Cloud Jargon Buster

8 terms you need to know when renewing, purchasing or managing software in the cloud

Software management in the cloud can get complicated, not least because there is a plethora of licensing models and deployment options that businesses need to choose from. As cloud computing is seeing wider adoption by businesses, software licensing is becoming increasingly important for advancing SMEs’ digital transformation strategies.


But with all the options and avenues come a lot of technical jargon and IT terminology which can be hard to understand. Here is our Cloud Jargon Buster to help you navigate this vital area of your business:


  • Software as a Service (SaaS)

There are three basic cloud service models: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). SaaS is probably the most well-known and widely used cloud service model. It’s based on accessing software applications through a web browser without additional installations or downloads. Popular SaaS applications include Gmail and Microsoft Office 365.


  • Platform as a Service (PaaS)

PaaS usually includes an operating system, programming language or a web server and is usually used to create, deploy and manage SaaS. In this scenario, the customer has shared control over what is run in the cloud environment, including third-party software, but typically does not have control over the operating system. Businesses often use PaaS in order to reduce the amount of time and resources required to maintain and update apps.


  • Infrastructure as a Service (IaaS)

One of the most common applications of IaaS is the hosting of web-based applications such as Amazon Web Services (AWS). This cloud service model allows users to access and manage applications, data, servers, hard drives, storage and networking in the cloud. IaaS customers usually pay based on their use, typically by the hour, week or month.


  • Types of software license

There are three most common types of software license in the cloud: proprietary licence, which consists of software that is licensed under very specific conditions; general public license (GPL), which usually applies to open source software and allows users to update the source code and distribute new versions of the software; and ‘specific use’ license, which is tailored to particular needs of the business.


  • Subscription-based pricing model

Every cloud service model comes with different licensing options. The subscription-based pricing model is one of the most commonly used licensing options. It allows customers to pay a fee for a specific duration of time and is most widely used for SaaS services. For instance, if you have a business license for cyber security software, most likely this license needs to be renewed every year or every two years.


  • Consumption-based pricing model

Another popular licensing model for cloud services is the consumption-based model. In this scenario a cloud service provider charges the business a fee which is based on the level of consumption of the business. For instance, a cloud storage provider might charge based on the amount of data that needs to be stored in the cloud.


  • On-demand cloud service

On-demand cloud service is designed to accommodate spikes of activities or ad hoc IT requirements that businesses may have. It allows businesses to purchase cloud services for specific projects or to accommodate spikes of activity and additional services required on a temporary basis. For instance, if customers need to use additional servers for the duration of a project, they can do so and then drop back to the previous level after the project is completed.


  • CAPEX vs OPEX: Capital expenditure or capital expense (CAPEX) is the money an organisation spends to buy, maintain, or improve its fixed assets. These assets could include buildings, vehicles, equipment, land or the technology infrastructure within the business. Operational expense (OPEX), on the other hand, refers to the ongoing cost for running a product, business, or system.


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