A Look at IBM's Small Business Cloud

Tuesday Sep 27th 2011 by Gerry Blackwell
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IBM, like just about every other vendor, is promoting cloud computing solutions. Here two of its customers demonstrate that those services work.

IBM believes the world needs to get smaller and smarter, and the way to achieve both goals is for small businesses to embrace cloud computing.

For years, the century-old computer giant has promoted “solutions for a small planet.” Now it’s pushing solutions for “the smarter planet.” Whatever the tag line, the company says that cloud-based solutions from IBM can help small businesses grow faster and succeed bigger.  

IBM offers applications and services in almost every nook and cranny of computing, from ecommerce to collaboration to customer relationship management (CRM) -- provided either directly or through partner ISVs (independent software vendors).

“It’s really smaller businesses that are driving most of the innovation we see in the world today,” says Ed Abrams, vice president of marketing for small business and midmarket at IBM. “That’s why we’re so committed to enabling their success.”

To demonstrate how it's making good on that commitment, IBM recently announced two compelling but very different small business cloud-success stories that exemplify the smaller-and-smarter philosophy.

LotusLive: Online Collaboration

Russell's Convenience, a chain of 24 convenience stores in the western U.S. (mostly in office buildings), started using LotusLive, IBM’s collaboration suite, 19 months ago. According to Raymond Huff, the company's president, Russell's Convenience has seen a 40 percent reduction in business travel costs as a result.

“Everybody hears the same message at the same time now,” Huff says of the weekly meetings he conducts online with managers and licensees at the chain’s stores.  

With stores in Colorado, California and Hawaii, Russell’s had long been plagued by communications problems related to time zone differences -- up to four hours -- and the inefficiencies of phone and email. Huff often had to travel to meet with his people to make sure everybody was on the same page.

“Now, when the guy in LA gets it, the guy in San Francisco gets it too,” he says. “It actually makes us a smaller organization. The communication is a lot more efficient, and I’m very pleased with the increase in productivity.”

Collaboration tools like those in the LotusLive suite and in ecommerce solutions such as Smarter Commerce may be naturals for the cloud, but it’s surprising how many applications and services can be and now are being delivered online, including even small business accounting.

Refining Small Business Collaboration

Russell’s can’t as readily monetize the benefits of using IBM cloud-based solutions, but its use of LotusLive has delivered tangible benefits, Huff says. Managing store remodeling projects, for example, was always a major headache until he implemented LotusLive.

Remodeling projects involve liaising with a store manager or licensee, landlord, architect, contractor, suppliers -- each one a separate activity in the past, involving emails, phone calls and courier shipments to exchange documents, drawings and instructions.

Now he can add all the participants to LotusLive -- the service allows him to add outsiders as temporary guest accounts without paying for additional licenses. All the documents, drawings and schedules reside in one place online, and all the communication happens there too, including online meetings if needed.

“It’s pretty seamless now, and it’s one activity versus 85 different activities,” Huff says.

Version control on documents passed back and forth used to be a problem in particular. Project participants would get confused about which was the latest or which was the final version. LotusLive keeps track of all versions, showing order, status and date completed.

Smarter Ecommerce Via Cloud Computing

At S&S Worldwide, an online distributor of sporting goods products for recreation, health care and education professionals, sales triggered by recommendations to shoppers at its website grew 75 percent in three months after the company started using IBM’s cloud-based Smarter Commerce software.

S&S had been using another in-house application to generate suggestions to its ecommerce site visitors on what products they should consider buying. But that recommendation engine only accounted for 5 percent of online sales; not a very impressive record.

IBM's cloud-based Smarter Commerce package analyzes information about a particular visitor’s behavior at the site, as well as trends in preferences of all visitors. It then automatically generates offers on products the customer has shown interest in before or products that others who share similar online behaviors and profiles have purchased.

After only three months, the Smarter Commerce recommendations were accounting for 9.8 percent of art supplies and sporting goods sales at the site. Product views shot up 24 percent, and the time visitors stayed at the site rose 30 percent. 

“The results have been quite impressive with the IBM Smarter Commerce cloud service,” says Will Bender, S&S Web merchandising manager. “The recommendations have led directly to a much more tailored and compelling customer experience.”

S&S also started using the IBM's cloud computing technology to drive personalized direct email marketing. In the initial campaign, 60 percent of recipients opened the messages -- a 50 percent improvement over previous campaigns.

More importantly, the click-to-order conversion rate was 33 percent, about three times higher than for similar S&S campaigns in the past. For a cost of one penny per email message sent, S&S earned $1.32 on average, an impressively high return on investment.

IBM’s Case for Small Business and Cloud Computing

The cloud, IBM's Ed Abrams argues, is particularly well suited to small businesses like Russell’s and S&S.

“Most small business owners don’t want to be in the business of trying to manage IT,” he says. “By leveraging the cloud, they can focus on their core businesses, while ensuring they get the IT resources they need to make their businesses succeed. But they don’t have to make a long-term capital expenditure commitment.”

Another reason small businesses are embracing the cloud, Abrams says, is that the per-user-per-month software-as-a-service (SaaS) approach allows them to buy only the capabilities they need, when they need them. And they can shop for the services they need anywhere in the world.

A reason they probably should turn to the cloud, he adds, is that cloud-based offerings from reputable companies actually offer superior security and reliability compared to on-premises solutions managed by small businesses that lack in-house IT expertise.

Paying per-user per month or year may reduce pressure on scarce capital resources, but some critics note that in the long term, cloud-based solutions may actually cost more because businesses never stop paying for them.

Cloud Computing Cost Benefits

Given the tendency of many small businesses to hang on to software applications for years, do cloud computing solutions necessarily always make the best economic sense? We asked Abrams.

“There are back-office applications that small businesses may still choose to make a long-term investment in,” he concedes. These could include “applications that might stay the same for 10 to 15 years, because they want to build essential infrastructure.”

But small business owners are getting smarter about figuring out when and where to invest capital in IT services and when it makes more sense to leverage the cloud and only pay for what they need, Abrams says.

“After the last few years of economic turmoil especially, a lot of small businesses have recognized that the smartest thing is not to get all their capital tied up in heavy IT-related investments.”

“When you add to that the fact that cloud solutions are stable and proven now, more and more small businesses are realizing the better way to go is ‘pay by the drink.’ It means they’re better able to manage cost flows and usage needs.”

Small businesses such as S&S and Russell’s, meanwhile, are clearly reaping benefits from following that advice.

Why Consider IBM's Cloud

One of the great marketing tag lines of all time -- probably not even invented by IBM -- was, "Nobody ever got fired for buying IBM." That was readily believed in an era when IBM dominated computing. It doesn’t anymore, of course, but Abrams argues that the company remains a safe bet for small businesses looking for a cloud computing provider.

“What differentiates IBM in the cloud space is what differentiates us in the overall IT space,” he says. “It’s our 100-year heritage of experience, expertise and knowledge that we can put to work to help small businesses succeed. And they don’t have to worry about getting into bed with a cloud provider who’s not going to be there in two, three or four years.”

Gerry Blackwell is a freelance technology writer based in London, Canada. Read his blog, AfterByte

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