Cloud computing driving productivity, profitability of SMBs

A study recently conducted by tech giant Microsoft Corporation and the Thought Arbitrage Research Institute (TARI) showed that cloud computing is driving productivity and profitability of small and medium businesses (SMBs).

India has over 50 million SMBs that are contributing over 30 percent to India's gross domestic product (GDP) and employing over 117 million people. However, SMBs face many challenges, including limited access to resources and technology, which greatly limits their productivity and profitability. The asymmetry between SMBs and large enterprises can be as much as seven to eight times.

According to the study on the 'Socio-Economic Impact of Cloud Adoption by SMBs in India', reduction in the investment cost (capital expenditure) on technology can lower entry barriers for SMBs for accessing technology, which then creates a positive multiplier effect. Productivity gains afforded by the cloud are strongly reflected in business metrics, such as improvement in operating expenses and better cash flow from business operations.

According to the study, SMBs have shown a multiplier effect of 1.5 times in improvement of productivity metrics while profitability indicators (reduction in operating expenses) show a multiplier effect of three times once SMBs move from low to medium cloud usage. Furthermore, 96 percent of SMBs find a positive impact on their operating expense within two years of high cloud usage, which remains stable with time, demonstrating that the gains are sustainable. Also, SMBs' ability to improve products and reduce launch time improves 100 percent when they move to high cloud usage.

It is important to note the steep upward differential in gains when there is medium or high cloud adoption vis--vis merely using basic cloud services such as email and file storage. This is significant as most SMBs feel that mere adoption of basic services is sufficient to make an impact.

In terms of improvements in productivity and profitability, the survey noted that asset utilisation increases by 17 percent on low cloud adoption, but 52 percent on moderate and 66 percent on high usage. Moreover, employee productivity increases by 21 percent on low cloud adoption as compared to 51 percent on moderate and 81 percent on high usage.

The study also noted that operating expenses reduce by 13 percent on low cloud adoption, but a considerable 47 percent on moderate and 68 percent on high usage. Cash flow has seen a 13 percent increase on low cloud adoption, 33 percent on moderate and 53 percent on high usage.

The study also found that profit improvement and cost reduction metrics improve 30 percent for SMBs using medium cloud, whereas this metric improves 10 percent for SMEs on the government database; employee productivity metrics improve 50 percent for SMBs using medium cloud whereas it improves 20 percent for SMEs on government database; asset utilisation metrics improve 50 percent for SMBs using medium cloud whereas it improves marginally for SMEs on government database. The asset base of SMBs is more effectively utilised by employees through cloud computing as it allows multiple users to access software related business applications, from any location, at any time.

Cloud computing technologies are not only advanced but also affordable and easy to deploy and use. This is opening up an opportunity for SMBs to bring about a paradigm shift in the use of technology to improve their operations and productivity, in-turn improving their competitiveness and profitability. With Internet Service Providers having built connectivity infrastructure across India and a mature channel partner ecosystem offering tailor-made cloud services to SMBs, the study highlighted that this is an opportune time for SMBs to leverage cloud technologies to drive their growth.