Cloud Computing Boosts Virtual Companies

Posted by: Jennifer Schenker on April 8, 2010

Cloud computing is no longer a fluffy abstraction. Consider California-based Rimon Law Group, which calls itself a Web 2.0 legal firm. Rimon employs 28 senior lawyers in seven U.S. states but has no offices, thanks to cloud computing services that are helping to change the face of businesses across the globe.

Rimon and many other professional services companies such as Innovations International, a 25-year-old U.S. consulting firm, are using cloud computing to slash costs, put on a professional face for clients, and transform themselves into virtual organizations.

What exactly is cloud computing? By one definition, it means shifting computing tasks and storage from local desktop PCs and company servers to remote systems across the Internet. And in the case of communications services, it means replacing local electronic switches known as private branch exchanges—which can range in price from several thousand up to hundreds of thousands of dollars—with software that can be easily controlled by any company employee over the Internet, without any training.

Both Rimon Law Group and Innovations International are among thousands of companies now using technology from RingCentral, a seven-year-old company based in San Mateo, Calif. RingCentral was named a 2010 Technology Pioneer by the World Economic Forum and has raised $25 million in funding from the likes of venerable Silicon Valley venture capital firms Sequoia Capital and Khosla Ventures. The company’s software is lowering the cost structure for business phone systems to as little as $10 a month and delivering those services in the U.S., Canada, and the U.K.

RingCentral's pitch is resonating with clients who are eager to save money and ensure they don't lose business when executives are on the move. The company's cloud-based technology "is a great equalizer that allows very small companies to come across as a fully professional entity to their customers," says chief executive Vlad Shmunis, a native of Ukraine who now lives in the U.S. "Similarly, companies of any size can just be more accessible to their customers anywhere in the world."

The market for these types of cloud-based unified communications services is projected to be worth $1.6 billion by 2016 in Europe alone, says Dorota Oviedo, a research analyst in the Warsaw office of Frost & Sullivan. It's no surprise, then, that a number of newcomers are targeting the same space, including Poland's Edge Solutions. Edge has a cloud-based offering called IntraOut which provides mobile phone synchronization, email, business grade instant messaging, high definition VoIP, groupware, teleconferencing, and videoconferencing.

Unified communications are only one of a number of software services being delivered via the cloud. Other services include email, customer relationship management, human resources and executive search, application development, storage, and security. Innovations International, for example, says it is using RingCentral instead of a private branch exchange, plus Google apps for e-mail and calendar functions, and technology from Mountain View (Calif.)-based Egnyte for cloud-based data management. Combined, cloud based services are projected to grow globally from $14 billion in 2009 to $33 billion in 2013, according to research firm IDC.

A 2009 IDC survey of 75 British companies with 250 or more full-time employees found that 47% of companies are already using some cloud services in two or more areas and 16% are using them in seven or more areas. Expect that number to mushroom as more and more services move to the cloud, says David Bradshaw, IDC's research manager for European cloud services.

Both small businesses and large enterprises are interested in unified communications being delivered as a cloud service, since it represents a cost savings and eliminates the headache of managing and integrating multiple applications and vendors, says Frost & Sullivan's Oviedo.

For law firm Rimon, the choice to go virtual was easy. The average price per office per associate in downtown San Francisco is $10,000 annually, a waste of money since most of lawyers never see clients in their offices anyway, says Yaacov Silberman, the firm's co-founder. What's more, it's easier to attract the best people if employers can promise better quality of life, such as by letting people work from home or easily move from place to place without fear of losing their jobs, if, for instance, their spouses are transferred, he says.

Since its creation in 2008, the virtual law firm has successfully lured high-profile talent such as Dov Grunschlag, a 30-year legal veteran specializing in labor and employment who worked as a professor of law at the University of California's Davis campus and served as law clerk to then-Chief Justice Roger Traynor of the California Supreme Court before entering law practice. Other Rimon Law attorneys include seasoned Silicon Valley attorney Fred Tsien and Martin Goodman, a lawyer with 40 years experience specializing in creditor's rights, who has worked for credit unions and banks such as Citibank.

RingCentral's services include multi-extension business phone systems with an auto-receptionist that professionally answers, greets, and directs callers to the right department or person. Each employee can define how they want to automatically route calls to their home office or mobile phones, based on the time of day and availability. Users also can make calls from their iPhones while on vacation and make it look as if the call was placed from their office. And, Internet fax capabilities convert incoming faxes to PDFs, making them immediately available to distribute to team members to view, forward, and file electronically.

Phone companies see such services as a compliment, rather than competition. That's why AT&T and ClearWire have both partnered with RingCentral to distribute the service in the U.S., says Shmunis. In Britain, RingCentral worked with BT Group in 2008 to offer services to BT's small business customers with cloud based phone systems. RingCentral says the partnership was disbanded due to strategic and other changes at BT. In a written reply to a question from Informilo BT confirms it had a commercial partnership with RingCentral. "However, however, after a performance review, we decided to discontinue the relationship," BT says. RingCentral is now directly servicing the U.K. small business market via its own local Web site.

Shmunis, a seasoned entrepreneur who sold a telecommunications company he co-founded called RingZero Systems to Motorola in the late 1990s, remains optimistic about RingCentral's international expansion and says he also sees huge growth opportunities for the company in the U.S. Since one-half of the work force in the U.S. is employed at businesses with 100 people or less, Shmunis believes there are well over 10 million potential businesses that could be customers of such services in the U.S. alone.

Guest blog post from Jennifer L. Schenker.

This blog post was adapted from www.informilo.com. Click here to read the original posting, provided courtesy of Informilo.