The famed children’s fable, How the Grinch Stole Christmas, tells the story about the Grinch who attempts to ruin the holidays from the children of Whoville by stealing their gifts and decorations. As in most fables, the Grinch’s diabolical plot is foiled. If only it was that simple in the real world.

2011 has been challenging for most small to medium businesses and business in general will enter 2012 under a cloud of uncertainty. While some industries are seeing an increase in demand, most businesses are trying to hold out, awaiting an improved climate. There seems to be little opportunity to raise prices in a market where customers are demanding lower prices on goods and services (see my blog post on “The Economic Squeeze”.

As businesses recognize that 2012 won’t likely see increased revenues from a raise in pricing/fees, the pressure to reduce costs will continue to grow.

Despite the fact that there is a large pool of unemployed people, most businesses have actually seen an increase in their cost per employee. This has been as a result of reducing staff that are either undertrained or not required for survival, and in turn providing a raise to keep critical and trained employees. Not to mention, these key employees have by and large been asked to fill the gaps created from the reduced worked force.

While on the surface this increase in cost does not seem logical, it is in fact vital. The loss in valuable, trained employees can have a long-term negative impact on any business. “The productivity gained by maintaining a well-trained workforce, even in difficult financial times, can't be overstated. When machines, desks or computers sit idle, productivity will eventually flatten and it could be nearly impossible to recover your momentum.”

So where is a business to cut? Fixed costs won’t change, we can be assured of increased healthcare costs, and given the gridlock in DC taxes remain the great unknown for the foreseeable future.

Talk about the Cloud seems to be the topic du jour today as it provides a formula for reduced fixed costs, increased per employee productivity, and a PAYGO model. Yet a survey from ITC service provider found that 57 percent of businesses are undecided about  adopting Cloud services. The reluctance is reported to be centered on concerns for security, reliability, and a fear of the unknown. The term ‘the Cloud’ might be daunting but in truth, most businesses already rely on the Cloud for many services (email, online payments/billing, file sharing, banking to name a few) and employees are using the Cloud, with or without their employer’s permission. 

• 37 percent percent of workers claim that they’ve used their own PC or smartphone for work,
• 26 percent have purchased work-based software or other technology with their own money,
• 15 percent of users have downloaded unauthorized applications to their work computers in the past year and off those users,
• 67 percent have used two to five unauthorized applications for work

As with any critical purchase, security and reliability concerns need to be addressed by selecting a vendor that has the history, reputation, and a loyal customer base. Companies such as InfoStreet have been providing SAAS services to small business and enterprise companies since1994 and provide their customers with a 99.9 percent uptime guarantee. In addition, businesses rely on their Cloud vendors’ security expertise since they often don’t have enough security personnel on staff, if any, and realize that while it might seem comforting to keep your cash under your mattress, relying on the expertise of our banks to manage financial resources is smarter.

Perhaps we need to look at the Cloud as a utility and not as a product or a service. Years ago, we dug wells for water and fueled our factories with coal burning furnaces. Now, you turn on the tap and get all the water you need and plug an extension into the wall and electricity is there.  We pay only for the utilities we use, increasing and decreasing as demand dictates. Think of the Cloud as a wireless plug for all your computing solutions.

As was noted in a recent article from the Harvard Business Review: “One simple example is when a service is needed only 10 hours per day, 5 days per week. The cost of owning the servers and applications the 118 hours/week they are not in use is not a good allocation of funds for many businesses. Many Cloud providers allow bringing up services when they are needed and bringing them down when they are not.”

Most small businesses and enterprises don’t require their Cloud provider to handle voluminous End-of-Month runs that are required for enterprise companies, but the cost benefits are the same. Take a company that, in order to secure a new contract needs to partner with another vendor on a one time basis. The project requires the company to build a new intranet to host the CRM, Knowledge Base (News - Alert), Conference Calling, and File Sharing to be used by a large team for a fixed period of time. To purchase these tools would add costs and implementing them would take significant man hours.

Utilizing the power of the Cloud, all this could ramp up within hours and the company only needs to pay for the apps needed for the length of the project. And since all the data is in the Cloud, these partners are not required to be under one roof; they can share the data, collaborate, and ramp down when the project is done. Your business can compete against larger competitors for projects without investing significant dollars.

This is the time of year where we are inundated with talk about gifts: what to buy, where, for how much, and for whom. The Cloud provides small businesses and enterprises with the gifts of money (reduced costs), time (increased productivity), mobility (the freedom to work from anywhere, from any web enabled device), immediacy (you can provision a new service instantaneously), and control (you pay only for what you use).

The Cloud provides a competitive edge that can make the difference between a stellar 2012 or a repeat of 2011. The Grinch from the fable tried to steal the joy from the Who. Don’t let the hesitant Grinch steal your business’ 2012.

Siamak Farah is founder and CEO of InfoStreet (News - Alert), a provider of IT and productivity Software as a Service (SaaS) and developers of the popular StreetSmart business software. His years of experience as a software developer affords him unique hands-on technical knowledge, while his work at NeXT Computer, side-by-side industry visionaries like Steve Jobs (News - Alert), gives him the marketing and management insight that has helped propel InfoStreet’s growth year-over-year.