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Almost all startups find their first few months to around a year as the most difficult period. Statistics say that around 50% of the startups fail in their first year itself and around 95% of startups fail within first five years of their formation. Though there are many reasons for failure of startups at infancy, one big cause is the lack of enough seed capital. With many processes to be set up, establishing the IT infrastructure can be a big drain on initial capital for many startups. Similarly for SMEs, spend on maintaining conventional IT can be a big drain on their revenues.

Businesses which can understand the value of new technology vis-à-vis the future trends are the ones which take the lead in the market. Startups and SMEs who can face fatal competition with the larger established players in their market, certainly need to be more vigilant for the new technological developments which can add agility and buoyancy to their businesses. Cloud computing phenomenon is one such marvel which is perfectly well suited for startups and SMEs. Let us examine few reasons here as to how cloud computing is beneficial especially for the startups and SMEs:

Cost:

Internet is glut with basic information about cost savings that cloud computing offers that it seems a cliché to state that. But it is important to understand that the cost factor adds to the benefits exponentially especially for startups and SMEs. Delve deeper and you can see that cost saving are important for the following reasons:

1. Other than saving upfront on capital for establishing IT infrastructure and on-going expenses for maintenance and upgrades, startups and SMEs can save on incurring ‘transfer costs’ by directly opting for cloud services. Startups do not have transfer costs as they are starting afresh and usually SMEs who are yet to adopt IT for some of their functions can save on transfer costs by directly choosing the cloud services. There will be practically no integration between legacy and cloud applications if the startups and SMEs go for cloud early.
2. If startups and SMEs opt directly for cloud services, then they will benefit from savings in terms of deemed opportunity costs. Cloud services will spare the much required capital and allow the team to concentrate on growing their business in their area of core competency. Not spending time on maintaining the IT and using it on-demand, will free resources for growing business which in turn will translate into deemed savings on opportunity costs.

Business Efficiency:

Adopting IT services in the cloud brings in the much required competitive edge to the startups and the SMEs. In the fierce competitive market place quick and efficient execution of business is important. Cloud services enhance the efficiency of the startups and the SMEs in the following ways:

1. Cloud services bring the agility to the startups and the SMEs by allowing them to remain lean and not spend on unnecessary overheads of installing and maintaining IT within their organizations. Cloud collaborative tools allow them to collaborate not only with the employees but with their vendors and customers also. This allows them to maintain minimum office space and allocate the saved capital resources into investing either for employee development programs or any other activity which will help in increasing income for the businesses.
2. With cloud computing services are available almost instantly with minimum set-up. The cloud services let the startups and SMEs to become IT-efficient really quickly.
3. Efficiency also sets in indirectly for the startups and the SMEs. They can show growth in revenues earlier due to saving significantly on expensive licenses and upgrades. They just have to pay on pay-per-use basis. No extra overhead costs. The lower costs help in reaching the break-even faster and report impressive upward sloping growth graph.

Data Storage and Security:

Since startups and SMEs do not have large chunks of data, they face lesser threat for data security and lower risk for any data loss. Their backups and data storage may not require data transfer and distribution over multi servers. In fact, their data backup, storage and recovery may be much better facilitated by the cloud vendors as the infrastructure maintained by the cloud vendors may be much better in terms of efficiency than what the startups or the SMEs would go for because of high costs of owning IT infrastructure. In short, cloud storage could reduce the downside risk at lower costs.