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How the Cloud Will Transform Business by 2020

Companies that don't take advantage of cloud computing will be in the minority in less than six years. Here's why.
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The cloud can save you time and money, but it also has the potential to change the way you do business.

The percentage of U.S. small businesses using cloud computing is expected to more than double during the next six years, from 37 percent to nearly 80 percent, according to a study from consulting firm Emergent Research and financial software company Intuit.

While use of the cloud today is generally associated with the ability to reduce costs and improve efficiency, widespread adoption of this technology is projected to have a transformative effect on small businesses, but also on large companies and government organizations.

"We're seeing efficiency gains continue, but we're also starting to see the emergence of new capabilities," says Steve King, a partner at Emergent. So what are these new capabilities and which companies are taking advantage of them? Here are four examples of small businesses Emergent lists as having fully adapted to the cloud:

Plug-In Players

These are businesses that plug into cloud-based service providers. San Francisco-based ZenPayroll is one example. The company automates and handles all payroll taxes, filings and forms so that small businesses never have to fill out government documents. Of the six million small businesses in the U.S. today that require payroll, 40 percent process payroll by hand, and one third of those get fined every year for incorrectly paying their payroll taxes, according to ZenPayroll chief executive officer Joshua Reeves. By "plugging" into cloud-­based providers such as ZenPayroll, which processes more than $800 million in payroll annually, small businesses will be able focus on mission critical areas of business.

Hives

Hives refer to businesses that operate with employees working in different locations and companies that have increasingly flexible staff levels. "This used to be called the Hollywood model where you would form up a team, accomplish a task, and de-form," says King. "What we're seeing now is that the cloud is enabling this to happen. We’re seeing many cases where people are pooling together resources, whether it's in a co-working space or a shared workspace. 

Head-to-Headers

These are small businesses that are competing with major firms for business, a growing trend in the U.S., thanks in part to the cloud, according to the Emergent report. Airbnb is one example, but the same trend is taking place with small financial advisory firms. For example, two of the top ten U.S. merger and acquisition advisory firms by deal volume are "kiosk" investment banks, referring to firms with between three and five employees, according to King. "These are the guys that compete with large businesses, taking advantage of the capabilities that the cloud provides," says King. "They’re competing with Morgan Stanley, JPMorgan and the others." 

Portfoloists

Portfoloists are freelancers that rely on multiple income streams and use the cloud to manage these streams efficiently. Today, 30 percent of small business owners with less than 20 employees have at least one second job, according to Emergent. "We're seeing more and more examples of this across the economy," King says. 

The lesson for entrepreneurs who don't use cloud computing is simple: In six years, 80 percent of competing businesses are expected to adopt some form of cloud computing. Those that don't, risk falling behind.

 

 

IMAGE: Blend Images/Jon Feingersh
Last updated: Aug 7, 2014

GRAHAM WINFREY

Graham Winfrey is a staff writer for Inc.com. He previously covered alternative investments at Private Equity International magazine, prior to which he worked at Business Insider and msnbc.com. He lives in Brooklyn, New York.




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