Lowering IT costs through hosting

Small and mid-sized businesses (SMBs) have reason to feel optimistic - despite the recession, in the past 12 months, 52% of SMBs reported an increase in revenue, up from 39% in 2008, according to Microsoft Small Business Technology Index 2008. Now 2010 is set to give SMBs further opportunity for growth, but to capitalise on an upturn these companies need to look carefully at what will enable them to be more productive and to compete more effectively. This is where IT suppliers and partners have a role.

Small and mid-sized businesses (SMBs) have reason to feel optimistic - despite the recession, in the past 12 months, 52% of SMBs reported an increase in revenue, up from 39% in 2008, according to Microsoft Small Business Technology Index 2008. Now 2010 is set to give SMBs further opportunity for growth, but to capitalise on an upturn these companies need to look carefully at what will enable them to be more productive and to compete more effectively. This is where IT suppliers and partners have a role.

Microsoft commissioned some research in January this year, looking at business and IT issues affecting SMBs in light of the economic downturn. This was run across 15 countries worldwide with more than 3,000 participants. The research follows a similar survey conducted 18 months ago, acting as a clear benchmark to show how businesses have been affected during the downturn and specifically how this has changed attitudes towards hosted services. Hosted IT is in essence the 'renting' of services on demand, on a pay for use and user basis, rather than running the data on an in-house server.

Cost pressure effects

Worldwide, 86% of SMBs now see IT as very important or critical (compared with just 35% in 2008). In markets like the UK that figure is as high as 97%. This shows just how much SMBs worldwide have been increasingly relying on IT to cut costs and aid productivity through the turbulent past 18 months.

Many SMBs think that if they cannot afford to own various IT tools then they cannot afford to have them at all. However, the awareness of 'rented' services is growing. Perhaps as a direct consequence of the recession, businesses have looked into the most cost-effective forms of IT investment with the highest return on investment (ROI). Nearly three-quarters (73%) have considered hosted services compared with less than half (44%) in 2008. In fact, 65% are now using hosted services compared with 21% that were just considering it in 2008. There is still an education job to be done here as, despite this rise, 20% are still unaware of hosted IT services and 20% have security concerns preventing adoption. Interestingly, these concerns are most prominent in the UK.

It's well known that rich tools such as customer relationship management (CRM) can really improve customer service, at a time when reaching your customers in the right and compelling ways is becoming more important than ever, yet still so few SMBs seem to be exploring these tools. The research states that company websites are the top hosted service (used by 59.6%), but SMBs aren't taking advantage of the more sophisticated options like CRM, servers, mobile e-mail, or back-up that provide better ROI. This highlights a big challenge for companies like Microsoft, and their partners, to do more to tell SMBs what options are available to them and what cost and productivity benefits hosted services will bring.

How the hosted model works

So how do hosted services enable SMBs to compete more effectively and be more productive? Subscription models mean you can buy the services on a pay per user model - so you can rent it for a month to support a particular sales campaign for example. You are not tied into the potentially hefty cost of buying on-site services forever and for each different requirement your business may have. Instead, everything is handled externally in a datacentre, ideal for SMBs who want to remain nimble, competitive and focused on making their business win, rather than being tied into large investments and the hassle of ongoing IT management and maintenance.

I believe that there is no one-size-fits-all solution here. Rather, it's about giving SMBs the access to the most sophisticated IT, with the choice and flexibility of both on-premise and hosted offerings, depending on their individual needs. Dale Vile, research director of Freeform Dynamics, recently said, "Technology and hosted services can provide tangible business advantage, even for smaller companies, and it's not surprising to see that investment in IT and hosting goes hand in hand with good financial performance."

Robert Epstein is head of SMB sales and marketing, Microsoft UK

Read more on IT for small and medium-sized enterprises (SME)

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