04 April 2017
Q&A with Andre Deetlefs, Executive: Lines of Business at Jasco Enterprise
1. How can the modern business make cloud services pay in the short term?
The opportunity to make cloud services pay will come when businesses want to take on new services that were previously unavailable because they required a large initial capital outlay. This cost-to-entry barrier can be overcome by choosing to use cloud services, a decision that makes a lot of sense for small businesses and fresh start-ups, given the cash flow advantage that comes from using these services on a monthly basis. For instance, a new start-up could sign up with Gmail, register their own domain and get their email as a cloud service rather than spending money upfront buying and putting in an email server. In the short term, because the service is paid for as a monthly expense, it has less of an impact on cash flow.
While this might seem attractive, it’s important to bear in mind that because the service provider is taking most of the risk and absorbing all the costs of initial outlay, the service price over a longer term becomes an issue. When paying monthly costs in a cloud solution, typically the break-even period that we’re seeing in the market currently is something like 18-24 months. This means that if you plan to use the service for more than 24 months (a lot of customers are thinking along 4-5 year time horizons) hosted solutions could work out to be more costly than expected. This makes sense given that the service provider outlays the investment upfront and as such needs to see a return, which happens typically after 18-24 months.
2. How about in the long term?
That’s the tricky one. The answer lies in the fact that by using cloud services the business has access to skills without having to hire those skills in-house. Given that cloud services are operated and maintained directly by the service providers, this means that the company benefiting from the service does not have to employ its own staff to look after those services and this is where there is a definite case to be argued for making the cloud pay. To use the previous example of the email service, if a company bought their email server up front and hired someone to manage email in the IT department, it would be a cost to the company. By using a hosted solution, those costs associated with that email server and that employee falls away. it’s important to consider more than just the cost of the actual service, it’s all the extras that come with the service that can ensure cloud pays in the long run.
3. Are cloud services critical to the success of the modern business – without them, are questions like ‘will it pay?’ moot as the business will battle against those that do invest?
I think this is definitely becoming the case, and there is increasing pressure for modern businesses to evolve to keep up with changing customer needs. Due to the lower cost to entry, more businesses are starting to use cloud services because they’re affordable up front. Where for example a company needs an CRM system, rather than purchasing a traditional system, they can sign up online with the likes of SalesForce.com and start using the solution on a monthly basis. This company would have previously gone without a CRM system because it was not financially accessible but having these services available in the cloud makes it more affordable as an OPEX-type payment. Having access to a CRM system means that the company is now able to provide their customers with better service, which enhances customer relations and increases customer retention, which is obviously good for business. By investing in these kinds of cloud services, businesses will have a distinct advantage over those that do not and it could make all the difference when it comes to surviving in today’s competitive world.
4. How can the business benefit from cloud services? What steps do they need to take now, and in the future, to ensure they are a robust investment?
Again, businesses can now consume these cloud services and benefit from the fact that there is a lower cost to entry in the cloud market. They can also benefit from almost instant gratification, in terms of ease of set-up of cloud service. However, before making a decision, in order to ensure that cloud services will be a worthwhile investment, it is important to only consider services from trusted, established providers. There are a lot of fly-by-night providers out there, so it is essential to check credentials and experience. Like any other purchase, investigate if other customers are happy with the service rendered before buying in to a service.
5. What cloud services are the most likely to deliver value to the business and why?
I think there’s a range of cloud services that are likely to pay off and deliver significant value to businesses. Starting from communications and collaboration services, and here we’re talking functionality like voice and video calling, conferencing and even contact centre cloud offerings. From the business tools point of view, there are CRM applications, ERP systems, accounting systems, and even Human Resource and payroll systems that are hosted in the cloud and available as a service. These will all deliver value and allow employees to be more productive, more collaborative, more helpful to customers and colleagues and will allow them to spend more time on what’s important.
6. Any other thoughts?
Start-ups now have the opportunity to access an excellent suite of hosted products and consume services that are enterprise-level in nature. This means that when bootstrapping a small company of, for example, ten people with a contact centre of three service agents, it’s possible to get up and running using only cloud services. It’s also possible to get hosted telephony, email, ticketing services, HR, payroll and the like, and to pay only for the people that use the solution within the business. As the business scales, it becomes possible to add more users and keep that same level of SME functionality.