Big tech companies haveen grown immensely over the past two decades. Companies like Amazon, Apple, and Google have become household names with consumers and investors alike as they relentlessly increase their product offerings and revenue. Looking at the size and scale of these companies, it is easy to draw the conclusion that small and medium businesses (SMBs) are a dying breed. However, the pioneering of large tech firms has trailblazed a landscape of easily accessible, cloud-based services that can drive growth for SMBs. While they may be reluctant to adopt these new cloud-based services, SMBs that do so are setting themselves up to stay ahead of their competition.
Behind the scenes, cloud providers are responsible for propping up the back end of many of the most trafficked websites. Pinterest, Netflix, and even Apple all use cloud services to run parts of their operations. But it’s not just business-to-consumer companies that are making use of the cloud, it’s industry-specific organizations as well. A new crop of vertical business-to-business (B2B) companies have emerged in the past decade—all making use of the cloud to offer streamlined versions of existing services. These verticalized companies can trace their origins back to the original cloud computing platform: Amazon Web Services (AWS).
AWS originated in 2003, offering a handful of web services for companies. Since then, it has expanded its offerings and now provides more than 175 webtools for companies. AWS, Microsoft’s Azure, and other platforms offer companies access to cloud computing on a pay-as-you-go basis. In this way, companies only pay for the computing power they use in a given period. Whereas before companies would have to invest capital into server infrastructure if they wanted to get on the web, pay-as-you-go cloud computing allows them to pay for this infrastructure as a standard service expense.
The first players to adopt cloud computing into their strategies were large, horizontal companies that could afford to test out the waters these services peddled. Since then, cloud computing platforms have used customer feedback and data to refine their offerings and create a more user-friendly experience. Now, vertical companies have emerged that offer services running on the cloud specifically designed for varying business niches.
But while these new vertical cloud computing companies are ready for SMBs, the opposite has not come to fruition. A 2018 report by Deloitte found that 80% of businesses with fewer than 250 employees weren’t making full use of digital tools such as those offered by vertical cloud computing companies. At the same time, the report found that businesses of this size that did fully utilize digital tools saw twice the revenue per employee as their counterparts.
Barriers to entry
The primary issue preventing SMBs from integrating parts of their businesses into the cloud is simply the lack of awareness that these tools even exist. In 2007, a beauty salon owner would have been hard-pressed to find a cloud-based service tailored to their unique business needs. That mentality has persisted into the modern day, despite the widespread proliferation of these services. Breaking down preconceived notions surrounding cloud-based services like these is crucial to getting SMBs to integrate them.
While large businesses can afford to make the capital expenditure to adopt new technologies, SMBs may be hard pressed to do so. For instance, hosting a small website for customers to book appointments and managing a CRM to track and service regular customers requires comapnies to invest in the server architecture to support the website and the staff to maintain it. With cloud-based services, this large capital expenditure can be transformed into a much smaller monthly payment. This has the dual effect of reducing the overall upfront cost of adopting new business practices and the overall risks associated with them.
This rolling of business expenditures into standard operating costs is further augmented by the prevalence of pay-as-you-go pricing. After getting started, a business would only have to pay for the computing power it uses in any given period versus having to constantly pay to maintain a server. If the newly adopted system proves successful, scaling is as easy as simply paying for the new cloud computing power being used instead of further investing capital in more server capacity. With most cloud computing services, their offerings become more economical as the scale increases.
Evolution of cloud services
In recent years, cloud computing services have expanded dramatically. The market has matured, and the new crop of vertical companies is able to follow in the footsteps of the larger, horizontal companies to streamline offerings. These new companies understand their target customers — SMBs — may not have a dedicated IT person who can spend their entire workday building and fleshing out a web app. Their goal is to get these business owners in the door and show how they can easily simplify major parts of their employee workflows for a nominal fee.
For instance, Toast is a cloud-based service tailored to the many needs of the restaurant industry. The all-in-one service has a suite of tools designed to make the lives of both local restaurant owners and national chain operators that much easier. The tools Toast provides have been influenced by horizontal cloud companies before it and are accessible to SMB owners without needing them to be IT experts.
For nearly every business niche, there is a cloud-based service that has emerged or is emerging to simplify some workflow. The horizontal cloud market is maturing, and as time goes on and new players enter the field, niche vertical companies will become more prevalent. Even for SMB owners who struggle to find a cloud service custom to their niche, HR, customer booking, and customer data storage tasks can be streamlined via current cloud offerings.
How to get started
So, how can SMBs begin adopting cloud-based services? One method would simply be to find a vertical solutions provider for their business types and trial their offerings. While there is nothing wrong with this method, there is currently a buyer’s market when it comes to the cloud that SMBs can take full advantage of.
In addition to using pay-as-you-go pricing, many (if not most) cloud service providers offer some variation of an initial "freemium" model — a combination of free and premiumi. For instance, a provider may allow a business to book 1,000 customers a month for free or allow up to 20 employees to access the service per month. Once a business goes over these thresholds, billing kicks in and it becomes an operating expense.
In addition to allowing businesses to trial these services and truly find ones that fit into their business models, freemium trials are being introduced. The goal is to show that these specialized providers understand business needs and are offering SMB owners the opportunity to see, firsthand, the value they offer before making a commitment. As most SMBs are still averse to adopting new digital tools, cloud service providers have a very high customer acquisition cost and will bend heavily to make a sale.
Instead of just taking whatever freemium trial is offered broadly on a cloud service provider’s website, SMB owners can benefit from picking up the phone and calling their sales team. More likely than not, the provider will be happy to increase the parameters of the freemium model for an enthusiastic, potential customer. If there is a specific service not offered in the freemium model, a call may make it available for trial as well.
At the same time, SMB owners shouldn’t be afraid to hop from one provider to another if they discover the pricing or tools are better. While it may seem like a transition from one provider to another would be a costly and time-consuming task, it’s far easier for these providers to convert existing cloud users into customers than completely green ones. They may offer to cover the cost of the data migration or provide some other incentive to the business to make the switch. As long as the customer acquisition cost for these cloud service providers remains high, SMBs can reap the benefits of trial and error without paying a high price.
Finding the right cloud-based service is increasingly becoming easier as well. SMB owners have the current advantage of being able to see reviews of these services on places like G2. There, they can find in-depth reviews of business owners in similar situations with similar perspectives and make informed decisions about which services are worth trialing.
To make the most of these services, SMBs should also focus their hiring efforts. The talent needed to run dedicated servers is vastly different from the talent needed to utilize cloud-based tools. SMBs should prioritize finding talent with high learning curves versus those who come to the table with a large set of skills but also costlier wages. As the industry has matured, the documentation and user-friendliness of these services has only expanded. Dedicated employees who are willing to increase their own skills will benefit their companies while keeping costs down.
The cloud market has matured to a point where there is a vertical-solutions provider for nearly every business niche. To stay ahead of the competition in an evolving business landscape, SMBs should look at integrating pay-as-you-go cloud services into their models. At the same time, these vertical-solutions providers are scrambling for customers, and businesses can leverage their planned patronage to get the best possible deal for services. Adopting cloud-based services now and acquiring and maintaining talent that can learn to use these services will both streamline operations and keep a business ahead of the competition.