Small businesses have had a rougher road than larger enterprises during the past three years. Credit markets have withdrawn their support, although recent studies suggest that the situation is “thawing”, especially among community banks. Cash flows have slowed, as the majority of clients have been forced to be “slow pays” to meet current demands, and the credit quality of new clients presents new risks that must be mitigated in the near term.
Is now the time to get more “lean and mean” about internal operating expenses? Controlling expenses is key to running a company with less than $5 million in revenue, the upper cap for the majority of small businesses in America. New firms today must “connect” more than ever before to the “electronic grid”, but the escalation of costs in this arena have baffled small business owners, forcing many to question what alternatives exist to manage a cost-effective IT department.
The market has been responding to this need in the form of “cloud computing”, a new marketing term that encompasses outsourcing a major piece of your cost-laden exposures to a more acceptable “pay-as-you-use-it” business model. With all the recent hype in this area, recent studies, however, reveal that 75% of small business owners are totally unaware of the concept of “cloud computing” and how it can put them on the fast track.
The concept is actually simple and straightforward. Sometimes referred to as “Software as a Service”, or “SaaS” for short, this component of the software services industry has been growing at multiples of non-SaaS service providers due to increasing demand. Under this business concept, major capital investments in software and related hardware, together with highly skilled professionals to manage the process, are outsourced to a third-party provider. This provider spreads its “capital risk” across its entire client base, and then offers a variable transaction-based pricing schedule tied to actual usage. Your cost structure then aligns with your business, growing as you grow.
How do you discover if a cloud based computing solution is right for you? Here are a few steps to follow:
Get Knowledgeable: Before jumping in with both feet, educate yourself on the subject matter. There are many articles on the Internet addressing this topic. Read as many as you can to get familiar with the terms, the concepts, and the process for making a decision about a potential implementation;
Assess Your Current Situation: Time to involve your financial people to determine your total IT-related costs, including capital asset costs, operating expenses, and the total cost for maintaining and enhancing your current IT environment;
Involve Internal IT Staff: Armed with the facts and numbers, it is time to involve your key IT managers. They must support the idea if it is to be successful, since they will manage the eventual implementation. If you encounter resistance, you may require the assistance of outside consultants that routinely handle this type of project;
Assess Potential Costs and Benefits: At this point, the financial benefits in the form of lower operating costs and software expenses should be definable. Your fixed costs should decline, replaced by a variable cost structure that is more manageable. Planning and preparation follows in which the steps to reorganize your present structure are designated in a project plan;
Implement – Yes or No?: It is time for a decision. If you elect to defer, then continue to update your plan for future consideration. Otherwise, full speed ahead.
“Cloud Computing” solutions can revolutionize your small business operating model, making your firm more competitive and cost efficient going forward.