If you’re a small-business owner, you’re probably using computers and all that technology stuff to run your company. But you may still be using technology the old-fashioned way, the way small businesses did it in, say, 2010.
You probably have PCs in the office, servers in a backroom connecting them in a network and some other gear where you store all your your data. The software you’re using probably came in a shrink-wrapped box, and you hired an IT expert to install it and run your network.
Yep, that’s old.
That’s pretty much what a Pennsylvania heating and cooling company had and what it eventually left behind thanks to a small business called the Marks Group that helps usher other small businesses into the 21st century way of using tech.
The cloud, defined
You may be like most small businesses in the country that haven’t yet taken to the cloud. That cloud refers to the system in which users access computing power through a Web-based network, instead of having to set it all up in their office.
In the cloud, most of your small business tasks — from managing your books, keeping track of inventory to making sure your customer are satisfied — are done online. No need to buy your own servers and other gear, and, in some cases, no need to hire an IT staff to run your network. Someone else will do that for you.
In the past, this was called utility computing, because it pretty much turns computing power into a utility, like water or electricity.
Instead of paying for a software application upfront, you typically pay a monthly subscription fee based on the number of users. Instead of having all your data in the office, your information is stored in a data center somewhere else, maybe even hundreds of miles from where you are.
More than half, or 57%, of small businesses in the United States do not use cloud technologies, compared to 43% that do, according to a 2013 report from the National Small Business Association. But here’s another striking statistic: Just five years ago, in 2010, only 5% of small businesses were handling their technology through the cloud.
Swift savings
Among the new cloud-computing converts is Oliver Heating & Cooling, a 44-year-old company with about 200 employees based in Morton, Pennsylvania.
The company recently turned to the Marks Group, a small business based near Philadelphia with 10 employees that helps companies operate more efficiently by embracing new information technologies, including cloud-based systems.
Oliver was struggling with “outdated software” for keeping track of customers, according to Todd Whitmire, the company’s IT director.
“We were having trouble tracking leads and sales,” he tells NerdWallet. “We were having difficulty compiling all the information. Getting all the reports was starting to get extremely difficult.”
The Marks Group helped migrate Oliver’s system to Microsoft Dynamics. The company elected to go with the cloud-based version. It cost roughly $20,000, which included the fees to the Marks Group.
The company realized savings almost immediately. In the past, Oliver had to pay up to $15,000 up front for licenses, and up to $2,000 for each update. With the cloud-based system, Oliver pays a monthly fee of $65 a user, or roughly $950 a month.
They also saved by not having to buy hardware. Oliver spent about $137,000 every five to seven years to buy new servers, which translates to about $30,000 a year.
“We’re ahead of the game now because we’re not spending $30,000 a year for servers,” Whitmire says.
There’s also the convenience and efficiency from their new customer relations management, or CRM, system.
“It’s well worth it,” he says. “It’s live information, and you can drill down. You know how executive managers like those dashboards. They can see everything live. It gives them a warm, fuzzy feeling.”
Entering the 21st century
That’s good news for Gene Marks, the owner of the Marks Group who also writes a popular column on small businesses for the Washington Post, Forbes, the Huffington Post and Entrepreneur magazine.
He became an evangelist for cloud computing after his own rough experience with business software.
He started the Marks Group in 1994 with his dad who, he said, “was selling the world’s worst accounting software, an application he was developing on his own that never made it to prime time.”
“After six tumultuous years, a great thing happened: the year 2000, which essentially disabled his software,” he says, referring to the so-called Y2K crisis that faced computer systems throughout the world.
So their company shifted strategy and started reselling other software products and support services. The Marks Group now offers both cloud-based and on-premise business applications for a range of tasks from managing customer relations to monitoring inventory to keeping track of finances.
Marks names five key tasks small businesses could be doing in the cloud:
- You can keep your customer accounts through “customer relations management,” or CRM, programs, such as Zoho.com.
- You can manage your finances and transactions, using a program like Xero.com.
- You can make it easier for your employees to collaborate and coordinate business operations, through applications like Microsoft Office Live 365.
- You can make it easier to manage projects using a program like Basecamp.
- You can make communications within the company faster and more efficient. Marks cites the popular communications app, Slack.
Veteran technology analyst Roger Kay of Endpoint Technologies Associates says “small businesses can definitely leverage the cloud,” especially as their options grow steadily. “With respect to cloud, there’s something for everyone,” he tells NerdWallet.
Now, the cloud is not always an easy sell to small businesses. Marks cites three frequently asked questions.
“Why am I paying monthly when before I just paid one time?”
“To this, I explain that they will no longer have to deal with annual maintenance, hardware, upgrades, backups and access,” he tells NerdWallet. “This lowers their cost of ownership.”
“How do I know my data is secure?”
“To this I ask if they honestly think their own internal security is actually better than Microsoft, Salesforce or other big cloud vendors,” he says. “These companies’ business model depends on the best security, and although no one can be 100% secure, they certainly have better resources at their disposal.”
“How do I know these cloud vendors are going to be around and what happens to my data if they’re not?”
Marks responds, “Even if a cloud vendor has trouble, it’s more than likely that their customers will be purchased by someone else.” In the business software industry, vendors are acquired by other companies, and in most cases, acquirers find ways to maintain the acquired firm’s customer base.
Kay of Endpoint Technologies Associates also says he would put security and convenience as the top reasons why small businesses should embrace cloud computing.
“I wouldn’t measure the value in cost savings, but in the insurance value of not losing data as a business, which could be catastrophic,” he says.
“I knew a guy who lost his notebook with all his stuff on it, and he had never backed it up. It literally put him out of business. There is also a slight value in being able to access your files from other machines. I’ve been known to look up a file through a viewer on my phone when I didn’t have a computer with me.”
Cloud convenience
The quest for convenience also drove another small business to turn to the Marks Group for help. Thompson Mahogany is a 172-year-old lumber company based in Philadelphia.
General manager Andrew Nuffer says the company wanted to get rid of a system he calls “sluggish.” His main question to the Marks Group, he said, was: “Hey, is there some way my guys can access [our system] on their iPads or smartphones so they don’t have to come back to the office to enter their information into our CRM?”
Yes, there was. With the Marks Group’s help, Thompson Mahogany became another cloud-computing convert.
“In the long run it’s worth it,” Nuffer tells NerdWallet. The new system has made life easier for him and his employees, he adds. “We can just pull over to the side of the road and look something up. We’re able to get more work done.”
But Nuffer, whose company started in 1843, says he still has qualms about totally embracing the cloud. The company still has on-premise systems for some key tasks, such as inventory management.
Nuffer said the company is not considering moving those to the cloud. “Too many trade secrets in them,” he says, though he adds, “But who knows. That may change in the next 10 years. If you had told me 10 years ago that I could do everything on an iPhone, I’d have laughed at you.”
“This is our first step into that realm,” he says. “Maybe we go further. I don’t know.”
More small businesses will probably continue to embrace the cloud, Gene Marks speculates.
‘“The real reason? Small business owners will soon have no choice,” he says. “Software companies are plowing the majority of their R&D into cloud-based applications. Infrastructure companies are making speeds and access much faster. For software companies, the business model is much better, a consistent, predictable revenue stream and more control over support costs. Small businesses are going to be pushed there, like it or not. So now’s the time to deal with it.”
You can find out more about cloud-based business applications in a NerdWallet article on 20 Apps for Small Business Owners. The Marks Group also has a video page on the different cloud applications for small businesses.
Benjamin Pimentel is a staff writer covering small business for NerdWallet. Follow him on Twitter @benpimentel, on Google+ and on LinkedIn.
For more information about how to start and run a business, visit NerdWallet’s Small Business Guide. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
Photo of Gene Marks courtesy of the Marks Group.
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