“Move to the cloud” has become standard advice for small businesses, but it’s not always clear what that actually means. Cloud hosting covers everything from storing files in OneDrive to running virtual servers in a data centre, and the right choice depends entirely on what you’re trying to do.
What Cloud Hosting Actually Means
At its core, cloud hosting means running services or storing data on infrastructure owned and operated by a third party, accessible over the internet, rather than on hardware you own and manage yourself.
The appeal is straightforward: no upfront hardware costs, someone else handles maintenance and physical security, and you can scale up or down based on actual need rather than having to buy capacity for your worst-case scenario.
The confusion comes from the fact that “cloud hosting” describes several quite different models.
The Main Models
SaaS — Software as a Service
You use software delivered over the internet, managed entirely by the provider. You don’t manage any infrastructure, operating systems, or application updates: you just log in and use it.
Examples: Microsoft 365, Google Workspace, Xero, Salesforce, Dropbox, Zoom.
This is the model most small businesses already use without necessarily calling it cloud hosting. If your team uses Microsoft 365 for email and Office apps, you’re using SaaS.
Best for: Business applications where you want to use the software, not manage it.
IaaS — Infrastructure as a Service
You rent virtualised infrastructure (servers, storage, networking) from a cloud provider and manage everything above the hardware level yourself. You choose the operating system, install software, apply updates, and configure security.
Examples: Amazon Web Services (AWS) EC2, Microsoft Azure Virtual Machines, Google Compute Engine.
IaaS gives you maximum flexibility but also maximum responsibility. You’re essentially renting a virtual server and managing it as you would a physical one.
Best for: Businesses with technical staff who need to run custom applications, host websites, or manage their own server infrastructure without the capital cost of physical hardware.
PaaS — Platform as a Service
The provider manages the infrastructure and operating system; you deploy and manage your application on top of it. You don’t worry about patching the OS or managing the underlying server; just your code and data.
Examples: Microsoft Azure App Service, Google App Engine, Heroku.
PaaS is primarily relevant for software developers building and deploying applications rather than for general business use.
Best for: Development teams building and deploying applications.
Managed Hosting / Hosted Services
A middle ground that doesn’t fit neatly into IaaS/PaaS/SaaS. A provider hosts and manages a specific application or environment on your behalf: a managed WordPress site, a hosted VoIP phone system, a managed SQL database, or a hosted desktop environment (DaaS).
The provider handles the underlying infrastructure and often the application layer too; you manage your content, users, and data.
Best for: Businesses that want the benefits of cloud infrastructure without the overhead of managing it themselves.
Public, Private, and Hybrid Cloud
Beyond the service model, cloud hosting is also described by where the infrastructure lives:
Public cloud — infrastructure shared across many customers, operated by a large provider (AWS, Azure, Google Cloud). Cost-effective and highly scalable, but you share the underlying hardware with other customers (though workloads are isolated).
Private cloud — infrastructure dedicated to a single organisation, either on-premises or hosted in a data centre. More control and potential compliance advantages, but higher cost and more management overhead.
Hybrid cloud — a combination of on-premises infrastructure and public cloud, with workloads distributed based on requirements. Common for businesses that need to keep sensitive data on-premises but want cloud scalability for other workloads.
For most SMEs, public cloud (via SaaS or managed hosting) covers the majority of needs. Private and hybrid cloud become relevant as data sovereignty, compliance, or specific performance requirements come into play.
What Most Small Businesses Actually Need
The honest answer for most SMEs is that you’re probably already using the most relevant parts of cloud hosting:
- SaaS for productivity, email, accounting, and communications
- Managed hosting for your website, if it’s not a simple static site
- Possibly IaaS if you’re running custom applications or need a hosted server
If someone is recommending you “move to the cloud” without specifying what that means for your particular situation, it’s worth asking exactly what they’re proposing to move, where it will live, who will manage it, and what the ongoing cost looks like.
Key Questions Before Choosing
- Who is responsible for backups?
- What happens if the provider has an outage?
- Where is your data stored, and does that matter for your compliance requirements?
- What are the exit costs if you want to change providers?
- What is the total ongoing cost compared to on-premises alternatives?