Is there an SMB Cloud Divide in Europe?

Microsoft recently commissioned Ipsos MORI to conduct an in-depth survey among small to medium sized businesses (SMBs) with fewer than 25 employees, across 22 markets in Europe and Turkey. The survey indicates that there is a cloud adoption divide among SMBs across the region. I asked the Area leaders for Microsoft in Western Europe, Éric Boustouller, and Central and Eastern Europe, Don Grantham, for their thoughts on the findings. Let me know what your views are!

Q: The recent Ipsos MORI study seems to reveal an emerging divide between SMBs who are adopting the cloud, and those who have not yet done so. Sounds concerning!

Eric: It is indeed interesting to see this divide emerging among small businesses when it comes to cloud adoption. Economic challenges in certain markets may make some companies hesitant to adopt the cloud. However, if you look at the whole dataset, in countries where the economic environment is especially challenging (such as Bulgaria, Greece, Ireland, Italy and Spain), small businesses are really striving to take an innovative route to success through technology.

Don: Yes, and this is further borne out in the more optimistic outlooks from the SMBs that have adopted the cloud, as they are already clearly seeing the benefits it offers. Across the board in Europe, cloud adopters are more likely than non-adopters to be planning expansion activities in the next three to six months. And again, if you take Greece as an example, cloud users are almost twice as likely to be thinking about launching new products and service in the next three to six months, than non-cloud users (35 percent versus 24 percent). 

Q: According to the data, 65 percent of respondents based in Central and Eastern Europe (CEE) say their organization is currently using cloud-based services, while the cloud adoption rate among SMB respondents in Western Europe is 45 percent. Do you feel that the study indicates that small businesses in Central and Eastern Europe are overtaking their Western peers?

Eric: Well, it’s worth noting that 45 percent is the average cloud adoption rate across SMBs in 14 different countries. There are certain countries where adoption is much higher among SMBs: France for example (69 percent), and Switzerland (58 percent). The survey also shows some other interesting trends among SMBs that both regions have in common. One third (32 percent) of cloud SMBs in both Western Europe and CEE think that their business or financial prospects will improve in the next 12 months. Also, SMBs in both regions are almost neck and neck when it comes to looking ahead to launching products/services, expanding into new markets/sectors, investing in tech and hiring new employees in the next year. 

Don: However, you do make a valid point when you consider that cloud adoption among Ukrainian SMBs is as high as 85 percent – they reported the highest cloud adoption of all the 23 countries surveyed. The Czech Republic had the second highest rate of adoption, at 75 percent. These two countries clearly have a strong SMB backbone, innovating with technology to drive their economies forward. In fact, adoption across the board in CEE was above most of the adoption rates reported in Western European countries. This reflects what we are seeing on a daily basis in these markets – young CEE companies are hungry for success and see the cloud as a great opportunity to increase their competitiveness, particularly in tough economic times. Some have referred to this as the ‘leapfrog effect’.

Q: What other benefits can SMBs gain from migrating to the cloud?

Don: Dozens! Where do I begin? The beauty of the cloud is that it gives small businesses the tools to operate at the same scale as much larger ones, yet cloud services such as our Office 365 offering are still very affordable. Ipsos MORI indicates that most companies who are adopting the cloud are using at least eight different types of cloud services (including email, data storage, document exchange, instant messenger). SMBs can choose to scale their service up or down to support them at peak or low periods of activity for example. Cloud solutions also improve communication and collaboration – colleagues can share and manage documents quickly and easily, and hold virtual meetings and instant message one another to help enhance customer service. 

Eric: And since SMBs typically refresh their technology less frequently than larger organisations, with cloud-based solutions they can always stay on the latest versions. In short, there is no better time to be an SMB than right now! Small companies have a huge opportunity to use technology to compete on at eye level with their peers and also larger businesses. The latest IT can really help small businesses grow at a rapid rate, which is very exciting for the wider marketplace. 

Q: Because of the virtual nature of these services, can businesses achieve efficiencies in the personal lives of employees, as well as in their working lives?

Eric: Absolutely. Small companies are often better placed to offer their staff more flexible work benefits such as remote working opportunities. All the SMBs surveyed who were already using the cloud were more inclined to agree it would be important to offer employees remote working opportunities in future. The Nordic region is widely regarded as being at the cutting edge IT, successful enterprises and people everywhere using advanced technology as part of their everyday lives – both professional and private. 

Don: That’s right — many Western Europe businesses are moving towards this ‘New World of Work’, as we call it, and the trend is apparent in parts of CEE too. And across all respondents in Europe and Turkey, cloud users were more likely to report that the flexible working benefits from IT have had a positive effect on their work-life balance. Enterprise employers have enjoyed the benefits of flexible and mobile working for some time now, so it’s great to see smaller businesses reporting similar advantages.

Q: Some argue that the cloud is less secure than keeping data on premise. What’s your opinion?

Eric: That’s indeed one of the most interesting findings of the survey: It seems that about half of the surveyed SMBs think that moving to the cloud means they will lose a degree of security and control of their data. Ipsos MORI indicates that the perception of security risks is one of the biggest factors holding companies back from cloud adoption. On the other hands the SMBs which opted for the cloud are convinced that this helps them to improve security. 

Don: And for good reason, because the challenge is that many businesses, especially smaller ones, do not have the resources to deploy robust physical and technical security controls or achieve information security and privacy certifications. We have invested significantly in data transparency, privacy compliance and comprehensive security measures to support customers to achieve those benefits in our cloud solutions like Office 365. 

Q: What about the younger companies that are just starting out in the current competitive landscape? Is there hesitancy to adopt among this group?

Don: Quite the opposite. In fact, we are finding that younger companies established in the last six years have a strong appetite for innovative IT. Born during the recession years, you might call these small businesses “Cloud Boomers” – they are more likely to be using the cloud than their more established counterparts, effectively wielding the cloud as a competitive weapon to drive their success forward. Young SMBs ‘under six’ in Hungary are more likely to be using cloud than older SMBs, and these young companies are one third (31 percent) more likely to view cloud as crucial for growth in the future.

Eric: Yes, this certainly seems to be true among region’s newest companies, aged two to five years old. And in particular, this is the case in countries like the UK, Denmark, Germany, Italy, Sweden and Spain.  These companies have typically been less constrained by the barrier of heavy capital investment in technology. Their slightly older peers generally have a legacy tech infrastructure, and a slightly less enlightened view of how IT can both drive cost efficiencies and grow revenues. ‘Cloud Boomers’ are more optimistic re: their outlook, are more ambitious about plans to grow, and report better work/life balance. With lower structures and greater flexibility afforded by the cloud – they pose a real challenge to some of their more-established counterparts.