5 Reasons the Cloud Is Great for SMEs
Entrepreneurs need to adopt technology in order to keep up with big firms’ productivity. Success would be sweet not just for the entrepreneurs, but for the whole economy.
In every country—and especially in emerging economies—small and medium-size enterprises (SMEs) account for the lion’s share of jobs. Brazil’s 8.5 million SMEs make up 99% of the country’s businesses and 52% of employment. In Mexico, 4.2 million SMEs account for 78% of the workforce.
But small entrepreneurs are falling behind. In both Brazil and Mexico, SMEs struggle with productivity. According to McKinsey, in Mexico productivity has risen 5.8% a year in large, modern companies, but has dropped 6.5% a year in small firms. Small businesses with 10 or fewer workers were 28% as productive as large firms in 1999; by 2009 that fell to 8%. That’s the biggest gap in labor productivity among members of the Organization for Economic Cooperation and Development.
Meanwhile, Brazilian SMEs are only about 30% as productive as large companies, barely better than those in Mexico.
As an entrepreneur, you might be so overwhelmed just trying to survive that you don’t have time to devote to the latest technology. But digital tools could deliver big gains by improving information and communications technology and using digital tools that would give you access to bigger markets, even international trade.
You don’t have to be a technology expert to make digitization work for you. In fact, one of the easiest ways to adopt information technology is through the cloud. The cloud offers businesses a way to adopt new technology gradually, without a big investment. You probably already use the cloud: email and social networks are based in the cloud.
Mexican SMEs have gotten the message: 46% use the cloud, up from 3.5% in just five years. In a recent survey, 33% of Mexican SMEs said they use cloud services now, while 41% predicted they would be using the cloud in the next three years—a 22% increase. In Brazil, cloud and mobile services are expected to grow three to seven times faster than traditional on-site computing technology, with IT investment by SMEs rising US$63 billion in 2020, up 37% from 2016.
While that’s an impressive gain, the majority of SMEs still don’t use the cloud. In Brazil, 70% of SMEs haven’t adopted the cloud. Being an early adopter can give your business efficiency and a competitive advantage.
Here are more reasons to consider the cloud:
- It’s cheap and flexible.
Cloud services are scalable, meaning you pay only for what you use. If your business lands a big contract and you need more digital storage, for example, you can get it instantly, without having to go out and buy computers or servers. You can scale down, too. And you get a monthly bill, like for electricity, which helps you predict cash flow. Not only do you not have to pay for technology support personnel, but the cloud can cut software and hardware costs 40% and energy consumption 80%.
- It’s easy.
The cloud offers more than just file storage—known as IaaS or infrastructure as a service. You can also can get a platform as a service (PaaS) where you can develop apps, or software as a service (SaaS), where the updates happen in the background without effort on your part. The maintenance is taken care of for you.
- It’s mobile.
You can access the cloud from anywhere, whether you’re traveling or you have remote employees. You can check your business from your computer in your office or from your phone at home—no need for synchronizing. All you need is an Internet connection.
- It gives you security.
Cloud providers work hard to keep their systems secure, and make updates immediately. You still have to vigilant against phishing or viruses from going to malicious sites. Another security aspect, though, is geographic. If your business suffers a fire or flood, you might lose your computers but you won’t lose your information because it’s stored elsewhere, or at least a backup is.
- It’s more than storage.
Cloud services exist for many business goals, such as accounting, analyzing customer data, while avoiding the need for IT staff.
—Enterprise resource planning (ERP) is among the most popular cloud services for SMEs. ERP software started as huge, complex packages for the biggest corporations, but pared-down versions have become available for small businesses. Because the services are in the cloud, you don’t have anything to install—you just sign in. ERP puts many aspects of your business into an easy-to-read dashboard. It makes it easy to share information across your business, and increases productivity. It also can incorporate regulations, taxes and other laws when, for example, creating invoices.
—Customer relationship management (CRM) is another genre of software that began for large corporations but now is available in simplified form for small businesses, including via the cloud as SaaS. CRM helps businesses track customer contact, sales and history, generate sales leads, forecast sales and automate workflow, for example sending out reports or follow-ups. Some also can automate a call center or a fidelity program.
In Brazil, 43% of SMEs don’t have a customer database. In Mexico, only 3% of SMEs have a procedure for knowing their clients.
—E-commerce is an important and relatively cheap and easy way for SMEs to access international markets. The strength of SMEs is their ability to differentiate for niche markets, but sometimes those niches are too small domestically. E-commerce puts SMEs in touch with a far bigger pool of customers. That’s especially useful in Mexico, where many SMEs already export. Last fall, the Mexican government signed a pact with Alibaba, the Chinese e-commerce giant, to give Mexican SMEs better exposure in the Chinese market.
The cloud works with e-commerce by storing your Web site so you don’t have to keep it on your own computers. A Web site can become a trove of data about who is interested in your products, yet only 34% of Brazilian SMEs use the Internet to market their products.
—Digital finance platforms and applications let SMEs track some variation of sales data, profitability, customer data, point-of-sale data and so on. Some even automatically re-order stock as goods are sold. Some banks include such apps with digital bank accounts. Santander already has 127,000 digital SME customers in Mexico.
—Mobile payments are growing fast in both Brazil and Mexico. If your sales transactions are in cash, you’re missing out. You aren’t building a track record that a lender can review in order to give you a loan for investment in modernization or expansion. And you aren’t keeping track of sales—not just how much, but where, when and to whom.
If that sounds too complicated, relax. Bluetooth terminals linked to an app on your phone or tablet are cheaper and more flexible than the credit-card readers they replace. It’s the wave of the future, as the number of people with bank accounts rises quickly in Mexico and Brazil, thanks to all-digital mobile accounts. For example, iZettle, a mobile point-of-sale platform, offered card readers in Mexico through a partnership with Santander. (words 1,187)
Resources in Brazil:
Brazilian e-commerce portal: https://www.ecommercebrasil.com.br