Although the term “cloud” is seeing increasing use, it’s necessary to clarify what portion of “the cloud” is of interest to a particular audience. For small and medium businesses (SMBs), there are generally two areas of relevance in the evolution of IT services to the cloud. The first is the application layer, commonly referred to as Software as a Service (SaaS). The second is the infrastructure layer, known as Infrastructure as a Service (IaaS).

Software as a Service
Many SMBs are benefiting from the proliferation of options available to the SMB, including: Accounting, Customer Relationship Management, Human Resources, Internet Marketing and more. Benefits of SaaS applications include little or no start-up or license costs, pay by the number of users accessing the application so that scaling up or down is easy, no long term contracts, no capital outlays for servers and other infrastructure to run the application(s), and no administrative personnel required to keep the applications running (updates, monitoring, fixes, enhancements, etc.).

Questions to Get Answered
Once the SMB decides that it wishes to consume one or more applications in the cloud, there are a number of relevant considerations to ensure that they are selecting the “right” cloud application provider(s). These include but are not limited to:

What is the reputation of the SaaS provider?
Are they a well-known company such as Salesforce.com, Intuit, Google, or Microsoft? Companies with a reputation to protect may offer a more reliable service than a start-up. Check online blogs, review sites, small business resource communities, etc. for reviews of both the provider and the application.
Are users generally satisfied with the application functionality and usability?
Have they tried to access customer service or technical support?
Would they recommend the application to other small business users?
If the provider of the application(s) is not a known company, what is their company profile?
How long have they been in business, how many customers do they have, who are their testimonial users (if available)?
Do they have a money back guarantee?
Do they have a Service Level Agreement that specifies availability of the service, performance (e.g. response time), notice of maintenance activities, etc.?
Do they offer 24×7 support? Is it via phone, email, and online ticket? Call their technical support and see how long it takes to get a human on the line.
Do they seem knowledgeable?
Are they customer centric and eager to help?

Reliability
One critical consideration is the importance of the application to the critical functions of the business. An expense submission application may be able to tolerate some downtime; while an application that processes credit cards for customer orders or that evaluates the credit worthiness of prospective customers may have a much more profound impact on the health of the business. What is the impact of downtime (planned or unplanned)? The more critical an application, the more the business should think about a) who are the most reliable providers, and b) what will we do if and when the application is unavailable? What is the work around?

Don’t assume that because a provider uses “the cloud” that they are inherently reliable. Is the application geographically redundant or is it running in a single data center? Does it have load balancing to ensure that multiple servers can handle requests? What is the data backup and recovery strategy? The reality is that although SaaS is a great development, not all SaaS providers have the sophistication to handle mission critical applications. What is small potatoes to the provider may be the difference between business success or failure to the SMB. Again, check the available reviews, references, and user testimonials.

Beyond availability and reliability, the SMB should consider the SaaS business model, including pricing, term commitments, ability to add and subtract users (including the cost), cost and availability of upgrades, enhancements, and optional modules (functionality). As with any other purchase the SMB makes, it should do diligence to ensure that it knows what it is getting, for what cost, with what potential variables, and what commitments (exposure).

Infrastructure as a Service
For the SMB looking to take advantage of IaaS, this generally consists of the opportunity to move applications that would otherwise be run on servers on the SMB premise, to virtual server instances in the cloud that are managed by a third party cloud provider, and offer many of the benefits of the SaaS scenario above. Cloud server instances can be created on the fly, can be started and stopped as required by the application(s), eliminate the acquisition and administration of physical server resources (these are managed by the cloud provider), and often are more reliable than servers running “on-prem”, as they are backed up by redundant data centers, network connections, server hardware, and 24×7 monitoring and support.

Questions to Get Answered
For the SMB considering moving applications from on-premise servers to cloud server instances, the following considerations are relevant:

What is the reputation and reliability of the provider?
What is the expected cost? How am I being billed? If based on usage (i.e. variable), how will that compare to my current costs? Hourly costs may seem lower on the surface, but if the servers are going to be available all the time to users, what is the total cost?
How friendly and functional is the user interface? What is the overall user experience like? How does is vary from provider to provider?
Does somebody within the company “own” the service and the relationship with the provider(s)?
Who will do the planning, implementation, and ongoing evaluation of the results?
Is your data backed up? How often? Can you initiate a back up? How is the data retrieved?
What redundancy is available for each server?
If a server fails, what is the restoration process? Can you access and restore backups yourself?
What kind of support is available and how much does it cost?

Again, cloud offers phenomenal advances in cost, functionality, and reliability. But like any purchase the SMB makes, it should be done with eyes open and as an astute purchaser.

Todd Benjamin is the vice president of Enterprise Hosting at Hostway Corporation.

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5 Responses to “Small and Medium Businesses in the Cloud”

  1. Pat Luegger says:

    thank you. I still haven’t a clue what “the cloud” is but at least I have some info. :-)

  2. Good checklist about cloud computer providers, specailly when you say that is better to work with established brands, like Intuit.

  3. The concept of moving to a could server is becoming more and more popular today. Everyone is learning about the great features that come with cloud services, but as you mentioned, what is holding a lot of small businesses from moving (upgrading) to cloud is the costs. I hate to say this, but the cloud is definitely not the cost-effective solution for most of the small businesses at this point.

  4. Many businesses are countering that complete dependency by going with hybrid cloud solutions. For instance, companies such as Egnyte and Rebit will replicate data stored locally on a hard drive or NAS to their cloud services, offering SMBs the best of both worlds: local control and access to data and peace of mind that the data is backed up to the cloud. For more on ways to avoid getting burned during a cloud service provider’s downtime, check out: Analyst’s View: After Intuit’s Apology, Cloudy Outlook for the Cloud? .

  5. SaaS as a concept is often associated with the application service providers (ASPs) of the 1990s, which provided “shrink-wrap” applications to business users over the Internet. These early attempts at Internet-delivered software had more in common with traditional on-premise applications than with modern SaaS applications in some ways, such as licensing and architecture. Because these applications were originally built as single-tenant applications, their ability to share data and processes with other applications was limited, and they tended to offer few economic benefits over their locally installed counterparts.

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