European SMBs and the Cloud

A European Analysis of the Small Business Community

Research commissioned by Microsoft

Contents

Introduction 3Research methodology 3

Summary of key findings 4Business decision-makers are optimistic about the next few years 4Computing technology is fundamental to the success of SMBs 4Most business decision-makers use cloud computing, but not necessarily for business purposes4It should be the role of the IT sector to be responsible for the security of cloud computing 4

Small and medium-sized businesses in Europe 5Selling internationally 5The economic context 6

The role of IT in the success of small- and medium-sized businesses 8Valuing technology 9The challenges of technology 9

The emergence of cloud computing, and its role in the success of small- and medium-sized businesses 11

Does cloud use have an impact? 11Are non-users missing out? 13The future of cloud 13

Do small and medium-sized businesses have faith in cloud computing? 15The challenges of cloud 15Privacy and security 16Can cloud be trusted? 16

Conclusion 18

Introduction

Research methodology

Microsoft commissioned independent specialist technology market research company Vanson Bourne to undertake the research upon which this report is based.

2,100 interviews were carried out in November 2011 with senior business decision-makers in small and mid-size businesses. The survey was wide-reaching across Europe, covering the following countries/regions:

Western Europe (Austria & Switzerland, Belgium, Denmark, Finland, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, UK)

Eastern Europe (Czech Republic, Greece, Hungary, Poland, Romania, Russia, Ukraine)

The business sectors targeted were:

Automotive Financial services IT Manufacturing Retail Telecommunications Other commercial organisations

Results discussed in the main narrative are primarily based on the entire European sample. Where variances in regional response are worth noting they appear in a separate information box.

In these difficult economic times, small and mid-size businesses are facing severe challenges to their survival, so opportunities to find savings, maximise profits and be as competitive as possible cannot afford to be overlooked.

This study examines the attitudes of business managers, their expectations for the future, the

role of their company within their country’s economy, how they view their competitors, the importance of technology within their company, the adoption of cloud services and how they view the technology sector.

Summary of key findings

Business decision-makers are optimistic about the next few years

28% of businesses expect to more successful over the next 12-18 months than they have been

in 2010-2011, compared to just 5% expecting to be less successful.

24% of businesses to expect to hire more staff, compared to just 7% expecting to lay off staff.

81% think SMBs are fundamental to the economic success of their countries.

It is a lack of economic certainty (58%), not cashflow shortage (29%), that is prohibiting growth.

The majority (58%) of SMBs will be selling internationally within twelve months.

Computing technology is fundamental to the success of SMBs

66% think computing technology is vital to their business.

64% think computing technology has a crucial role in helping their business get through the current economic crisis.

61% would prefer to make capital investment in new computer technology, making cloud a tricky proposition.

Most business decision-makers use cloud computing, but not necessarily for business purposes

45% use business cloud computing services

and those using cloud for business see a litany of benefits.

It should be the role of the IT sector to be responsible for the security of cloud computing

77% think the IT sector should be responsible for ensuring the integrity of cloud services

…even though only 45% trust IT companies’ when they talk of security and 44% when they talk about privacy.

and as a result 71% want to know where their data is located and …

48% would think twice about using cloud because of data privacy.

Small and medium-sized businesses in Europe

If one were to rely solely on press reports on the economy at the moment, one would be forgiven for thinking that the near-term future for businesses within Europe is bleak to say the least. Having endured the global financial crisis throughout the latter end of the last decade, it appears that Europe is teetering on the brink of another economic faltering. The predictions of both the Greek and Italian economies defaulting in the near future, the worries of the stronger European economies having to support weaker national economies, and the declining confidence in the Euro have created an atmosphere that most would consider anxious at best and terrifying at worst.

Given that even the most optimistic analyst is predicting that things will get worse before getting better, we would expect businesses in Europe to be feeling pretty dismal, to be planning for the worst, to be cutting jobs, and to be looking to survive rather than to expand. But is this true?

Surprisingly not, according to the results of this research. Across all countries surveyed, more business decision-makers say that they expect their businesses to be more successful in the next 12-18 months than in 2010-11 than said they expect their businesses to be less successful. 28% expect to be more successful and just 5% expect to be less successful. And it is not just a case of coasting along in the meantime, as only 30% say that they merely expect to maintain the status quo over the same time period.

This mentality carries over onto the size of the workforce, too. Slightly under a quarter tell us they expect to hire new staff in the forthcoming 12-18 months, whereas only 7% say that they expect to lay off staff in that timeframe. How are small- and medium-sized businesses expecting to achieve this success?

European SMBs are optimistic for the future

I expect to have to lay off staff

I expect to hire new staff

I expect us to be less successful than 2010-11

I expect us to be more successful than 2010-11

7%

24%

5%

28%

Selling internationallyThe research suggests that international trade may be one of the key reasons, as over the next twelve months more of these business expect to be trading internationally than not. At present, 46% of those we spoke to sell internationally, with a further 12% currently planning to be able to do this within the next twelve months.

In short, for the first time, those small and medium businesses in Europe who are not selling internationally will be in the minority, not the majority.

46%

12%

42%

Already sells interna-tionally

Plans to sell internationally within twelve months

No plans to sell interna-tionally at all

It’s undeniable that the widespread adoption of the internet is central to this growth in European businesses’ reach. The easy ability to find a market

for your product coupled with the low cost of entry has made it easier than ever for businesses to sell beyond their doorstep.

What is evident from the research is the nature of who these businesses are targeting will change, too. Amongst those who are selling internationally at the moment, only 2% say that China is their largest single market, whereas 10% are expecting China to be their biggest market in 2020. Though most say that Europe and the domestic markets are their biggest markets at present (and most say the same for the future), there is a noticeable swing towards new and emerging markets; 82% of those who sell internationally say their biggest markets are Europe or domestic at the moment, but only 68% say the same about where they expect their largest market to be in 2020. Though sales at home and around Europe are important, it is clear that new and emerging markets will become ever more important to small- and medium-sized businesses across Europe.

The economic contextSo not only are more businesses looking to sell internationally, but in future it seems that an increasing percentage of businesses’ primary markets will be overseas. This seems remarkably at odds with the news headlines; are small- and medium-sized business across Europe totally impervious to the troubles around them?

As much as business decision-makers in these companies are optimistic about the future, they are still affected by the Eurozone crisis. When asked what the top three barriers are to growing their business within their country, only one answer was selected by the majority: 58% say that it is economic uncertainty that is preventing them from growing. Just 29% - fewer than one in three - said that a lack of cash-flow prevented them from growing their business domestically.

Uncertainty prevails

Cashflow shortage prohibits business

growth

Economic uncertainty prohibits business

growth

0% 10% 20% 30% 40% 50% 60% 70%

29%

58%

Admittedly, one might argue that the two are interlinked: economic uncertainty may cause a cash-flow shortage but it’s the uncertainty that’s the more pressing issue. What is evident is that most businesses do not lack the ability to grow; the news reports understandably make them act a little more conservatively than they would like. And this conservatism is not necessarily helping either these businesses, or the national and European economies as a whole. 81% of those we spoke to believe that small and medium sized businesses like theirs are not just important, they are the backbone of the economy. A further 64% say that it is their businesses that will be most responsible for providing the jobs and innovation to bring back the good times.

The importance of SMBs to the economy

I believe it is businesses like mine that will be most respon-sible for providing the jobs and

innovation to bring back the good times

I believe small and medium sized businesses are the

backbone of the economy

64%

81%

If small and medium-sized businesses across Europe become too worried to expand because of the current political climate, the economic outlook becomes a vicious circle.

But, crucially, these businesses are not looking towards failure. They are more likely to see the

next eighteen months as more successful, and most are aiming to be selling internationally within twelve months. If small and medium-sized

businesses truly are the backbone of the economy, the future seems rosier than the headlines might lead us to believe.

There is some variation of these findings amongst the different countries in which the research took place. Some countries were more optimistic about the next eighteen months than others. Although 28% overall said they expect to be more successful in the next eighteen months, 40% of

those in Sweden, 39% of those in the UK and in the Czech Republic, 38% of those in Russia, and 37% of those in the Ukraine expect to be more successful over the next year than in the previous year. By contrast, Greece (25%), Italy (23%), the Netherlands (22%), and Spain (15%) are notably behind.

In some instances this is understandable; Greece and Italy are in the midst of very serious economic turmoil at present so it is natural that respondents there would not be as positive as elsewhere. Nonetheless, in every country in which the research was performed, a greater percentage of people expected to be more successful in the next year than to be less successful. Regardless of location, small- and medium-sized businesses everywhere are more likely to be expecting to be more successful.

Similarly, not in one single country did the majority of respondents say that it is a lack of cashflow that is prohibiting them from growing within their own country. The most selected reason as to what is stopping domestic growth of their business in every region is economic uncertainty.

Though 58% across all the countries intend to be selling internationally within twelve months, there is some significant variation on this. 70% of those in Austria and Switzerland are planning to sell internationally, as are 69% in Portugal, 67% in Germany, 63% in France and Poland, 62% in Ireland, and 61% in Spain.

By contrast, the majority of those in Russia (56%), Ukraine (54%), Hungary (53%), and Sweden (51%) have no plans to sell internationally. The Eastern European countries here are particularly interesting, as they are geographically much closer to the emerging Asian markets than those elsewhere in Europe and we therefore might expect them to be keen to trade internationally. Indeed, amongst those in Russia and the Ukraine who are trading internationally at present, only 4% say that China is their largest market, though 17% of those in Russia and 22% of those in the Ukraine expect China to be their biggest market in 2020. This illustrates perhaps a big difference within these countries: only the minority are trading internationally at present (and only in limited amounts with China), but they expect a big growth in the significance of the emerging Eastern economies within ten years and are ideally placed to seize on that opportunity.

The role of IT in the success of small- and medium-sized businesses

By their very nature, smaller organisations are more fragile and more transient than enterprise-sized organisations. New, small businesses spring up overnight and can disappear just as quickly. Though enterprise organisations need to remain agile in order to maintain market share, smaller businesses are more likely to disappear entirely rather than just losing size or value if they do not take every opportunity that they can.

During the research, these small- and medium-sized businesses (organisations with 250 employers or fewer) tell us that less than half have been

operating for ten years or more. This is a good indication of average longevity; if the average business of this type had a tendency to endure, we would have a far greater number of respondents telling us that their businesses have been operating for much longer periods of time. That the majority are under ten years old tells us that most businesses like this tend not to make it to ten years of operation.

The longevity of small- and medium-sized businesses is not guaranteed. Though there is always a chance, if small- and medium-sized

businesses want to survive, they need to actively seek and seize any sort of competitive edge that they can in order to remain relevant and competitive. We have already seen that this is happening: a significant proportion trade internationally at present and the majority are looking to trade internationally within the next twelve months, showing that businesses are taking full advantage of the opportunities that increased communication and audience that the internet can open up. By doing so, they are able to sell to new and emerging markets; as China, India, and the other Asian markets grow in significance over the next decade, small- and medium-sized businesses in Europe who have the means to do so are well-placed to trade directly with them.

This implies that more than ever, technology is fundamental to the success of small- and medium-sized businesses success, both at present and in future.

Those we spoke to during the research agree. 66% agree that computing technology is not just important but is vital to their business.

The importance of technology

Our use of computer technol-ogy will be the deciding factor

in whether my business thrives or just survives

Computing technology has a crucial role to play in helping my business get through the

current economic crisis

Computing technology is vital to my business

55%

64%

66%

In addition, 64% say that computing technology is crucial to helping them to get through the current economic crisis, showing that many organisations’ use of technology at present is fundamental to getting them through the awkward period ahead of

them. Because 61% also say that technology will be a key driver of growth of their business, it also shows that the majority will be using technology to succeed in future.

Valuing technologyIn short: technology is fundamental to how small- and medium-sized businesses will both survive the current economic turmoil and grow in future. No wonder that 55% say that their use of computer technology will be the deciding factor in whether their businesses thrives or just survives. The success of small- and medium-sized businesses and their use of computer technology go hand in hand.

Indeed, those who say that technology is vital to their business are also the most likely to be optimistic about the future. 31% of those who said this expect to be more successful in the next year; 26% of those who disagreed that technology is vital to them agreed with this statement. 61% of those who say that technology is vital are expecting to sell internationally within twelve months, whereas just 40% of those who disagreed expect to trade internationally.

Companies who value technology are more optimistic

Will sell internationally within 12 months

I expect us to be more successful than 2010-11

40 %

26 %

61 %

31 %

Computing is vital Computing is not vital

This gives further credence to the idea that success and international trade go hand-in-hand, but illustrates just how important technology is to that success.

But beyond this, those who consider technology to be vital are more likely to think of businesses like theirs to be the backbone of the economy (87% versus 73% of those who disagreed). Those small-

and medium-sized businesses who grasp new technology as a means of success are more likely to see themselves as holding their economies together: the more technologically adept companies are the ones who are driving the economy onwards.

The challenges of technologyFor most, computing technology is fundamental to their success, though there are worries that other countries both in Europe and in emerging economies might outpace technological innovation and adoption at home. It would therefore make sense for the decision-makers at small- and medium-sized businesses to want to flex their old systems of procurement and management in order to experiment and embrace new technologies.

However, the research shows that in the main, this is not happening. Decision-makers want their

technology to fall under capex - 61% say that they would prefer to make capital investment in new computer technology as part of their future planning, and only 37% would prefer to ‘rent’ rather than ‘buy’ new computer technology.

Intriguingly, those who agree that technology is vital to their success are much more likely to want to make technology a capex expense: 73% said this, compared to just 38% who said that technology is not vital to their continuing success. To some extent, this is understandable: those for whom technology is not important will be less likely to heavily invest in it, thus will not feel the need for ownership.

But at the same time, the majority of those that we spoke to - 72% - said that computing technology must help their staff work anywhere at any time. They want their staff to work increasingly flexibly, but their acquisition mechanisms remain much as they have been for the past few decades.

Looking across the countries in which the research took place, the majority of respondents in every country stated that computing technology is vital to their business. This is especially true in the UK (where 91% said this), Portugal (81%) Hungary (77%), the Czech Republic (76%), Greece (75%), the Ukraine (72%), and Germany (72%).

Only one country did not give a majority answer, though only narrowly: 49% of business decision-makers in Norway said that computing technology is vital to their success, although 53% agreed that computing technology has a crucial role to play in helping them to get through the current economic crisis.

There is consensus about how businesses wish to procure new technology too. The majority of respondents in almost all the countries surveyed wish to purchase new hardware and software through capital expenditure. This is especially true in the UK and Ukraine (74%), Poland (73%), Ireland (71%), Russia (67%), Sweden (66%), Germany (65%), Romania and Hungary (63%).

There are a few countries where only the minority want to acquire new tech through capex though: Denmark (44%) and Belgium (48%) are not as keen to acquire new systems through capital expenditure. Despite this, these countries were less likely to want to rent rather than buy tech services than average; across all countries, 37% found this appealing, but just 36% of those in Denmark and 29% of those in Belgium said the same. Clearly in these countries, there is a reluctance to procure computing technology using any one given methodology.

The emergence of cloud computing, and its role in the success of small- and medium-sized businesses

We have seen that in the main, business decision-makers throughout Europe believe that computing technology is fundamental to their success. The bind that many businesses find themselves in is that new technologies appear and disappear all the time; it is frequently difficult to know which technologies will be fundamentally game-changing, especially in a smaller business with little-to-no budget or manpower to experiment.

Nonetheless, there are always significant technological improvements which, if properly utilised, can reap wonders amongst savvy businesses. The internet revolutionised how businesses operate in the mid-nineties, allowing the rapid growth both of intranets within businesses so that colleagues could share data and resources, and the ability for businesses to communicate quickly, cheaply, and efficiently with suppliers, customers, and other interested parties across the planet.

A technology that has grown in significance over the past few years is cloud computing. The ability to provision services as and when required, the ability to run programs in a virtual environment that allows staff to use the same interface at any computer anywhere in the world, and the ability to decrease the reliance on in-house servers and infrastructure, have been trumpeted in some parts as the start of a major shift in how organisations will use computer technology in future.

Is cloud computing being used in small- and medium-sized businesses in Europe? The majority - 59% - of business decision-makers that we spoke to said that they themselves do use cloud at present, but not necessarily for business reasons. 28% say that they use cloud solely for business services and an additional 17% say they use cloud for both business and personal reasons (leaving a final 18%

who use cloud for personal reasons, not business reasons).

Users of business cloud services are in the minority

28%

17%14%

41%

Business cloud comput-ing services

Both business and cloud computing services

Consumer cloud comput-ing services

I do not use cloud computing services

Though these figures seem low, cloud is still an emerging technology; indeed, in addition to the 42% using cloud for business reasons at the moment, another 27% say that they intend to use cloud for business reasons in the next twelve to eighteen months, meaning that 69% will be using cloud for business purposes in the next two years.

Does cloud use have an impact?Is there any marked difference between those using cloud at present versus those who are not? Put simply - yes! Most notably, those who use cloud for business reasons at present are the most likely to expect to be more successful in the next year - 33% of them said this, compared to just 23% who said they plan to use cloud and 26% with no plans whatsoever.

Users of cloud are more likely to expect to be successful in the near future

No plans to use cloud

Will use cloud in future

Use cloud at present

26 %

23 %

33 %

One of the main fears of cloud computing cited elsewhere is that it can lead to a reduction in the size of the IT department and thus a decrease in the size of the workforce. What our respondents told us is that this is not necessarily the case: those using cloud at present are the most likely to hire new staff over the next twelve to eighteen months. 27% said this, compared to 25% of those with plans to use cloud and just 18% amongst those with no plans to adopt cloud.

This suggests that cloud is not being adopted as a tool to outsource processes already performed in-house and to reduce costs, but is instead being adopted as a tool to enable growth and to sustain them over the gloomy economic future.

Adoption of cloud is a sign of growth - more likely to hire more staff

No plans to use cloud

Will use cloud in future

Use cloud at present

18 %

25 %

27 %

Those currently using cloud computing are not only the most likely to be selling internationally at present, but are also the only group where the majority are selling internationally at the moment. 54% said this, compared to 48% of this with plans to use cloud in future and 34% with no plans at all. On aggregate, those using cloud are also the most likely to be selling internationally in twelve months:

67% in total will be selling internationally in the next year, compared to 63% of those with plans to adopt cloud, and 41% of those with no plans at all.

Understandably, those who are using cloud computing at present are the most likely to agree that computing technology is vital to their success; 76% report this, compared to 67% amongst those planning to adopt cloud and 54% with no plans to adopt. Again, it is remarkable that even amongst those with no plans to adopt cloud, the majority still say that technology is vital to their success - is this group likely to be left behind?

Those with no plans to adopt are also the least likely to be worried about both their country as a whole and Europe in general being technologically left behind.

Europe is slower than emerging economies in Asia at understanding the benefits to the economy and business of new technology

I worry that my country is not ahead of the game when it comes to embracing the latest computer technology to support business

38 %

41 %

53 %

56 %

53 %

55 %

Use cloud at present Will use cloud in futureNo plans to use cloud

41% of those without cloud plans are worried about their country being slow to adopt new technologies compared to 55% of those currently using cloud and 56% of those with plans to use cloud; just 38% of them are worried about Europe being left behind, compared to 53% using cloud at present and with plans to use cloud in the next year.

Are non-users missing out?Those without plans to adopt cloud computing are going to be left behind. Though the majority of them believe that computers are vital to their success, they are not as worried about being technologically left behind. To them, technology is not a differentiator of success, but another tool in the box. That mindset is understandable, especially when one considers that the implementation of cloud computing requires a revolution in the business’s computer infrastructure rather than a minor evolution, but nonetheless those with no plans to invest are potentially missing out.

When we asked those who are using cloud for business reasons at present what benefits they have seen as a result, they selected a litany of answers. Almost half (49%) said that their business is now more flexible; almost as many (45%) said that their business is saving money due to their implementation of cloud. 39% - more than one in three of those using cloud - say that their business is more productive because of their use of cloud, a remarkable fact. Over a quarter (28%) say that they are now more responsive, and a similar number (25%) say they are more innovative.

The benefits of cloud use:

More profitable

More innovative

More responsive

More productive

Saved money

More flexible

18%

25%

28%

39%

45%

49%

Tellingly, around one in five (18%) say that as a result of using cloud, their business is now more profitable than it otherwise would have been. If those who are adopting cloud can say that they have increased profits as a direct result, are those with no plans to adopt likely to suffer? And to suffer increasingly so over the next few years?

But it is not just about the bottom line. Cloud computing enables staff to work from anywhere, which partly explains why those using cloud at present are the most likely to believe that computer technology must help their staff work from anywhere at any time: 79% said this, versus 62% amongst those with no plans to use cloud. But again we see that although they don’t report as strong an opinion, the majority of those not using cloud still want their technology to enable their staff to work from anywhere. Without cloud, they lack the simplicity that their competitors who do use cloud have.

The future of cloudDespite the very evident benefits of cloud use amongst small- and medium-sized businesses across Europe, the fact remains that it is only the minority - 45% - who are using cloud for business purposes at present. Businesses desire the benefits that cloud can bring, but most have yet to make the jump. It may be that these businesses do not yet understand that the benefits that cloud computing brings are benefits that they desire, or that many are yet to see cloud computing as strategically important.

However, it is clear that to some, cloud computing is strategically important. Through the use of cloud computing, they have seen a wide range of benefits that, increasingly, those without cloud will want to emulate. Those who have already adopted cloud are very much ahead of the pack, which is why many are looking to adopt cloud in the next year. Those with no plans to adopt cloud at all will find themselves very much behind the pack.

There is a distinct pattern in current and future cloud adoption patterns across the countries in which the research was performed.

42% of everyone we spoke to use cloud for business purposes at present. Those that answered notably higher were Finland (44%), Denmark (45%), Norway (46%), Russia (46%), the Ukraine (46%), Romania (53%), Spain (57%), and the UK (59%). Notably, amongst those least likely to be using cloud for business reasons at the moment are Greece (33%), Italy (38%), and Portugal (38%), all economies that are particularly struggling under the current economic climate. This does suggest that use of cloud at present is tied to national economic stability, at least to some extent.

Only a minority have no plans to use cloud within the next twelve months; just 32% of the total sample said this. However, some countries are noticeably more reticent about adopting cloud. Those who are least likely to be adopting cloud are the Czech Republic (40%), the Netherlands (46%), Belgium (47%), and Hungary (48%). What is interesting here is that these are not the countries we would think might be technologically behind: they are mostly central and western European countries which, though not the major economies in Europe, have close ties to them. They are not necessarily seen as innovators, but they are thought of as being quick to seize new technological opportunities. This ties in with results elsewhere, as respondents in these countries are amongst the least likely to believe that companies using cloud computing services are more competitive than those that do not use them, and they are the least likely to believe that cloud computing is going to become more important to businesses like theirs. When a greater percentage of organisations in Greece, Italy, Spain, and Portugal are either using cloud or looking to use cloud in the next twelve months, it suggests that businesses in these countries need to seriously evaluate their technological strategies.

Do small and medium-sized businesses have faith in cloud computing?

Cloud computing is a tool which is being adopted by some small- and medium-sized businesses because it provides a range of benefits, both in terms of how the company operates and the revenue that the company generates as a result. The very nature of cloud computing means that in

order for it to be adopted meaningfully, the technological infrastructure of the organisation needs to change. Servers can be virtualised and put into the cloud, as can desktops and many services and programs. The result of this is not just an overhaul of the existing infrastructure, but an

overhaul of how the organisation thinks of computing, including how such services are requisitioned and paid for.

Cloud computing is a revolution rather than an evolution. Many consider revolution something to seize and to take advantage of, whilst others are fearful of the changes that it will bring.

But there is no doubt that for many, a revolution is not only desirable but necessary. Around one in seven business decision-makers we spoke to (15%) said that an ageing infrastructure is one of the main barriers preventing their business from growing within their country. Amongst those using cloud computing for business reasons at present, almost one in five (18%) reported this same problem, whereas just 11% of those with no plans to adopt cloud said this. But nonetheless - one in ten organisations with no plans to adopt cloud still report that their ageing infrastructure is having a detrimental effect on their ability to grow domestically. The difference between the two groups is that those who have adopted cloud computing are more aware of the issue and are proactively looking to address it. The need for small- and medium-sized businesses to adopt cloud computing is only likely to become more apparent in the next few years; indeed, this is why 52% of everyone we spoke to agreed that cloud computing will become increasingly important to businesses like theirs.

The challenges of cloudDespite the advantages that cloud computing can bring, there is still some popular reluctance to have full faith in it. By its very nature, cloud computing requires that a business no longer holds its data in-house, that they have to effectively surrender their data to a service provider to hold, manage, secure, and maintain. The exact location of where this data resides, and alongside whose other information this data is maintained, becomes an unknown quantity. With many high profile examples of officials and businesses losing data in the popular press over the past few years, along with how vital technology is

to these businesses, it is understandable that businesses feel some trepidation about making the move to cloud computing. Notably, 47% of those currently using cloud for business reasons say they are concerned that cloud services are presently unproven and are therefore too risky. Even those who are already using cloud at present are concerned about its robustness.

One might expect that this fear would result in a call for regulation, for small- and medium-sized businesses across Europe to demand official intervention in order to ensure that their data is safe. But in the main, this is not the case. 77% of those that we spoke to are happy to let the IT sector itself lead the way on being responsible for guaranteeing that businesses and people can easily and safely adopt cloud services with regards to access, transparency, data privacy, and security. This is especially true amongst those who have or are planning to invest in cloud, as 81% of them say that the IT sector alone should be responsible for these issues. Just 7% of the total believe that their governments should be responsible for making sure that IT vendors address this issue, with a further 16% believing that it should be a joint venture between the two groups.

The IT sector should be responsible for guaranteeing the integrity of cloud services:

77%

7%

9%7% IT sector

The government

A joint venture lead by an IT industry consor-tium

A joint venture lead by the government

This suggests that the majority of business decision-makers have an implicit trust in the IT sector, and have faith that IT vendors can make the

right decisions on these issues without the need for government intervention, and that this will allow them to procure cloud computing services safely.

Privacy and securityBut this is not quite true. Though most small- and medium-sized businesses say that it is the IT sector that should be responsible for these issues, and though most trust the IT sector (51% of everyone we spoke to said this), the majority do not necessarily trust IT vendors when they talk about privacy or security. 55% of those we spoke to did not say that they trust IT companies when they talk about security; 56% did not say that they trust IT companies when they talk about privacy.

Though this might make it seem that IT vendors are severely lacking on issues relating to security and privacy, 59% of our respondents also said that the IT sector can be trusted to self regulate with regards to the privacy and security of customer data.

Most are happy to let the IT sector regulate itself, but most are wary about IT vendor’s promises of privacy and security. The research suggests that IT vendors need to tighten up the privacy and security of their services, and need to be able to demonstrate these improvements to their potential customers. What we see is something of a murky path. Though there is some level of trust in the IT sector, small- and medium-sized businesses are extremely worried that vendors are not as hot on these issues as they could be.

Can cloud be trusted?Is this fear of sub-standard privacy and security due to the rise of cloud? Given that cloud computing necessitates data being held by a third party, we might assume that the rise of cloud computing is coupled with this worry about a vendor’s security ability. But this is not true: only 30% of those we spoke to agreed that data is not secure within the cloud, much lower than the percentage that is worried about a vendor’s security (55%) and

privacy (56%) abilities. But security is still a concern. Though 30% is not the majority, the fact that a third of businesses believe that data is not secure in the cloud is a significant proportion. This is a problem, as 48% say that data privacy would make them think twice about adopting cloud. The inverse of that statistic is telling, though: 52% would adopt cloud without being worried by data privacy concerns.

Concerns about cloud

Data is not secure in the cloud

Data privacy would make me think twice about using cloud

30%

48%

Cloud computing obviously has benefits which, for many, outweigh any perceived threat of unsecured data. It is possible that many are using cloud for processing and manipulating data which is not as sensitive.

What is particularly intriguing is that it is those using cloud for business reasons right now, are the most concerned about this. 52% say that data privacy would make them think twice about cloud, implying that though it is a concern, they have evaluated the matter and adopted cloud anyway. Have they come to the conclusion that any perceived security problems that cloud might have are simply not true? Though the majority believe that data in the cloud is secure, only 36% believe that data is as secure in the cloud as it would be on a server or computer that they have in-house.

And here is the crux of the problem: though many can see the advantages of cloud and few believe that cloud is totally insecure, two-thirds believe that data is more secure on their own computers than it would be if it was held in the cloud. It is not the case that cloud is flawed or problematic, it is that the success of small- and medium-sized businesses is so closely linked to the availability and security of their data that many want it to be as secure as possible.

It is not the case that cloud is insecure or offers no benefit to the organisation, it is more the case that data is everything to the savvy organisation, and many are reluctant to surrender their data for fear of surrendering control.

Given this, it is unsurprising that 71% of everyone we spoke to told us that they want to know where their data is located at all times. Even amongst those who already use cloud, 75% expressed this

desire.Small- and medium-sized businesses in the main have no problem with the benefits of cloud and the propositions put forward by vendors. Instead, the problem they have is that they cannot let their data go. In the digital age, data is everything. The average business can easily control the security and integrity of their data if it is held on their own computers: this is a reassurance they lose if they put their data in the cloud.

Though there is some variation across the various countries here, they tend to be relatively slight. In every country, the majority think that the IT sector should be responsible for leading the way with regards to access, transparency, data privacy, and security, rather than local governments leading

the way. This does vary - at the highest, 95% of those in the Czech Republic believe that it should be IT vendors doing this, whereas this dips down to 59% in Belgium. Perhaps the biggest finding is that though the majority in every country want to know where their data is located; those that answered least positively are not necessarily the same countries that are not

looking to adopt cloud, as discussed in the previous section. On average, 71% of want to know where their data is located, and we would expect those countries that are reluctant to adopt cloud to give higher rated answers. In fact, all four answered lower than this average: only 69% in the Czech Republic, 69% in Belgium, 69% in Hungary, and 63% in the Netherlands. In fact, three of the countries who are most likely to be adopting cloud are also the most likely to want to know where their data is: 80% of those in the UK report this, as do 81% of those in Russia, and 83% of those in the Ukraine.

Clearly, the desire and use of cloud computing does not necessarily equate to feeling less worried about location of data. Quite the opposite is true. This may be because those countries who are most likely to be using cloud computing are more technologically focused, therefore although they appreciate and use cloud, their data is still key to how they operate.

This hypothesis is strengthened by the finding that it is those countries that are most likely to be investing in cloud computing who are generally more likely to think that cloud is unproven and too risky. 44% of all respondents said this, which rises to 52% in Italy, 54% in the UK, 61% in Germany, and 65% in Spain. Though worried about the risk, these countries are all investing in cloud in significant numbers. Clearly, for those who are investing in cloud computing, any perceived risk is worth the significant benefits.

Conclusion

On the one hand, the proposition made by cloud is fantastic. It allows the company to worry less about infrastructure, the handling of data, whether systems are compatible, and if everyone is using the same programs. It allows the corporate network to be accessed from any computer anywhere, and it allows the business to only purchase as much data capacity as it needs at any given time.

On the other hand, cloud requires significant changes to be made. Though it requires the computing infrastructure and the procurement system to change, the bigger change is the necessity for data to be held off-site and out of the hands of the business itself. In an age where everyone is connected via the internet and digital information is vital to the success of the majority of organisations, the lack of ability to manage the security of their data themselves is a significant leap of faith to make.

But it is a leap that a substantial number have made, and which an increasing number are intending to make in the next year. It is not difficult

to see why: those who have already adopted cloud report that, as a direct result, they are more efficient, more productive, more flexible, more responsive, saved money, and become more profitable as a result.

Given the gloomy economic times we find ourselves in, we would expect small- and medium-sized businesses to be bracing themselves for the worst. But they are not: they are more likely to be optimistic about their success in the next eighteen months, likely to be growing and selling overseas, and likely to be investing in cloud.

What we see is that cloud computing is not simply another tool. For increasing numbers of small- and medium-sized businesses, it is essential to how they intend to not only survive but how they intend to thrive over the next year. It is something which gives them a competitive edge that others do not have. Those who have not investigated cloud computing and have no plans to do so are thus more likely to find themselves in much weaker

positions compared to those that are investing in those systems now.