Why 50% of SMEs Will be Using the Cloud for Reduced Costs and Scalability?

“More than 50% of enterprises will use industry cloud platforms by 2028 to accelerate their business initiatives.” – As per a Gartner Press Release. 

Owing to the potential of cloud platforms to enhance accessibility, scalability, and security, many companies have started using cloud technologies. Out of these, SMEs have emerged as a leading segment that’s increasingly shifting to the cloud. Faced with challenges such as limited budgets and resources, the need for improved collaboration, and the desire for better data security, they are exploring the cloud to overcome these operational hurdles. 

This article will explore why such a significant number of organizations are shifting to cloud-based application development, and the benefits, challenges, and solutions catering to them. 

SMEs and Cloud Application Development: A Current Overview

As more SMEs are moving to the cloud for application development, the cloud applications market is expected to generate over $356 billion by 2025! This growth stems from the direct benefits of cloud-based app development, such as reduced upfront costs, enhanced security, and improved accessibility.  

Why are SMEs Turning to Cloud Application Development?

• Cost Efficiency

Managing expenses is one of the biggest challenges for SMEs as they typically run on tighter budgets and fewer resources compared to larger companies. In this scenario, turning to the cloud for application development is a cost-effective alternative. 

According to Accenture, businesses can experience Total Cost of Ownership (TCO) savings of 30% to 40% by moving their workloads to the public cloud. By transitioning to the cloud, SMEs can significantly reduce cloud application development costs by eliminating the need for substantial investments in physical hardware. Instead of purchasing and maintaining servers, this flexibility allows them to adopt a pay-as-you-go model, enabling them to pay only for the resources they use.  

• Access to Advanced Technologies

Cloud application development provides SMEs with access to advanced technologies they may not have yet. With these solutions, SMEs can benefit from established workflows and frameworks integrated with modern technologies like AI, ML, and big data analytics without significant investment. As a result, SMEs can improve their operational efficiency, reduce costs, and enhance customer experiences, all of which contribute to a stronger position even in a competitive market.

• Agility 

The key to success in today’s market is agility. For SMEs who are still trying to establish their presence in the market, the ability to timely deliver products and services is essential. Cloud application development accelerates this process by offering a variety of tools and frameworks that streamline development. By leveraging pre-built cloud solutions, development teams can focus on customizations and innovations right away, rather than starting from scratch. This not only speeds up time to market but also enables SMEs to respond quickly to changing demands and seize new market opportunities.

• Enhanced Security 

Due to budget constraints, SMEs are often perceived to have weaker security measures compared to bigger organizations. Furthermore, a security breach involving sensitive business or consumer data can be especially damaging for these companies, at a critical time when they’re trying to position themselves. 

By turning to cloud application development, SMEs can take advantage of the advanced security features offered by cloud providers. These features include data encryption, authentication & authorization mechanisms, regular backups, and robust threat detection and mitigation systems. As a result, SMEs can access a level of security that would be challenging to achieve independently, enhancing overall protection against potential threats.

• Accessibility and Collaboration

Today’s digital workflows demand seamless collaboration and communication from anywhere, and cloud applications serve as an excellent solution to meet this need. By allowing employees to access data and tools from any location at any time, these applications help organizations overcome geographical and time zone barriers. This flexibility is particularly beneficial for SMEs with remote or distributed teams, enabling them to maintain productivity regardless of their physical locations.

• Business Insights

Cloud platforms often provide advanced data analytics tools that enable SMEs to gather and interpret real-time data. With the cloud’s centralized access to comprehensive data and analytics, SMEs can track performance metrics, identify trends, and gain valuable insights that drive growth and efficiency. This allows them to make informed decisions quickly and strategically, without having to subscribe to integrated BI solutions separately. 

Challenges and Considerations in Cloud Migration

While cloud-based application development has several benefits, it’s crucial to consider a few things to avoid common challenges and ensure a smooth transition. This is particularly crucial for SMEs as unlike large enterprises, they often have limited resources and face tighter budget constraints. 

As per CloudZero’s State of the Cloud Report 2023, the top challenges in leveraging the cloud for application development are:

To make the most of cloud capabilities, they must consider the following:

1. Managing Costs: While cloud application development can be cost-effective in the long term, managing and predicting expenses can be challenging. SMEs must carefully monitor and track their usage to avoid unexpected charges, which can arise from overutilization of resources or from underestimating the cost of certain cloud services.
2. Data Security and Privacy: Even though leading cloud platforms have advanced security features, SMEs must be proactive in safeguarding their data. Understanding and moving on with a shared responsibility is the way to go. 
3. Lack of Resource: Many SMEs operate with smaller teams, which can restrict their ability to invest in the necessary talent and tools for effective cloud development. Without dedicated or skilled personnel, they may struggle to design, develop, and maintain cloud applications that meet their business needs.

Some Other Challenges:

1. Workflow Interruptions: Even cloud-based application development is subjected to some downtime, such as when cloud providers conduct routine maintenance or update their servers and infrastructure. To mitigate this risk, SMEs must plan and establish proper strategies to minimize potential service interruptions during the process. 
2. Selecting the Ideal Cloud Platform/Service Provider: Choosing the right cloud provider is an important decision. It requires carefully evaluating various providers to find one that aligns with the organization’s specific needs, budget restrictions, and long-term goals.
3. Integration with Existing Systems: Cloud-based applications must integrate with existing infrastructure and systems. This can be complex, particularly for companies with legacy software systems. To sidestep this challenge, leverage professional cloud development services for SMEs. These providers can assess your existing applications and devise a strategic cloud migration plan. 

While these challenges may seem intimidating at first, several known companies have successfully transitioned to the cloud. 

Notable Organizations that Have Embraced Cloud-Based Development

Many companies have moved to the cloud for greater flexibility, security, and cost benefits. One such company is US-based Capital One. 

Capital One, a Fortune 500 company that initially started as a small-scale, credit card company, migrated to the cloud to enhance its services and operations. Their digital transformation started years ago, with an aim to:

• Shift to a cloud-first strategy 
• Become a technology-focused company that does banking instead of a banking company that prioritizes tech 
• Move to an agile model for developing and delivering software 

By migrating to the cloud, they could:

• Provision infrastructure instantly 
• Save significant costs 
• Facilitate real-time data processing
• Adopt the latest technologies
• Supports RESTful APIs, microservices, and DevOps processes
• Accelerate release cycles

Key Takeaways 

With growing market demands and the need for secure, scalable, and highly accessible applications, even small-scale organizations are exploring the cloud. While their journey is challenging for several reasons (budget restrictions, lack of expertise, etc), the potential for cost savings, enhanced security, and improved collaboration in the long run far outweigh the above challenges. One effective way to ease this transition is by partnering with cloud application development services. These providers specialize in customizing cloud solutions and integrating them with your existing infrastructure. So get ready to embrace this shift—those who successfully adapt and invest will be well-positioned to lead in their respective industries.

Author Bio: Nathan Smith has over a decade of experience in the IT industry. He shares his knowledge and insights through his writing, covering the latest trends, technologies, and best practices in web development, app development, cloud app development, DevOps, AI/ML development, data engineering and related fields. His articles cater to technology stakeholders, developers, designers, and tech enthusiasts alike.