A Guide to Cloud Computing Guide for Small Businesses

In the modern age of data storage, small business owners have their heads in the clouds

A Guide to Cloud Computing Guide for Small Businesses

Cloud computing offers businesses a way of managing their data, hardware and software requirements online. Documents, emails, customer information, business applications and other assets can all be stored externally – ‘in the cloud’ – to be accessed using a computer, laptop or smartphone with an internet connection.

You can use cloud computing as a stand-alone solution or in addition to your existing IT infrastructure. It can help you reduce hardware and software costs, support more flexible working practices, and make it easier to scale your IT systems. Cloud computing can also reduce your need for in-house IT support and offers reliable and secure back-up for your business’ data.

This cloud computing guide for SMEs explains how cloud computing works, how to decide if it’s right for your business and what you should consider when implementing it. It also looks at some of the risks involved – including data protection, business continuity and issues around service provision.

How cloud computing works

Cloud computing provides a way of delivering your IT requirements online. Documents, emails, customer details and applications can all be stored remotely and accessed over the internet through a web browser.

Cloud computing is made up of three key elements:

  • large-scale data centres hosted on remote servers
  • services – eg software and hardware resources provided over the internet
  • low-cost computers and other web-enabled devices like laptops, netbooks and smartphones

With cloud computing, users are able to access their business information over the internet – ‘through the cloud’. Since your applications and data are stored remotely, all you need is a web-enabled device and an internet connection. Businesses can use smaller, more low-cost portable devices, such as smart phones and netbooks, supporting more mobile and remote working practices. For more information, see the section in this guide on the benefits of cloud computing.

There are three main cloud computing services available.

Software as a Service (SaaS)

SaaS is the most common form of cloud computing used by small businesses, and involves using software hosted on remote servers. It allows you to run applications through your web browser and save, retrieve or share files that are stored ‘outside’ your business.

Services such as web-based email, office software, customer relationship management systems or tools that support collaborative working are all examples of SaaS. SaaS provides greater flexibility, allowing you to scale your IT requirements quickly and easily to meet the changing needs of your business.

Infrastructure as a Service (IaaS)

IaaS allows businesses to use virtual hardware resources to build their IT infrastructure. This includes server space, data storage facilities or networking hardware. As with SaaS, you can modify or expand capacity as required. Other benefits include a reduction in your IT costs – by outsourcing your hardware requirements you no longer need to buy it or have the internal expertise to maintain it.

Platform as a Service (PaaS)

PaaS involves using online application development capabilities to build and adapt applications to suit your business needs. The software development tools and hardware you need to do this – known as ‘cloudware’ – are all located remotely and accessed through the web.

Benefits of cloud computing

Cloud computing has a number of benefits compared to more traditional approaches.

Reduced IT costs

Using cloud computing can help your business reduce its IT expenditure. For example, having your business applications provided over the internet means you would no longer need to install and set up that software across your business yourself.

You can also reduce your hardware and software requirements and your ongoing costs – maintenance and other upgrades can be managed off-site by your cloud computing service provider.

Operational cost savings can also be made to your staffing requirements. By outsourcing your IT needs your business may no longer need the same levels of in-house technical expertise – allowing you to focus more on your core business.


Cloud computing allows your business to easily upscale or downscale your IT requirements as and when required. For example, most cloud service providers will allow you to upgrade your existing package to accommodate business needs or changes to market conditions. This would support your business growth without needing expensive changes to your existing IT systems.

Access to new technologies

Cloud computing can help ensure that you always have access to the latest technology. You would no longer need to worry about updating your software or investing in new back-end technology – as your service provider could manage this on your behalf. This can also give you access to software, hardware and IT functionality that would be too expensive to buy outright.

More flexible working practices

Cloud computing allows your employees to be more flexible – both in and out of the workplace. Employees can access files using web-enabled devices such as smartphones, laptops and netbooks. The ability to simultaneously share documents and other files over the internet can also help support both internal and external collaboration.

Enterprise-level back-up

Cloud services can provide your business with enterprise-level back-up. While there are some concerns around data protection, cloud computing can give your business access to professionally managed back-up for all of your business information. For more information, see the section below on data protection and cloud computing.

Environmental factors

Cloud computing can offer a more environmentally friendly way of fulfilling your IT requirements, by helping reduce your energy consumption. Cloud service providers invest in large-scale data centres that often offer businesses a greener alternative to the more traditional approach to IT.

It can also help you reduce equipment wastage, since any reduction to your hardware needs will limit future redundancy.

Data protection and cloud computing

As with other hosted services, data protection is an issue when considering cloud computing.

The main data protection risks to your business are:

  • loss of data by third-party service providers
  • unauthorised access to your data
  • malicious activities targeting your service provider – eg hacking or viruses
  • poor internal IT security compromising data protection

Before introducing a cloud computing system, you should carry out a risk assessment of these hazards and their potential impact on your business.

Service providers operate – and usually host – all the server requirements for a cloud computing system. These can include database management systems for data-intensive applications, such as those required for e-commerce or customer relationship management. High levels of data protection are necessary for such applications, and you should check your contract or service level agreement (SLA) to find out what security measures your provider takes to protect your data.

Your legal responsibilities

All UK businesses holding personal data about third parties – eg customers – must comply with the Data Protection Act 1998. When using cloud computing services, your data can be stored outside the European Economic Area – but your business is ultimately responsible for that data.

You should check your contract or SLA to find out what level of responsibility the provider will take for security, functionality and continuity of service, and whether there are any provisions for compensation in the event of a security breach.

You can download data protection best practice advice and cloud computing guidance for businesses from the Information Commissioner’s Office (ICO) website (PDF, 464K)

Business continuity and cloud computing

Business continuity planning can help ensure the survival of your business should there be a critical systems failure. From an IT perspective, this could be threats to data from fire and flood, theft of hardware – eg laptops or memory sticks – or hacking.

Cloud computing can form part of a business continuity plan. Cloud computing service providers back up and protect your data by holding it on servers remote from your physical premises and your own hardware. If, for example, employees are unable to work in their normal building, they could still access files and information over the internet and continue working.

Managing cloud computing risks

However, it is also possible for service providers to lose data, suffer denial of service attacks, or go out of business. These possibilities should be factored into your risk assessments.

Individually negotiated contracts should include availability guarantees and penalties if the service is interrupted. However, many consumer services – eg free applications where you accept the provider’s terms and conditions rather than negotiate a contract – specifically exclude these provisions from service agreements. Contracts should also take into account sector-specific legal requirements – eg the UK money laundering regulations for businesses working in financial services.

To guard against the possibility of complete loss of data from a remote provider, you should consider backing up all data using servers that are under your physical control, or using a back-up cloud storage provider – although this will involve additional expense.

For a broader view see our article on business continuity management.

Choosing a cloud computing service

Cloud computing applications useful to small businesses include:

  • sales tools
  • office software
  • customer relationship management (CRM) software
  • human resources software
  • payroll software
  • collaborative working tools

Many such applications are available on a Software as a Service basis – where the software is maintained and upgraded by the provider and accessed through the customer’s web browser. There are a wide range of providers that offer cloud services to business. We strongly recommend using the advice in this guide to source the best solution for your business.

Sales and CRM tools

Online sales and CRM applications can help you target new business and service the needs of existing customers more effectively. Sales teams, for example, can use web-enabled devices such as smartphones to access and update customer information whilst on the move.

For more information, see our guide on customer relationship management.

Virtual offices

Office software and collaborative working tools available through ‘the cloud’ allow employees to work anywhere using web-enabled devices – exchanging emails and sharing information as needed. This supports more flexible working practices and allows employees to collaborate with colleagues, clients and customers.

Find out about virtual office applications on the Lasa Knowledgebase website – Opens in a new window.

Changing providers

When selecting a service provider it is important to know how easy it would be for you to change the level of service you are receiving, or – if necessary – end the contract or service level agreement and move to another provider. To avoid being ‘locked in’ to a service, you should carefully consider your contractual obligations and how technically viable it would be for you to change service providers in the future.

As with all suppliers, you should do your research to find the provider most suited to your business requirements. Ask other businesses and carry out research online to ensure that the provider you choose is reputable.

Integrating cloud computing services into your business

Cloud computing services are often chosen by businesses to supply a particular IT need, rather than replace all existing IT infrastructure. They can help businesses make the most of limited IT budgets, while the level of professional support provided can help the business grow more quickly. When thinking about using cloud services, you should first consider trialling it with non-critical applications or business processes – to see how it works for your business and what benefits it can bring.

Whatever type of cloud service you are considering, cloud computing provides an opportunity to review and improve existing business processes and reinforce best practice.

Assessing service providers

Before implementing cloud computing in your business, you need to consider the following issues:

  • Data protection – how will you protect your data, and what measures has the service provider put in place to ensure your data is secure? What level of responsibility will the service provider take for any data loss and what are your legal obligations for your data? If the provider’s servers are located outside the European Economic Area, what data processing rules and jurisdiction will apply?
  • Business continuity – in the event of service downtime, a security breach or loss of data, how will your business continue to operate? What back-up systems do you have in place? What service availability guarantees can the provider give?
  • Service level – what level and types of support will your provider offer? What financial compensation will they give you if their service becomes unavailable?
  • Pricing – how much will the service cost?
  • Flexibility – what are your options for upgrading or downgrading service requirements in the future?
  • Contract terms – what are your legal obligations if you want to end the contract early – eg to change providers?

For more information, see the sections in this cloud computing guide on data protection and cloud computing, business continuity and cloud computing and choosing a cloud computing service.

Ensuring your business is ready

To be able to work effectively ‘in the cloud’ your business needs a fast internet connection. Cloud computing works most effectively when you can upload data to the provider’s servers as fast as you can download from them. SDSL (symmetric digital subscriber line) internet connections are preferable to ADSLs (asymmetric digital subscriber lines) as they support faster upload speeds.

You should also check whether your business shares its internet connection with other businesses, as this will reduce upload speeds. Your choice of internet service provider and the support they offer is a key consideration too – because internet access is fundamental to cloud services. For more information, see our guide on selecting a business ISP.

Cloud Computing Guide for SMEs, Crown Copyright © 2003-2013

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