A remote workforce, distributed teams, and the use of contract labor are facts of operational life for almost all small and midsize businesses today. In order to collaborate, these far-flung teams are using a variety of free and paid services (for example, Dropbox, Google Drive, and others) both to share documents and store data. Coupled with the rising bring-your-own-device trend, the diffusion of data across multiple services and multiple devices is posing significant enterprise risk in terms of potential data loss, security breaches, and regulatory compliance to small-businesses CFOs. A 2010 Ponemon Institute study determined that the average cost to a business of each lost laptop was a little more than $40,000. Further, insurance-industry data provider A.M. Best found that 51% of midsize businesses that suffer a catastrophic data loss shutter their doors within two years.
Clearly, without centralized data storage, without enforced policies across multiple locations, employees, and devices, small and midsize businesses are living dangerously.
One way to mitigate risk is to invest in an enterprisewide solution that standardizes on a single tool for centralized document storage. As CFOs go down this path, they will be challenged in three key areas:
- There are at least 50 different enterprise cloud storage and backup solutions in the marketplace today. Options range from premium consumer products, such as Dropbox for Teams, to more traditional enterprise solutions, such as Microsoft’s SharePoint. Consumer-oriented solutions that have been upgraded with security and access control features for corporate use tend to be more user-friendly, and easier to implement than more traditional enterprise software, but lack their sophistication and customization capabilities.
- There is a cost trade-off between products that require high setup costs but have low recurring fees and solutions that require minimal setup costs but charge higher recurring fees. For example, a robust tool like SharePoint has significant upfront setup and configuration costs ($1,000–$14,000 for a 20–50 person firm); however, it has relatively low ongoing costs ($4–$8 per user per month, or a fixed monthly rate for a hosted cloud solution). Conversely, more consumer-oriented solutions such as Box for Business or Dropbox for Teams have low initial setup costs but often have considerably higher recurring costs ($10–$15 per user per month), which can rise quickly as your firm grows and adds staff.
- Management must consider the investment required in change management to support the adoption of whatever software you choose. Most small and even many midsize businesses lack the resources and expertise to train employees in the software’s use and encourage them to adopt it in their work. Consumer solutions, as noted, are built to be easy to use. Therefore, employees will require less training and, perhaps, less encouragement.
To navigate these challenges, and to make this important and complex investment decision, CFOs need to think about the future needs of their organization across a number of dimensions. The degree of anticipated growth, both in staff and data, plus the desirability of making a large capital expenditure versus an operating expense over time, will figure into deciding what type of solution is right for the business.
- For slower-growth companies, paying a premium for an easy-to-use, per-user-priced consumer solution makes sense. In these cases, companies should standardize on a single upgraded consumer solution based on employee preferences. (You can poll your employees to identify the most popular tool; chances are many are already using one of these solutions for work and for their personal life.) Another consideration when choosing collaboration software from a nontraditional source is the financial health of the provider. Dropbox for Teams and Box for Business presently are both popular and well-funded.
- For fast-growth companies, in which flexibility and the ability to customize can be tied profitably to workflow, investing in a more enterprise-grade solution such as Sharepoint or IBM and Oracle’s collaboration offerings may be more cost-effective in the long run, despite the greater upfront cost. CFOs must include in the higher cost of change management (training and support) in their analysis. At the same time, companies choosing to make the initial investment in an industrial-strength solution should establish clear policies to enforce adoption and discourage the use of alternatives, as IBM did when it banned employees from using Dropbox and iCloud last year. If the company allows its data to sprawl across various document storage and collaboration solutions, the benefits of the enterprise solution can quickly evaporate.
One midsize health-care industry software company, for example, had a geographically dispersed, multidevice workforce that shared content across multiple and disparate databases, servers, and e-mail. Although the company could have benefited from a centralized data-management solution, it did not want to invest in a full-blown IT infrastructure for a firm of just 50 people. Therefore, it chose a consumerized plug-and-play, cloud-based platform for its file auditing, management, searching, and security needs, and so far has been happy with the operational simplicity it has provided for a relatively low capital expenditure.
Finance executives of small and midsize companies should approach the diffusion of data within their organization not only as a risk to be mitigated but also as an opportunity to be seized: to increase collaboration and improve the productivity of the virtual teams that are increasingly becoming the norm in business today.
Singu Srinivas, a partner at Waterstone Management Group, has nearly 20 years of experience working with Fortune 500 and smaller high-growth technology companies. His experience has centered on creating growth strategies, developing go-to-market capabilities, and enhancing the operational effectiveness of B2B and B2C technology companies, as well as the services arms of manufacturers, retailers, and ISPs. Neil Jain, a principal at Waterstone, has more than 15 years of experience formulating growth strategies and improving operations for companies in the software, hardware, and telecom industries. Meredith Tierney, a senior associate at Waterstone, also contributed to this article.