The concept of cloud computing is starting to gain traction among smaller South African businesses, with a growing number of SMEs relying on a range of cloud services in their everyday business dealings. Often, they're not even aware that the technology they're using is defined as a cloud service by the vendor that provides it.
That's according to a growing body of market research that shows SMEs are starting to rely more heavily on a range of online services to do their daily work. The numbers don't align perfectly - perhaps because definitions of SMEs and cloud services differ widely in the industry - but at least three recent surveys show cloud adoption is on the rise in the country's SME sector.
A recent SME 2014 study conducted by Boston Consulting Group and Ipsos MORI Research on behalf of Microsoft South Africa finds the use of cloud computing among South African SMEs has risen by 12 points since 2011; and now three in four (77%) SMEs use the technology. Dropbox is the most used solution today (66%) as it was in 2011 (34%), while Microsoft products are currently used by one in three (32%).
Another study by the Joburg Centre for Software Engineering (JCSE) finds that around half of SMEs claim to use cloud services. However, when they're asked which services they use from a list of the most popular cloud-based services in the world, only around 5% say they're not using any at all.
The most conservative numbers come from the World Wide Worx SME Survey for 2014, which has a larger and more comprehensive sample of SMEs than the other research. This study shows that around 22% of SMEs are currently using cloud services, up from 9% in 2012.
So, why are SMEs looking to the cloud? Respondents to the JCSE survey cite cost reduction, simplification of IT and the ability to move IT out of their business as some of the major benefits they expect to see. Vendors say the research dovetails with what they're seeing in the market.
"We're seeing a definite move to the cloud among SMEs," says Ivan Epstein, CEO of Sage Asia, Australia, Middle East and Africa. "They're looking for efficiency and convenience." In Sage's market, companies that once used Excel to run their businesses are moving towards full-featured accounting software because a pay-per-month pricing model makes it more affordable for them, he adds.
Capital idea
"Access to good technology used to be the preserve of big businesses, but with the cloud, SMEs can now gain access to the same kind of technology at an affordable price," says Jonathan Kropf, CEO of Cloud On Demand. SMEs tend to be wary about spending their capital and have limited access to bank financing to buy technology, he adds. Cloud services allow them to buy services on demand from their operational budgets rather than dipping into their capital.
In line with the market research, most vendors identify data backup and e-mail as the cloud services South African SMEs are mostly likely to use. However, cloud-based CRM systems and file servers are also starting to gain some traction. "E-mail and backup are well understood in the SME market and that's why they're the most heavily adopted solutions," says Kropf. "But moving full workloads offsite (to a cloud provider's infrastructure) is a paradigm shift."
Kropf says the nearing obsolescence of Microsoft Small Business Server 2003 - one of the most popular operating systems among SMEs in South Africa - will push more small businesses to the cloud. Microsoft ended support for this operating system earlier this year, with the result that SMEs will soon be scrambling to move onto newer platforms. Given the cost of migrating to new platforms, many SMEs will look to the cloud to cushion the financial impact.
E-mail and backup are well understood in the SME market and that's why they're the most heavily adopted solutions.
Jonathan Kropf, CEO, Cloud On Demand
Mobility will also drive adoption of the cloud. "The e-mail and backup segments of the cloud market are accelerating as more and more people become mobile and as SMEs look for ways to reduce their office overheads. The amount of people working from coffee shops or hot-desking has certainly shot up in the last two years," Kropf says.
The ability to give employees access to applications and data from any Internet-connected device, for them to be productive wherever they are, is a major reason for growing cloud adoption in the SME market, agrees Epstein. SMEs value the ability to be responsive and keep business processes flowing on the go, he adds. If they can save office space, so much the better.
Tangible results
Although adoption of the cloud among SMEs is growing steadily, it is being held back somewhat by connectivity costs, security fears, and a lack of understanding of the concept. More adoption of the cloud relies on it being easy to implement, understandable pricing models and wide access to affordable and reliable broadband, says Adrian Schofield, manager of the JCSE's Applied Research Unit. The risks around connectivity, privacy and security are all manageable if they're understood, he adds.
The JCSE's research suggests that, among the smaller enterprises, there is a lack of understanding of the terminology of cloud computing. SME owners simply want tools that work and that help them run more successful businesses. "The big issue is that the vendor community is selling the terminology to decision-makers who don't understand it," Schofield says. Vendors should make the technology more tangible by showing SMEs how it can help them save money or get more sales.
There's still a cost attached to having a fast, reliable line available, and cost is everything to SMEs.
Raymond Wright, MD, Network Alliance
Depending on the solution an SME buys as a cloud service, connectivity costs remain a concern, says Raymond Wright, MD at Network Alliance. "There's still a cost attached to having a fast, reliable line available, and cost is everything to SMEs," he says, adding that wider availability of cheaper fibre is helping to address the challenge.
Many SMEs still use ADSL lines, where they may be contending with other users for their share of ADSL bandwidth, and that offer quality of service guarantees. Where ADSL costs them around R2 000 a month, they could pay R10 000 for a fibre line that gives them the connectivity that will provide their users with the best experience for applications such as Sharepoint, says Wright.
Moving to the cloud will be a gradual process for many smaller enterprises, says Epstein. Many may initially opt for 'connected services' or hybrid cloud models to ease their path into the future. Connected services offer hooks into the cloud so users can benefit from working online while still using a PC software package. For example, a desktop accounting solution might allow users to access a range of digital transaction and payment solutions from within the package's interface.
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