Should Your Startup Consider the Cloud?

Business in general and startups in particular should practice the inexorable pursuit of cost savings. Cloud computing has that potential. It is actually a superior option for startups because, typically, no prior substantial investments in hardware and software have been made.

The cloud, a euphemism for the Internet, has existed for decades now, but the concept of remote infrastructure and software access on a subscription basis is relatively recent, increasing its profile and prominence since around 2008.

Cloud Computing

Cloud computing is gaining traction in the business world at large,  becoming the “go to” solution for hedge funds, institutional investors, and businesses of all stripes. While there is no widely accepted definition for the term “cloud computing”, in the context of what follows, it is any subscription service offering real-time software and/or virtual hardware capacity via the Internet.

Cost Effective

Businesses interested in a cost effective means to create or add capacity and/or functionality, without investing in new infrastructure, training and licensing fees should consider the cost savings inherent in cloud computing.

A wide variety of large and small providers are available to provide the services your business requires. These services fall into seven categories.

1.  SaaS

This acronym translates to software as a service.  SaaS allows subscribers to access software applications without investing in servers or paying licensing fees for multiple employees. Everything is included in the subscription fee, including software updates and upgrades. Using an SaaS service makes administration easier; provide automatic updates and patch management; ensures compatibility; enhances collaboration and provides access to users from any device capable of accessing the internet. Base or Highrise vs Pipedrive are a great example of a SaaS CRM.

2. Utility Computing

This refers primarily to cloud storage; offering a means of storing large quantities of data in the form of spreadsheets, photos, videos, documents, etc. and sharing this stored data with anyone internal or external to your business. Large investment costs for memory and data back-up mechanisms are shouldered by the service provider.

3. Web Services

Similar to SaaS, web service providers do not deliver applications but instead offer APIs (application programming interfaces) allowing programmers to write applications compatible with other programs in the workplace.

4. PaaS

This acronym denotes platform as a service. Basically a variation of SaaS, this service allows a business to build its own applications that run on the provider’s infrastructure for delivery to the business’ users.

5. Managed Service Providers (MSP)

MSP is perhaps the oldest horse in the cloud’s stable. It is basically a service to monitor for viruses or spam. It can also be a desktop management service similar to Everdream.

6.  Service Commerce Platforms

Service commerce platforms are a cross between SaaS and MSP. They abound in trading environments where users place orders and the service commerce platform coordinates delivery and pricing within user defined parameters. One example is Deem, Inc., formerly Rearden Commerce.

7. Internet Aggregation

This is the holy grail of services and yet to be fully realized. The concept is to integrate the six cloud computing services described above, creating a one-stop-shop for business.

In the current environment, a business may need to have multiple providers to meet its needs. As aggregation trends continue to develop, businesses may ultimately subscribe to a single provider.

It is no secret that technology enhances efficiency. Technology can also lower costs and provide a ‘leg up” on competitors. The beauty of cloud computing is its inherent ability to make the implementation of new software, new technologies and updated systems virtually painless.

Using cloud computing reduces the need for a robust IT staff, which allows even more revenue to flow to the bottom line. Automatic software upgrades and no licensing headaches are another huge positive offered by cloud computing. Smaller businesses, competing with larger competitors,  will appreciate the fact that cloud computing can put the business on an equal footing with its larger rival in terms of technology.

Every business should carefully weigh its options before choosing one or more of the cloud computing options discussed here. There is no substitute for due diligence and cloud computing is not necessarily the best solution for every enterprise. It is best suited for businesses with a global footprint and/or businesses that face problems of scale.

Cloud computing is very likely the future and as competition flourishes, costs will plummet. Even at today’s price levels, a defensible argument can be made for cloud computing as a cost saving alternative to building and supporting an infrastructure. When aggregation is perfected, more businesses will be in the cloud.

About Andrew Cravenho

Andrew Cravenho is the CEO of CBAC LLC & Factor Auction. As a serial entrepreneur, Andrew focuses on helping both small and medium sized businesses take control of their cash flow. Prior to CBAC, Andrew founded an annuity financing company relieving tort victims of financial hardship.
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