Essentially, cloud computing is a way of turning computing power into a commodity. Compare it to electricity – 100 years ago electricity stopped being something only the very richest could afford and became a commodity that everyone could use just by flicking a switch. From a business perspective, just as you don’t need to build your own power station to run your factory, cloud computing means you no longer need to build your own data centre to use information technology (IT) to make your business a success.

Of course – being IT – cloud is a bit more complicated than flicking a light switch! And unlike a national or regional electricity grid, cloud computing services are provided by an array of different cloud vendors all vying to offer you their services… for hefty ongoing fees.

In this article, we’ll talk about the different types of ‘cloud’ services available and discuss what you need to be aware of when taking advantage of these services.

Type of cloud services for SMEs

Types of Cloud Services

There are three main types of ‘cloud’ that businesses can access. These different types of services can be used to either supplement your existing IT or replace it completely.

Cloud Infrastructure Services

Cloud Infrastructure, also known as Infrastructure as a Service (IaaS) is designed to replace your physical servers and data centres. The cloud service provider allows you to build your own ‘virtual servers’ on their hardware and networking equipment in their huge data centres, while the data and information used by your employees is securely transmitted to your business through a combination of dedicated telecoms infrastructure and the public internet.

While Cloud infrastructure can replace much of your physical IT equipment, you will still need the help of specialist technical people to build, patch and upgrade the servers sitting on the Cloud infrastructure, and to resolve any issues your employees may have with their IT.

Cloud Application Services

Cloud application services, also known as Platform as a Service (PaaS) is intended to replace the operating systems, databases and other specialist software that is required by complex, data heavy applications such as CRM or ERP applications. But cloud applications services are not just about replacing existing software, they also simplify access to some of the most exciting technological developments used by businesses today, such as Robotic Process Automation (RPA) (which improves the efficiency of your business processes and frees up staff to do higher value activities), the Internet of Things (IoT) (which connects physical objects to the internet), and blockchain (distributed, highly secure ledgers).

Unlike cloud infrastructure services, you do not need to build, patch or upgrade the virtual servers yourself – a cloud application service can be built or decommissioned at the click of a mouse and the cloud application services provider is responsible for ensuring they are maintained and keeping them secure. Additionally, unlike cloud infrastructure services where you must ‘bring your own licenses’ (BYOL), the operating system and application licenses are included in the service subscription.

Cloud application services still require skilled individuals to ensure that the cloud services and your existing data centres all knit together properly and that the applications themselves continue to meet the needs of the business as it evolves.

Cloud Software Services

The final type of cloud service is cloud software, or Software as a Service (SaaS). This type of cloud service replaces much of the software installed on personal computers, instead using a web browser to access it online.

Most people are familiar with free cloud email services, such as Google’s Gmail, and collaboration tools such as Trello or Slack – these are all types of cloud software services.

Cloud software services can be particularly helpful in getting small businesses up and running very quickly and to allow existing businesses to take advantage of innovative services.

Cloud software services for businesses range from accounting to workforce management and everything in between. Many tools aimed at small businesses use a ‘freemium’ model, where the basic product is free, but businesses pay for upgraded services.

Cloud software is frequently sold on a user-based subscription model, so if you do not delegate responsibility for administration of the system to a member of staff, unused subscription fees can add up quickly. It is also easy for employees to purchase cloud software subscriptions using a credit card, so the number of cloud software services used by the business can expand rapidly unless the purchase process is tightly controlled, further driving up costs.
Getting the most from your cloud services

As with most forms of information technology, there are plenty of traps for the unwary when it comes to getting the most of your cloud services.

Cybersecurity and data protection

While most cloud service platforms are relatively secure, it is still important to do your due diligence to ensure that using cloud services won’t compromise your cybersecurity or breach data protection regulations – for instance many countries have strict rules about where personal data can be hosted, such as the General Data Protection Regulation (GDPR) in Europe.

You can read more about managing the threat of cybercrime in this infosheet.

Software licensing

Traditionally, the management of software licenses has focused on the need to ensure businesses are compliant with the terms and conditions of their software licensing contracts. This is still true of businesses which consume cloud infrastructure services, where you ‘bring your own licenses’, however those using application and software cloud services will find that the licensing models tend to be simpler and therefore easier to manage.

The interaction of on-premise software and cloud software can cause significant licensing risk, so it is important to obtain expert licensing advice before integrating cloud services with your existing systems.

“There’s an opportunity for midmarket firms to save money by shifting IT operational costs from the capital expenditure side of the budget to the operational side, with cloud just a part of it”, Jim McGittigan, Gartner analyst

Financial Management

Adoption of cloud services has the effect of shifting annual IT spend from capital spend (CAPEX) focused on hardware and software which can be depreciated over a number of years, in favour of operating spend (OPEX).

While this has the benefit of aligning IT spend more closely to the business cycle, IT managers in larger organisations can find it challenging to explain to CEOs and CFOs why this shift is occurring and why it is in the interests of the business to make this change.

The risk of over-spending on cloud services is also something to bear in mind. Even though cloud services are often marketed as being ‘pay for what you use’, managing subscriptions can be a significant administrative overhead, cloud-services can have lengthy lock-in periods, and it can be difficult to reduce the subscription fees when business is bad.

Software Asset Management (SAM), the discipline which manages software throughout its lifecycle, is the key to getting to grip with your cloud services. You read more about SAM here.