The silver lining: cloud computing and small and medium enterprises

by Jim Minifie

10.06.2014 report

Download the report

Innovation – the successful application of new ideas – drives productivity. Australia’s biggest innovation opportunity lies in creatively exploiting global innovations. Grattan Institute’s new discussion paper, The silver lining: cloud computing and small and medium enterprises, shows how Australian businesses can get the most out of one of the biggest global innovations: information communications technology.

Small and medium enterprises (SMEs) are an engine of the Australian economy, employing two-thirds of private sector workers and contribute half of private sector GDP. Yet many SMEs have low productivity and, with less access to capital, benchmarking and consulting services, are slower than larger firms to take up innovations.

Today mobile devices, e-commerce, cloud computing and other online innovations offer opportunities for firms of all sizes. Cloud computing – the delivery of on-demand information technology services over the Internet – is a case study for how online technologies can benefit smaller firms. This paper explores issues raised at a workshop run by Grattan and Google on how policymakers and business can accelerate the spread of cloud computing among SMEs.

Cloud computing allows smaller firms to access sophisticated IT services that were previously out of reach. Cloud computing services make it easier for small firms with good new ideas to take them to market. Firms that use cloud computing report more growth in revenue and profit than others do.

But many Australian SMEs do not use cloud services. Many are not aware of the benefits or believe they lack the skills to capture them. Some are concerned about transition costs, data security and privacy. Networks are too slow or unreliable for cloud services in some areas.

Participants at the workshop concluded that government and industry can help remove obstacles to the use of cloud computing and help SMEs capture its benefits. The cloud computing industry itself should lead the education of SMEs on the commercial case for cloud computing. Government should:

  • Choose policy settings that promote broader productivity growth and innovation;
  • Ensure that interaction with government over the internet is the default for all businesses;
  • Provide an appropriate policy environment for investment in broadband networks that meet the needs of small business.

In the 1990s the adoption of ICT contributed more than a fifth of Australian labour productivity growth. Surveys show that it continues to make a large and increasing contribution. The information technology revolution is just starting to lift productivity. It is time for our small and medium enterprises to get on board.

Download the report