Hosted Services Improve Financial Performance, Report Finds

A worldwide survey of cost-conscious businesses, commissioned by Microsoft, finds those businesses that value IT as an enabler for better business productivity and effectiveness and those that use hosted services performed better fiscally than those that do not.

Businesses that value IT as an enabler for better business productivity and effectiveness and those that use hosted services performed better fiscally in 2009 than those that do not, new Microsoft research claims.

Microsoft's global SMB IT and Hosted IT Index 2010 investigates how small and midsize businesses (SMBs) across multiple segments fared during the recession and how they use technology. Technology market research specialist Vanson Bourne executed the report between November 2009 and January 2010. The survey questioned 3,193 SMBs (up to 500 employees) across 15 countries worldwide.

Despite the global recession, more SMBs surveyed in 2010 reported an increase in revenue than in 2008. Those that reported growth view IT as critical to their business success. In the past 12 months, 52 percent of SMBs reported an increase in revenue, up from 39 percent in 2008. Increasing 20 points since 2008, 55 percent of SMBs view IT as critical to their business. Of the SMBs that view IT as critical, 60 percent saw revenues grow over the past 12 months. In contrast, among SMBs that stated IT is not important, less than 29 percent saw revenue increase.

The 2010 index indicates SMBs are beginning to see the benefits of cloud computing: More than 40 percent of the respondents that use hosted or cloud technology reported revenue rises of 30 percent or more compared with the 90 percent of respondents not using hosted technology that saw decreases in revenue. The advantages of hosted or cloud technology are viewed as reduced cost and IT management and maintenance, as well as increased business value, productivity and competitiveness.

Importantly, awareness of hosted services is increasing, with 65 percent of SMBs using hosted software to some extent, while 73 percent of the remainder have considered it, compared with only 44 percent in the 2008 index. In addition, SMBs are beginning to understand the value of "renting" IT as a service-36 percent said a pay-as-you-go model would be attractive.

Cloud computing has become a watchword for the IT industry as software and services such as e-mail, Websites and e-commerce are increasingly available in an on-premises, off-premises or hybrid model depending on business need, said Michael Korbacher, director of EMEA software plus services in the communications sector at Microsoft. "Over the last five years, we have seen nearly 40 percent growth in usage of hosted services," Korbacher said. "Using pay-as-you-go cloud technologies, small and midsize businesses can now afford and easily have access to enterprise-class, secure services across any platform."

The findings from the research were concluded by analyst firm Freeform Dynamics, which independently assessed the SMB IT and Hosted IT Index 2010 to ascertain to what degree IT adoption is driving revenue growth specifically within the SMB community. Overall, the findings show greater awareness of the benefits of IT among SMBs and a high reliance on IT across all industries and geographies, and indicate a path toward better financial performance than for those not currently taking advantage of IT advances such as hosted services.

"Our assessment of the report tells us that an increased focus on IT correlates with good performance in all of the size categories surveyed," said Dale Vile, research director of Freeform Dynamics. "This whole picture corroborates the notion that technology and hosted services can provide tangible business advantage, even for smaller companies, and it's not surprising to see that investment in IT and hosting goes hand in hand with good financial performance."