Economic Concerns Highlight Cloud Value Proposition for SMBs

By Robert Fuller 1

cloud and economy

At Rackspace, we know the pains and challenges being experienced by SMBs in a rollercoaster economy, because a large portion of our customers — both direct and through channel partners — fall into that space. Our CEO, Lanham Napier, recently interviewed on Bloomberg TV, pointed out that a faltering economy is actually a good driver of adoption of cloud computing services, because hosted IT, in the cloud, is a solid money saver.

Interestingly, it’s non-conventional buyers of IT who are grabbing onto the money-saving possibilities of cloud. A March 2011 report by Forrester Research, Inc., “Navigating The Shifts In Computing Infrastructure Markets,” showed that growth in interest in Infrastructure as a Service (IaaS) – the second-strongest cloud offering category – was “coming from developers bypassing IT infrastructure managers; from engineers and scientists procuring their own infrastructure; and from business owners procuring technology directly for websites, web businesses, and marketing.”

In other words, the value proposition is so compelling, it’s encouraging people who wouldn’t normally have the confidence to choose IT solutions to make decisions that take their department or business into the cloud.

The value proposition of hosted IT is multi-fold. First off, switching to a pay-as-you go model means that a lower level of business traffic translates into smaller IT bills, plain and simple. But there are other cost-cutting aspects. With the traditional way of buying IT, even in the cloud, some vendors trap customers into a proprietary system, making it hard to leave, and giving them the opportunity to raise prices at will.  Buying IT that’s built on open standards – which Rackspace has committed to through its OpenStack project – means customers can easily switch vendors for better features, prices, or service.

Another important consideration is that most VARs and MSP’s are small businesses themselves. By expanding their services portfolio (Managed, Cloud, Mail and Rackspace Cloud Drive – Jungle Disk) these companies are able to extend cost saving services to their clients, and grow revenue streams at their own business as well.

A tough economy, and the pressures it brings to cut costs, can really wake up executives at SMBs to the advantages of Web-hosted IT. In good times, there’s the temptation just to leave things as they are in the IT department, because although IT efficiency is crucial to business operations, it’s often hard for a C-level executive to get his or her head around the intricacies of how it all works. But, with the need to save money biting hard, it’s hard to deny the attractions of a hosted model that has been proven to save customers 30% and more on computing. Add to that increased agility and flexibility – the services expand and contract with the business – and you’re looking at a new way of buying technology that makes every IT dollar work harder than it ever has before.

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