Opinions expressed by Entrepreneur contributors are their own.
The past few years have presented significant challenges for small and medium-sized businesses (SMBs), no matter the industry. Supply chain disruptions created production delays and order backlogs, a tight labor market led to staffing shortages and talent acquisition problems, and now inflation lingers at high levels and mounting costs continue to plague business growth plans. On top of this, interest rate increases cause further uncertainty: 91% of small business owners believe that SMBs are particularly vulnerable to complications caused by rising interest rates.
While these macroeconomic challenges paint a somewhat bleak outlook, the bright side for SMBs is that they are better equipped than ever before to manage them. As SMB leaders evaluate costs across their organizations, they’re finding cloud technology offers profound advantages.
Smart investments in the cloud, particularly for SMBs, are vital right now, as they can help businesses shrink and optimize annual IT expenditures, increase revenue and productivity, and innovate faster to stay competitive. In fact, they can achieve the same kinds of success that enterprise-level organizations do — without an enterprise-level budget.
Related: What is Cloud Computing? Here’s Everything You Need to Know.
Immediate cost reduction
Inherently, migrating to the cloud has the power to reduce costs for businesses of any size by removing the need for companies to manage on-premises data centers. In fact, a 2022 IDC study found that organizations that used a cloud provider instead of on-premises solutions were able to shrink their annual IT expenses by 25%. Cloud providers generally utilize a flexible deployment model that allows companies to scope their usage as needed. This means that businesses pay only for the services they use, so they avoid the risks of investing in excess capacity to prevent potential failures.
This pay-as-you-go model can transform budgeting and technology strategies for SMBs. It empowers businesses to respond to seasonal spikes and dips in demand without the kind of planning and capital expenditures required by on-site IT solutions. There are no fixed costs, lengthy contracts or expensive licensing fees involved. This frees up resources, allowing teams to focus on more productive and innovative work.
These cost reductions help clear the pathway for better performance by relieving overwhelmed SMB leaders of their financial and operational stresses.
Long-term cost management
In addition to the often-immediate cost reduction SMBs experience in migrating to the cloud, the right provider can help them keep costs low moving forward. Cloud services make cost optimization possible through a variety of cloud management and monitoring tools – many of which are automated — that make it easier for organizations to monitor and reduce their cloud costs on an ongoing and long-term basis.
In the cloud, these tools track usage and make adjustments dynamically, preventing companies from spending on excess, unneeded capacity. For example, there are solutions that will automatically move data that’s rarely used into lower-cost storage options. This creates remarkable savings for SMBs, all without requiring active management by IT teams.
Productivity benefits
Beyond these cost benefits, the cloud can help SMBs create operational efficiencies, become more agile and boost productivity. The positive business impacts of cloud technology aren’t assumptions — they’re supported by research. A recent study by MIT Sloan examined business outcomes for public firms in the U.S. over a period of 10 years and found that cloud adoption was “associated with significant productivity gains.”
What’s more, the study also demonstrated that cloud adoption is associated with roughly 6.9% higher sales in the long term. This isn’t a one-off or potentially random result: the MIT Sloan research notes that when two firms are compared — one cloud-ready and one is not — the first will continue to perform better. These companies that make the jump to the cloud see sustained, lasting benefits to the most meaningful parts of their businesses.
As SMBs continue to migrate to the cloud, there are even more productivity gains to be made. Recent research from Accenture indicates that by 2030, cloud-enabled SMBs are expected to unlock $79.8 billion in the United States across healthcare, education and agriculture, a 26% increase in current productivity benefits from the cloud, which were estimated at $63.2 billion in 2023.
The cloud makes impacts like these possible thanks to the flexibility and scalability it offers businesses of all sizes —an advantage that is particularly consequential for SMBs with lean staff and more limited resources.
Related: 5 Benefits of Cloud Technology for New Startups
Competitive advantage
SMBs that invest in the cloud and cloud-powered innovation are also better positioned to innovate and quickly adapt to changing customer demand and expectations. Cloud migrations facilitate the adoption of exciting new technologies, including artificial intelligence (AI) and machine learning (ML). These technologies generally require vast computing resources to operate. As a result, they’ve often been unavailable to teams that depend upon physical, on-site IT platforms for their tech needs. This can contribute to an innovation gap between SMBs and enterprises with greater resources.
Cloud services can close that gap by unlocking the potential of AI, ML, and other tech for SMBs. By bringing their data and operational workloads onto the cloud, SMBs gain access to a diverse range of tools that can help teams ideate, prototype and analyze results faster than ever before. These tools democratize technology — helping smaller businesses remain competitive both with their peers and with much larger competitors in their field.
When SMBs take full advantage of their cloud migrations — implementing technologies like automation, AI and ML throughout their workflows — they see benefits every year.
Continual optimization
For SMBs with limited resources and a lot of work to get done, a cloud migration can seem like an unnecessary or complicated endeavor. But a properly calibrated move onto the cloud can pay dividends for years into the future. It’s not just about continually looking for ways to reduce costs and remain productive but also freeing time and resources to innovate, keep customers happy and stay competitive.
With the cloud in their business toolkit, SMBs will be far better prepared to handle the kind of market volatility they’ve experienced in recent years.
