U.S. small businesses are increasingly embracing the cloud, with nearly 80 percent projected to be fully adapted by 2020, according to in a new report from Emergent Research and Intuit, marking one of many “disruptive shifts” facing small businesses.

“We don’t use that term lightly,” said Steve King of Emergent Research. “When we say disruptive shift, we do believe things are fundamentally changing and a new economy is emerging.”

The future 80 percent adaption rate is more than double the current 37 percent that is closing out what King categorized as “generation one” of the cloud.

This generation is the first of three representing the cloud’s economic impact, which King equated with the stages of the railroad industry. When railroads were first commercialized, tracks were built next to canals and were fast and cheap, paralleling the last 10 years of the cloud’s first generation. Generation two is what we are now beginning to see with the cloud, King explained, a transformation that for railroads came with the realization tracks can go anywhere, leading to factory towns and supply chains. On the horizon is the third generation—for railroads it meant an open western frontier and suburbia, and for the cloud, that societal-level change has not yet been realized.

“We believe we are at the beginning of generation two, where cloud democratizes information technology,” King said. “It’s easier and cheaper to start and scale a business, and we’re seeing the efficiency gains continue.”

The report, the first in a new “Dispatches from the New Economy” research series building on a 10-year partnership between Emergent Research and Intuit tracking small business trends, also outlines four personas of small businesses that have fully adapted—not just adopted, King noted—to the cloud.

These types of businesses are:

  • Plug-in Players, which plug into cloud-based providers that deliver comprehensive, tailored solutions and take advantage of those ecosystems and networks to collaborate and share information.
  • Hives, or the “Hollywood model” that futurists have been predicting to be the next big trend for the last 30 years, according to King. In this model, staffing levels are flexible, rising and falling to meet project needs and including pooled resources and shared workspaces.
  • Head-to-Headers, or small businesses competing against major firms by using platforms and plug-in services to reach markets previously only accessible to large corporations. This persona has become more prevalent in the pharmaceutical industry, where King has witnessed “a surge in growth in small pharmaceutical companies that can use high-end software and big data on the cloud, and not need to have big labs and staff.”
  • Portfoliosts, or cloud-adapted freelancers with multiple streams of income, some passion-based and some needs-based, who are building personal empires in the cloud.   

“Those personas resonate with us,” said Terry Hicks, vice president and general manager, QuickBooks Online Ecosystem at Intuit. “New types of small businesses are being created and different ways of thinking of managing business.”
Intuit is currently “living that transformation in real-time,” Hicks continued, as their customers switch from the QuickBooks desktop product to QuickBooks Online, which is currently serving more than 624,000 customers. The transition is shifting the way Intuit looks at QuickBooks, Hicks explained, as more of a platform than a product—an open one.

“We embraced that our platform needs to be open. We can’t solve every customer problem.”

This is where recent integrations fit in, including the one with ZenPayroll. ZenPayroll, launched a year and a half ago, currently processes more than $1 billion in annual payroll. The creation of the company, an example of the “plug-in player” small business persona, was “only possible because of those [technology] trends,” said Joshua Reeves, CEO and co-founder. “We couldn’t have built ZenPayroll 10 years ago.”

As Intuit continues to make these integrations, along with acquisitions like the one of inventor and order management system Lettuce in May, Hicks explained that the QuickBooks Online strategy is to offer a range of functionalities, from various sources, on an open platform.

“We are embracing as a fact that there are times we’ll serve customers, and times when partners will serve [them]. We want to be transparent and open about that.”

Meanwhile, cloud technology, its intersection with other technology trends, and the impact on small businesses will be covered in future, broader installments of Emergent Research and Intuit’s findings. Cloud computing alone, however, remains one of the “most exciting trends,” according to Hicks.

“Cloud technology is rewriting the rules for customers and has a dramatic effect on how we solve problems for small businesses going forward.”

A copy of “Small Business Success in the Cloud” can be found on SlideShare.

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