Wednesday, Jan 12, 2011

Gulf News

Maximising its use can help small and medium firms cut operational expenses

Dubai Small and medium enterprises (SMEs) are better off being under a cloud. At least where their tech needs are concerned.

Touted as the latest cutting-edge process out there, cloud computing, its adherents say, can easily provide SMEs what they require and at a much lower cost to operate.

And going by the take-up rates, these businesses seem to think they are on to a good thing. Some estimates place the number of SMEs which have adopted cloud computing at 14 per cent during the first-half of last year, with a further 38 per cent — and employing less than 20 employees — looking to do so in the second-half.

SMEs in the tech space are the fastest when it comes to the adoption, while those in the services sectors such as finance, HR and consulting use — or plan to do so — at a rate of 22 per cent.

“SMEs are adopting cloud computing as they will be the ones who can gain the maximum if they can act quickly to the changes,” said Pankaj Chawla, regional president at 3i Infotech Ltd., a specialised tech consultancy which has an ERP solution — Orion Advantage — targeted at the smaller enterprise.

“SMEs must leverage the cloud opportunity to stay ahead of the competition.”

Even with all the attention it has been getting in recent months, cloud computing is still a relatively untested process in the region. But there’s no denying that when used to its fullest potential, it can have a major bearing on the user’s expenses.

At its core, what cloud computing is quite simple — it is essentially a platform for businesses to host their system requirements, with the actual system being maintained in a secure environment. “All that’s needed at the user’s end is a basic ‘subscriber/rental’ agreement and fast internet access,” said Chawla.

Requirements

“At the same time, they don’t have to go out on a limb when their requirements expand. Services off the cloud are flexible and scalable and simply grow to meet needs. Moreover, by accessing the cloud, companies can be sure of availability 24x7.”

Of late, there has been a concerted effort by tech vendors and service providers in the UAE — and elsewhere in the Gulf — to mitigate the tech and telecom related costs for businesses, and more so for those in the SME space. Etisalat has come out with special packages that address this very need, as has du. The regional operations of global IT vendors too are now doing the same. But local SMEs will still need a lot more convincing. For long they have seen their IT-related costs as a “costly” expense they perforce have to bear.

Zahir Hassan, managing director of Power Print, says that while IT and telecom related running expenses can vary with the industry, there’s not much companies can do to keep these in check.

“If a business is seeking higher growth, definitely continuous investments have to be made on IT,” he said.

“In the printing and publishing industry, for instance, annual running costs on technology would be between 15 to 20 per cent, and it would be very difficult to bring it down any further. And if a business does so, it represents a tremendous risk.”

But Chawla wonders how well SMEs, or the vast majority of them, have actually “integrated” IT into their processes. “While SMEs have started deploying IT, they have not yet fully intertwined it into their processes,” said Chawla. “As the effective use of technology becomes more important in the highly competitive SME market, more companies are questioning whether to buy off-the-shelf software versus paying a software partner to produce software tailored to their own specific needs.”

That’s a debate which has got vociferous supporters lining up on either side. But a decisive victory is yet to be sighted as to which option SMEs are better off choosing. Chawla is pretty sure which option he would rather backs. “Custom-made software ensures it does exactly what the company requires and is flexible enough to meet changing market conditions,” he said.

Annual fees

“One should also consider that the price of off-the-shelf applications is only part of the total cost of ownership. Annual license fees and maintenance fees need to be weighed in —when all this is are added up, companies will find that custom-made software is not as expensive as it seems to be.

“Customised software eliminates time wasted trying to figure out appropriate settings. The entire concept is geared towards providing SMEs with an affordable alternative to traditional software in a way that not only cut costs, but also cuts maintenance to a minimum.”

useful tips

What small and mid-sized businesses should look for from their IT investments (according to Pankaj Chawla of 3i Infotech)

n Businesses need flexibility around paying for IT-related services; this is why scalable operating expenditure models such as those offered by cloud computing are becoming popular among small businesses.

n Innovations in technology (cloud computing), delivery (Software as a Service or SaaS) and revenue models (transaction, subscription-based, etc) are expected to reduce up-front costs and make deployment easier for SME customers.

n The biggest challenge for SMEs isn’t so much relevance or cost, but the complexity of IT. It is imperative for IT vendors to work together and with intermediaries to develop an eco-system that can remove complexity for SMEs.

— M.N.

At the same time, they don’t have to go out on a limb when their requirements expand. Services off the cloud are flexible and scalable and simply grow to meet needs ... 24x7.”

Pankaj Chawla

Regional president, 3i Infotech Ltd.

By Manoj Nair?Associate Editor

Gulf News 2011. All rights reserved.