The silver lining: cloud computing and small and medium enterprises

10 Jun 2014

This paper shows how Australian businesses can get the most out of one of the biggest global innovations: information communications technology.

Overview: Innovation – the successful application of new ideas – drives Australia’s productivity. Australia’s biggest innovation opportunity lies in creatively exploiting global innovations. One of the biggest of these is information and communications technology.

Small and medium enterprises (SMEs) are an engine of the Australian economy. They employ two-thirds of Australian private sector workers and contribute half of Australia’s private sector GDP. Yet many SMEs have low productivity. Innovations may spread slowly to many smaller firms because they lack the capital or market intelligence that large firms can access.

Online innovations – including mobile devices, e-commerce, and cloud computing – offer opportunities for firms of all sizes to become far more productive.

This paper explores issues raised at a workshop run by Grattan Institute and Google on how policymakers and business can accelerate the spread of cloud computing among SMEs. It uses cloud computing – the delivery of on-demand information technology services over the Internet – as a case study for how online technologies can benefit smaller firms.

Cloud computing can help level the playing field for smaller firms. It allows them to access sophisticated IT services that were previously out of reach. For example, it can allow them to manage and monitor their sales, operations and finances in real time.

The cloud also offers capabilities that were previously unavailable to firms of any scale. For example, it allows multiple users to access applications or update documents at the same time from mobile devices. Cloud computing makes it easier for small firms to take new ideas to market. Firms that use cloud computing report more growth in revenue and profit than others do.

But many Australian SMEs say they do not use cloud services. Many are not aware of the benefits or believe they do not have skills to capture them. Some are concerned about transition costs, data security and privacy. Networks are too slow or unreliable for cloud services in some areas of the country.

Workshop participants agreed that government and industry can remove obstacles to the use of cloud computing and help SMEs capture its benefits. The industry itself should lead the education of SMEs on the case for cloud computing. Yet government can:

  •  Choose policy settings that promote broader productivity growth and innovation;
  •  Ensure interaction with government over the internet is the default for all businesses;
  •  Provide an appropriate policy environment for investment in broadband networks that meet the needs of small business.

Information technology’s contribution to productivity is just getting started. Small and medium enterprises should get on board.

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