications it needs from a single provider, because integrating cloud services from different vendors will prove challenging.

Barnes said SMBs should consider a cloud-based approach for services that are already well-established in the region. He added that customer relationship management (CRM) is "an obvious starting point", given the relative maturity of SaaS-based CRM applications and the widespread availability of related consulting services across the Asia-Pacific region.

"Collaboration services--Web conferencing, document sharing and instant messaging--are all available as cloud-based offerings, and since the value of these solutions lies in their networked capabilities, a cloud-based delivery approach makes perfect sense," he said.

"Storage is another likely candidate for cloud-based delivery, Barnes added, since the cost of hosting storage-related capabilities on-premise is prohibitive.

Morris noted that most cloud services currently adopted by SMBs are geared toward applications such as human resources, payroll, CRM, e-mail and intranet services, including Microsoft SharePoint for information sharing across an organization.

Advice to first-time users
According to Kok, SMBs that subscribe to SaaS or cloud services for the first time should examine business protection applications such as security, backup and business continuity, which will help them increase resilience and ultimately, protect their businesses.

They can also look into point business applications that address specific business challenges, such as budgeting and forecasting. These help to streamline their finances during an economic downturn as the applications facilitate better financial planning and accounts receivable management.

"By starting small, the organization can evaluate benefits and then explore further options offered via the SaaS delivery model," Kok said.

In this respect, Lim said the first thing SMBs should do is consult their IT vendors and ask for recommendations of the best approach on what software should be kept in-house, and what services to consume via the cloud.

According to Morris, midsize businesses in the Asia-Pacific region with remote locations can manage the core systems themselves within their head office, but engage cloud-based providers to deliver services to their remote offices. They can then integrate these with their own systems.

"Because they don't have IT staff in those locations, it becomes much more cost-effective for them to have this hybrid model--they have cloud in some situations, and in-house systems in others," he explained.

>Lim added that SMBs do not necessarily need to modify their IT infrastructure immediately to take advantage of cloud computing.

Kok noted that if businesses that use applications hosted in the cloud for applications such as retail sales, customer support, datamining and compliance reporting, it will be necessary to link these to the company's own servers so users can have access to these applications.

Morris added that SMBs sometimes may have to enhance their infrastructure because some cloud applications rely on high bandwidth. "In some markets where broadband has not penetrated very far, it could be a significant stumbling block to use cloud services," he said.

Within the next 24 months, Barnes believes many SMBs will move entirely to cloud computing as business applications mature and become more stable and secure. Furthermore, providers would have by then developed a track record, he added.