What managers of small and medium enterprises (SMEs) need to know about cloud computing and services.

Author:Hadidi, Rassule

    Cloud Computing and services have significantly increased both in terms of usage and popularity in recent years. Announcements such as Apple's iCloud and Microsoft's Office 2010 availability via Cloud Services are among the recent examples of a growing number of Cloud Computing and Services available today. Millions of people are already using Cloud-based services such as email and office productivity tools such as Google Apps., free of charge. The Gartner Inc. (2009) estimates that by 2012, about 20% of the enterprise market e-mail services will be delivered via Cloud Computing and Services. Since software can be served out of the Cloud then users will not need to have popular software installed on their systems and as such, less expensive hardware like notebooks can replace more expensive desktops in SMEs.

    The Cloud's importance is evidenced by looking at its exponential growth. The International Data Corporation (IDC) estimates that worldwide, spending on public Cloud was about $16 billion in 2009, it will be about $29 billion in 2011 and will grow to about $55 billion by 2014. This is more than 26% growth over this period while the traditional computing expenditure will grow only about 5% over the same period. The growth and popularity of Cloud Computing and Services is not limited to the private and not for profit sectors of the economy alone. Even the public sector including the Federal Government and the White House are advocating the use of this technology and related services. It is simply the evolution of computing which begun in the late 1950s, continued with the time-sharing in the 1960s and grid computing in the 1990s, which led to Cloud services in the 2000s.

    In general, larger organizations have the technical expertise and resources to better utilize computing services. The SMEs, however; often lack the platforms, infrastructure, technical expertise, and the required financial resources to be able to utilize modern computing technologies to gain competitive advantage. Cloud Computing and Services allow these SMEs to use and pay for their computing needs as they arise. The SMEs are also able to scale up or down the Cloud services as needed. This feature of Cloud Computing and Services provide agility needed in today's rapidly changing global business climate that often calls for innovation in all business processes. This is truly significant given that in many organizations estimates indicate that often more than 50% of existing traditional computing is not used regularly and it is often wasted.

    Larger enterprises can build and maintain their information systems themselves. In contrast, MSEs usually do not have these capabilities so instead, they can rely on the Cloud for their needed information systems and technology including hardware and software, networking infrastructure, and data storage as well as services and technical expertise. Further, the Cloud services are generally available anywhere and anytime with very little or no capital investment from the SMEs. Simply said, Cloud Computing and Services can be utilized readily, easily, and at much lower cost than traditional computing.

    Advances in other technical areas such as virtualization are also supporting the growth and popularity of Cloud Computing and Services. Currently, software such as VMWare, Microsoft's Virtual server, and open source products such as Xen allow data centers to run more than one operating system on a single server or combine several servers into a much more powerful virtual server, or even pool many hard disk drives into a large network storage space.

    Although advantages of Cloud Computing and Services are many, managers need to be mindful of some potential issues that might negatively affect adoption of this technology and services. First, the migration path to Cloud Computing and Services need adequate planning. Not all applications are suitable for the Cloud. In particular, it is not economical to adopt some legacy systems for migration to the Cloud. Secondly, SMEs need to be aware of data security, compliance, and reliability if they are planning to migrate some applications to the Cloud. Thirdly, managers need to be aware of the so called "Cloud latency" that creates system performance delay due to the long distance and the fact that large data files and services may need to jump through a few network routers before they get to their destination.

    In the next section, we will review types and classifications of Cloud Computing and Services. In section three, we present the strategic value of Cloud services for SMEs. In section four, the potential advantages and risks associated with the use of Cloud Computing and Services for SMEs are discussed. The last section includes summary, conclusions, and managerial implications associated with the use of Cloud Computing and Services by SMEs as well as findings of this paper and future research suggestions.


    The term "Cloud Computing" has been used by information systems/information technology and business professionals over the last few years. The term "Cloud" signifies the Internet and "Computing" implies the use of technology. Historically speaking, Cloud Computing's foundation is based on a number of previous technologies such as grid, utility, and distributed computing. The major significance though is that Cloud Computing integrates prior technologies into several major services. Over the last few years a number of Cloud Computing and Services definitions have appeared in the literature. The National Institute of Standards and Technology (www.nist.gov) defines cloud computing as "a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction." Hartig (2009) defines Cloud Computing as delivering applications, services, and data over the Internet. Fingar (2009) states that: "Cloud Computing is a massive distributed computing model consisting of three tiers: infrastructure, platform and services, and is about using swarms of computers to deliver unprecedented computing power to people and organizations across the globe." Vaquero et al., (2009) state that "Clouds are a large pool of easily usable and accessible virtualized resources such as hardware, development platforms and/or services."

    A number of individuals and organizations have classified Cloud Computing and Services into several categories. For example, The National Institute of Standards and Technology (www.nist.gov) classifies Cloud Computing and Services into the four categories of public, private, community, and hybrid services. In case of the public cloud, an organization that owns computing and communication infrastructure makes them available to the public or an industry group for a fee. Amazon Web services, Amazon Elastic Computer Cloud, and IBM, for example, make infrastructure available to other organizations to use for a fee. A major advantage of the public Cloud is scalability. In contrast, the private Cloud infrastructure is only available to one organization. This organization manages the Cloud or may...

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