Small business can save as much as 71 percent.
Exactly how much the cloud saves on IT costs for small and mid-sized businesses has been difficult to know. Logically a business should save by replacing the capital expense of buying servers with the operational expense of a monthly subscription to cloud software. But no two businesses are the same and neither are their IT set-ups.
A study by an MIT researcher has come up with a figure for savings gained when ditching servers for cloud services – an average of 37 percent for a business with 16 to 100 computers. That’s a third less money spent every year compared to buying servers and running everything yourself.
The savings for small businesses (one to 15 computers) were absolutely enormous – up to 71 percent, the study found.
“One of my principal findings, reported in my paper “Is the Cloud Cheaper?,” is that while the total cost savings associated with cloud migration increase with firm size, the largest percentage savings are realised by small firms,” wrote Andrew McAfee, principal research scientist at the Center for Digital Business at the MIT Sloan School of Management.
“The average cost reduction for the smallest businesses (with 1 to 15 computer users) is approximately 71 percent, compared to 44 percent for medium-sized businesses (with 101 to 500 computer users), when all IT is moved to the cloud.”
Want help moving to cloud software? Check out the Cloud Adviser Directory – shortlisted experts in moving small and medium businesses to the cloud.
Admittedly the study modelling the costs of cloud versus on premise computing was funded by Google which sells a cloud productivity suite called Google
Google Apps. But the evidence comes from a highly credible researcher. McAfee was previously a professor at Harvard University and has been recognised as one of the most influential executives in IT.
McAfee has also made the comprehensive spreadsheet calculations he used to model the spending available to the public. You can have a look at it here – it’s a 22-tab monster, certainly looks impressive though I haven’t put it through its paces.
The spreadsheet covers server purchase and maintenance, backup, CRM and ERP databases across several scenarios. If you’re feeling brave you can make a copy of McAfee’s calculations in Google Spreadsheet and run them for your own business to find out how much you can save.
We’ve seen several case studies about savings from moving to the cloud – Hansens Accountants have saved $75,000 a year by moving to Microsoft’s cloud-based IT management tool, Intune.
The study also cites savings at publisher USstoragesearch.com of 75 percent by moving to Google Apps. Over the business’ lifetime, Google Apps will drop to just one-tenth of the cost of on-premise IT, the publisher said.
A Google blog made an interesting observation from the study that sheds some light on the higher take-up of cloud services by SMEs. This is trend is clearly evident in Australia where SMEs represent 97 percent of businesses.
“Because SMBs are more flexible in their decision-making and aren’t bogged down by legacy costs, they’re able to choose an IT system that best suits their business. Thus, moving to the cloud frees up money for SMBs to drive business and job growth, and can set a precedent for how large businesses adopt cloud technology,” wrote Rich Rao, director of sales and operations, Google Enterprise.
“ With savings achieved by moving to the cloud, these businesses are able to invest in areas that help expand or strengthen their business, whether it’s opening a new branch, starting a new product line, or hiring more people.”
It’s no wonder that some of the greatest innovation in this country is happening among your local businesses. What a great time to be an SME.