Innovation is key to survival in any economic downturn, but for many small and medium businesses (SMBs) it is often one of the first casualties.
In a competitive, challenging market, UK entrepreneur James Caan cautions against failing to innovate.
"Businesses that do not go ahead, risk going backwards," he told an audience of SMBs in London recently.
If technology is able to deliver real business benefits such as increased efficiency or competitive edge, the investment should be made, he says.
Ben White, CEO of business internet service provider Star, says it is particularly important to innovate during a downturn to ensure long-term success.
"Businesses that continue to innovate during a downturn will be fitter and better prepared when the market picks up again," he says.
Many business leaders and entrepreneurs agree that companies which do not differentiate themselves in a difficult market through new and improved products and services are risking failure.
According to research by the Institute of Directors (IoD) the majority of UK SMBs understand this, with 91% looking to grow their businesses.
While most of these (82%) see ICT as a key factor to enabling that growth, White says few can afford the cost and risk of 12-month IT projects that often fail to deliver what the business needs.
"I believe the next decade will be about buying technology as a service, which enables businesses to meet 90% of their needs almost immediately," he says.
This eliminates development and implementation costs and enables rapid deployment as well as fast delivery of business benefits, all of which help support innovation.
Driven by economic necessity and disillusionment with traditional IT implementations, increasing numbers of SMBs are turning to internet-based or cloud computing.
This is a utility model of computing where business technology needs, including software, network infrastructure, security, storage, processing power and virtualisation, are available as a service on a pay-per-use basis.
This model is able to deliver cost savings beyond those which, according to the Federation of Small Businesses, around two-thirds of UK SMBs are deriving from using the internet as a low-cost marketing and sales channel.
Low-cost audio and videoconferencing is another popular use of the internet to cut costs, says Rob Epstein, head of SMB sales at Microsoft UK. "This enables any business to bring people together at low cost to share information interactively," he says.
Technology as a service
Cloud computing enables SMBs to capitalise even further on their investment in a broadband internet connection, with most being able to get at least one application delivered as a service.
Software as a service (SaaS) is one of the top 10 ways UK SMBs are looking to cut costs and improve efficiency, according to the IoD research. SMBs can do more with ICT without needing to increase the number of IT staff.
E-mail is the most likely candidate and savings can be substantial. Instead of an SMB with 10 sites running 10 e-mail servers that have to be continually updated and kept cool, an SMB could opt for a low-cost service backed by a service level agreement.
Telephony is another common business tool that has now evolved into a software application that can be hosted and delivered by a service provider.
"Telephone systems are no longer about hardware requiring huge capital investment," says Steve Donovan, managing director of Armstrong Communications.
Telephone systems can now be managed like any other business software application running on the network either internally by the IT department or by an external provider.
"SMBs can buy telephone systems as a managed service at a monthly cost per user, which is more appealing than having to commit to a £30,000 investment in a new piece of hardware," says Donovan.
This approach also enables SMBs to benefit from much lower call rates that service providers have negotiated from larger suppliers such as BT and eases disaster recovery by being in the internet cloud, accessible from anywhere.
The present economic conditions are likely to accelerate adoption of cloud computing, says Epstein, because the financial benefits speak for themselves.
Innovative approach to survival
But cloud computing is not only about cutting cost. It is also attractive to companies looking to ensure longer-term survival through innovation.
This approach gives SMBs the means as well as the opportunity to innovate by providing fast access to enterprise-level technology at the same time as reducing capital expenditure.
Cloud computing is the great leveller between SMBs and large enterprise, says Rob Epstein, head of SMB sales at Microsoft UK. "For the first time, SMBs have access to the same technology, which can be deployed rapidly and at low cost."
Security, which is a top concern for 78% of SMBs according to the IoD research, is often cited as a reason for not considering a move to buying technology as a service.
Epstein says the security risk of cloud computing is often more a perception than a reality as long as SMBs follow the standard advice on implementing firewalls, running anti-malware applications and keeping systems patched and up to date.
White says he can understand the concerns about running applications from outside the organisation, but service providers typically have better processes in place and are in a better position to do security properly than most SMBs.
While the availability of cheap broadband internet access has put cloud computing within the reach of most businesses, not all SMBs will have the network and server infrastructure required to support it.
Cloud computing depends on secure and robust networks that have high availability, can carry data, voice and video traffic at the same time, and allow prioritisation of that traffic.
These are the hallmarks of next-generation networks (NGNs).
A network architecture with a single internet gateway and firewall ensures greater security, and increased flexibility is enabled by its underlying technologies, particularly Multiprotocol Label Switching (MPLS).
NGNs are inherently more secure than traditional networks because they have a single internet gateway on which all the security can be concentrated, compared with traditional networks which typically have four or five gateways.
The emergence of technology as a service means that NGN managed services are among those available to SMBs.
Service level agreements guarantee network availability, which could be costly and challenging for SMBs to achieve on their own.
"This means SMBs can have access to the kind of networks they will need to take advantage of new technologies such as voice over IP (VoIP) through cloud computing as and when required," says White.
According to Donovan, NGNs enable a much better quality of service for VoIP, as well as providing the necessary resilience and security.
Implementing an NGN as a service gives SMBs all the benefits of a low-cost, flexible network infrastructure that can be deployed quickly.
This will enable SMBs to grow the business with more home-based and field-based staff without the need for anyone with specialised skills to maintain an on-site network.
"Having reliable access to home-based staff has opened up a much wider pool of experienced call centre employees for US airliner JetBlue," says Epstein.
There is also the benefit of automatic business continuity as the network is no longer on site and can be accessed from anywhere in the event of a disaster, such as last summer's flooding in the UK that brought many SMBs to a halt.
"We are at a turning point for cloud computing now that the opportunity exists for developers from all sort of companies to put new applications out there [in the cloud]," says Epstein. "It could be a defining moment for some services."
And the opportunities to use the cloud computing model look set to proliferate now that Microsoft has thrown its weight behind the concept and unveiled its cloud computing development platform, Windows Azure.
Enterprise-level technology can be deployed tactically at low cost to respond to changing business needs and support innovation through enabling rapid development of new products and services, and as an increasing number of technology suppliers embrace the cloud computing model, the network has never been as important as an enabler for innovation.
|Benefits of technology as a service|
|No large capital outlay|
|Service level agreements|
|Reduced IT staff requirements|
|Fixed maintenance costs|
|Accessible through low-cost broadband|
|Enables faster IT alignment with business|
|Provides technology and cost savings for innovation|
|Naturally enables business continuity|
|Benefits of next-generation networks (NGNs)|
|Easier to secure with a single internet gateway|
|Allows data, voice and video traffic on single network|
|Enables prioritisation of data flows|
|High availability, especially as a managed service|
|Good quality of service for voice over IP applications|
|Can meet demands of new and evolving applications|
This was first published in November 2008