You may have heard of the term “cloud computing” – usually along with claims that it is set to revolutionize the way businesses use technology.

We're going to cover this trend and separate the hype from the reality.

Traditionally when you ran a business, you also needed to run a bunch of computer systems (called servers) to run business applications.

Depending on how big your business is, we could be talking about:

• accounting software
• an email and calendaring system
• customer relations management (CRM) system.

For a small business, this can be a huge cost and headache. The cost goes far beyond the initial, often expensive, purchase of hardware and software. It encompasses software and hardware upgrades, taking care of backups, and ensuring software is kept up-to-date.

Because many small businesses don’t have dedicated IT support on staff. This means downtime when something goes wrong.

As a business owner you have to go through a bunch of IT headaches to get the benefit that software applications gives you.

It was always just a cost of doing business.

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‍‍Enter "Cloud Computing"

The idea behind “cloud computing” is to give you the benefit of these business applications without all the associated IT management responsibilities.

You then access these applications via the Internet.

Think of cloud computing in a similar way to electricity. To get the benefits of electricity you could run your own generator. Most people let their electricity service provider worry about the technical details of how electricity is generated and delivered.

We just want the benefits of electricity without all the hassles. So we pay them a monthly fee to take care of it.

Cloud computing is the same thing applied to business software applications. We just want the benefits of the software while letting someone else worry about managing the IT that runs it.

Understanding A Cloud Computing Model

Under the cloud computing model, we pay a service provider a monthly fee for letting us use applications that run on their computer infrastructure.

Some service providers might offer their applications for free in exchange for:

• showing you ads
• hoping you'll purchase a premium version of their service.

Contrary to popular belief cloud computing is not new.

“Cloud computing” is just a nonsense marketing term. It's also been called “network computing,” “hosted applications,” or “software as a service” (SaaS).

Other than the obvious cost advantages, another big benefit of cloud computing is the ability to access your applications from anywhere.

Because the application is delivered via the Internet, you are no longer tied down to your office.

This allows you to access your data from home or even on the go with smartphones and tablets such as the iPhone and iPad.

Example Applications

So what type of software applications can you purchase this way?

Pretty much anything.

In fact, as it stands I pretty much run my whole business “on the cloud.”

To give you an idea here’s just a few of the cloud-based applications that I use every day in my business:

• Email and calendaring: Google Workspace
• File storage: Dropbox
• CRM: Ontraport
• Email marketing: ActiveCampaign
• Web hosting: SiteGround

There are many more but time and space don’t permit and the above would cover the needs of most small businesses.

The Risks And Downsides Of Cloud Computing

The advantages of the cloud computing model are obvious – you don’t need to buy, maintain and upgrade hardware or software yourself.

However, as with anything, there are also risks and downsides.

With cloud computing, you're basically trusting an external third party to properly manage, backup, and secure your data.

And sure like any business relationship where you put your trust in a supplier, there are risks involved.

But the question I ask myself is – could I run this application better than, for example, Google’s army of thousands of Ph.D. propeller heads? Unlikely.

Just like I trust the bank to secure my money, I need to trust my cloud computing service provider to ensure my data is secure.

This makes it vital to deal with a reputable service provider.

Even if they don’t breach the security of your data, you don’t want to be left high and dry if they go out of business.

Closing Thoughts

Cloud computing dramatically reduces the barrier to entry for startups and small businesses – giving them access to applications that would have otherwise been cost prohibitive.

Smart use of technology is essential to running your business successfully and cloud computing is a great tool to that end.

If you enjoyed this article, you may also enjoy our article on Building Business Systems. It will help you to skyrocket your sales and attract investors.