British businesses are not making most of the cloud, study shows

British businesses have yet to make the most of cloud computing services because many are hesitant to adopt it

British businesses have yet to make the most of cloud computing services because many are hesitant to adopt it, according to experts from Manchester University, the Federation of Small Businesses, cloud provider Rackspace and a few infrastructure-as-a-service (IaaS) users.

Businesses in the UK could become much stronger competitors by embracing the cloud, said the panel of experts in response to the findings of UK cloud computing research.

The research, which was conducted by Vanson Bourne and commissioned by Rackspace, found that cloud provides clear benefits, such as cost savings, and makes it easier for small businesses to expand.

The study of 1,300 cloud users showed that a majority of businesses adopting cloud technology reduced their spending on hardware, staffing and office space as a result. They also gained from a flexible workforce and cash to invest in other strategic projects.

But US businesses are leveraging this potential better than UK businesses and are leading the way, the study revealed. Another study in January showed that the UK lags behind the US in cloud adoption.

For instance, cloud computing has helped start-ups get off the ground, particularly in the US. Some 83% of US companies said this was the case, compared with 62% of UK companies.

One reason why UK businesses are hesitant to adopt cloud is because of cloud-related data sovereignty regulations, said Jonathan Finney, public affairs manager from the Federation of Small Businesses (FSB). 

“In the US, most small and medium businesses (SMEs) conduct themselves locally, but many UK businesses are involved in international trade and have to worry more about data sovereignty,” he said.

There are roughly three million small and medium businesses in the UK, and while many use cloud unknowingly – such as cloud email services – only 10% of them are using cloud actively for business applications, said Raj Patel, vice-chairman at Kashflow, a company that helps small businesses with cloud-based accounting platforms.

More UK businesses plan to cash in on cloud benefits

But cloud adoption is set to grow significantly in the UK, across all sectors and in all sizes of business, said the FSB's Finney. 

“Cost benefits are one of the biggest advantages of the cloud. An average SME would spend £2,000 on an on-premise application, and then 20% of that initial investment every year on maintenance. The same service on the cloud costs £18 per month,” said Patel.

Some 73% of SMEs and 70% of large enterprises agreed that cloud is a key factor in the recent boom of entrepreneurs and start-ups in the UK and US, the study found.

Among the benefits of using cloud services, the study found that large enterprises made the biggest savings. Nearly a quarter of respondents (23%) were saving between £500,000 and £4m a year.

IT heads who were present at the roundtable, and who had adopted cloud computing, urged UK businesses to use the cloud. “We wouldn’t be where we are today without having the ability to use the cloud,” said Darren Robertson, data scientist at Action for Children.

Smaller businesses also noted a reduction in IT costs, but of a lower proportion. More than one-fifth said they saved between 25% and 50%, and a further 41% said their savings were between 10% and 25%.

Cloud needs to prove business value in addition to cost savings

More than half of enterprises also said that the cloud had helped them to focus more on strategy and innovation.

“I expected to see more dramatic benefits of cloud services to SMEs than just cost savings,” said Brian Nicholson from Manchester University.

More UK businesses will adopt cloud when they see cloud creating value for users, rather than just cost benefits, because many are of the opinion that “if it ain’t broke, don’t fix it”, said Nicholson.

“UK businesses are definitely investing in technology and many are especially investing in the cloud, but they need more use cases to become more confident about the cloud,” said Finney.

But the industry consortiums and service providers have to do more to enable UK businesses to move to the cloud, the experts said.

“In two years, there should be more guidance, advice and reference architecture for small businesses to overcome cloud fears,” said Nicholson.

“The suppliers must make the cloud contract a lot simpler too,” he said.

But cloud contracts may not become simpler in one or two years, warned Nigel Beighton, vice-president of technology at Rackspace.

“This is because legislation does not move at the pace of technological innovation,” he said. “Today’s contracts are based on legislation that are not helpful for cloud adoption. Legislation will change, but it will take time.”

UK businesses will have more confidence in moving to the cloud if the G-Cloud happens successfully, said Action for Children's Robertson. 

Image: Thinkstock

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