Jane Lindhe Reporter

Jane is a retail and small business writer with a special interest in emerging companies and entrepreneurs. She covered the financial services industry before moving into general business journalism and has written for The Age and The Australian Financial Review.

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Businesses keep their feet on the ground and their sights on the cloud

Published 17 April 2013 11:52, Updated 24 April 2013 15:28

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Businesses keep their feet on the ground and their sights on  the cloud

Ignoring the cloud: Only 4 per cent of Australian businesses are using a cloud-based system, according to sa new survey. Photo: David Paul Morris

Despite the hype and the purported benefits of cloud technology, just 4 per cent of Australian businesses are actually using a cloud system, according to research firm Ovum.

Managing information and communication (ICT) needs in-house is the preferred strategy for 74 per cent of businesses, and only 13 per cent outsource their ICT, according to Ovum.

Ovum director of research Asia Pacific Steve Hodgkinson says that while almost three-quarters of businesses’ ICT activities are currently provided by an in-house IT team, that figure will fall to about 60 per cent within two years.

Shared services arrangements for ICT will remain steady at about 9 per cent, however outsourcing technology needs will increase by seven percentage points to 20 per cent over the next one to two years, the report found. Survey respondents included 63 chief information officers, of companies across a range of sizes, who attended Ovum’s CIO strategy summit in Melbourne in February.

“Change is definitely coming, while perhaps more slowly than expected, and momentum for cloud services in particular is expected to build during the next few years,” Hodgkinson says. “The reality for this group of CIOs is that ICT management is still about managing the people, processes and technologies of the in-house [team] . . . however, outsourcing and cloud services are projected to account for one-third of ICT activities overall in the next one to two years.”

While 4 per cent of ICT activities are sourced as cloud services, the use of the cloud in data centre and application services is expected to increase to about 15 per cent of the ICT mix over the next two years, according to the survey.

The trend is good news for cloud service providers such as accounting services provider MYOB and Xero. As BRW reported last week, Xero has 157,000 clients, doubling its numbers since 2012 and is acquiring an average of 100 new customers every day. The company doubled its revenue to $39 million in the year to March 31.

Xero, which services customers in 100 countries, counts Australia as its largest market. Managing director Chris Ridd predicts that up to 40 per cent of Australia’s 1.6 million SMEs have no automated accounting system, presenting a huge growth opportunity for the company.

The flexibility of cloud technology has also allowed Xero to work with web developers to provide 200 cloud-based applications for other businesses to buy as add-on functions to Xero’s solutions.

“The number one thing for small business owners is that they want simplicity. The cloud is very attractive to them because it is easy to use and fully integrated,” Ridd says. “Business owners access their accounting and other business services on their tablets, smartphones and literally on the run.”

Ovum’s Hodgkinson warns that delaying the adoption of cloud services could be costly for businesses. He says CIOs need to act sooner rather than later to gain skills in the procurement and cloud service.

“New mindsets and skills are required, particularly for counter-party risk management and systems integration, and these skills can only be learnt with hands-on experience,” he says.

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