Cloudy With a Chance of Rain-Making

Laurie-McCabeThe term “hybrid” is what the vast majority of SME companies seem to end up with. They shift some functions off to either public or private clouds while retaining their own IT systems for older, legacy applications. “Most companies are in a hybrid state and I think they will be there for a long time,” says SMB’s McCabe. “There are so many kinds of solutions coming to the forefront that help you streamline your business, manage performance or offer broader [types] of analytics that CEOs say, ‘We’ve got to make this function in the business more effective. But we don’t have anybody in house to stand this up and manage it day-to-day.’” That triggers a decision to rely on cloud companies to buy, install and service the necessary hardware and software.

Major IT companies are chomping at the bit to expand their cloud services in the small and medium-sized business segment. SAP, the big German software company with $100 billion in sales, once had a reputation for installing its ERP systems in mostly large companies but now says that 70 to 80 percent of its 200,000 customers are in the SME segment. Kevin Gilroy, senior vice president and general manager of the company’s small and midsize segment, says one key to understanding how the little guys are using his company’s services is that they no longer have to make capital expenditures to build IT systems to support their strategies in Vietnam or the Middle East. They can convert to paying for these services on a monthly basis, which makes them an operational expense and helps give the bottom line a quick lift. “The consumption of technology is becoming more retail-like,” Gilroy says. “They don’t need engineers and architects to design systems and then other professionals to run them. They can buy it by the drink and deploy it in a consumer kind of way.”

Just as SAP bought the online business-to-business trading platform Ariba to help SMEs buy and sell products, IBM has bulked up its portfolio of offerings by putting forward one-stop shopping. It bought SoftLayer in July 2013 and is rapidly expanding the hosting service to 40 data centers around the world. A customer’s traffic is free and runs through a closed, high-speed communications network, guaranteeing security. IBM also bought Cognos, a company that offers analytical tools, and it is rolling out those services to smaller customers. As with SAP, most smaller customers rely on middlemen to customize IBM’s offerings to their specific industrial and geographic needs.

All the computing power that the giants have put in place is what allows Avery Brewing’s Helton, a veteran of Lockheed Martin, to compete globally from the beautiful confines of Boulder, Colo. The privately-held company will produce 60,000 barrels of beer this year but doesn’t disclose annual revenue. It has started selling to a Japanese distributor who supplies American military bases there and to Sweden’s state-run liquor stores. Helton wants to continue to expand internationally. Not lacking in ambition, Helton says the ultimate goal is 350,000 barrels a year.

Avery had been using QuickBooks small-business accounting software for many years, but revenue and volume soared 60 percent in 2011. “That almost crippled the company from a systems standpoint, as well as from a human-capital standpoint,” Helton explains. “We didn’t have anything in place that could scale with us.” By late 2012, the company moved over to the ERP system set up by Orchestra Software, a Portland, Oregon-based specialist in craft breweries, which wraps its own layer of software around SAP’s software.