A Small Business’s Guide to the Different Types of Cloud Services

What are cloud services?

Cloud services are online tools and technologies that let businesses store information, run software and access computing power without relying on their own servers. This flexibility allows companies to use technology on demand without purchasing, maintaining or managing the underlying hardware.

By comparison, a traditional IT infrastructure is a closed, proprietary loop. All applications run on a private internal network, and business data is stored on in-house or offsite servers:

• In-house server: Data is stored on servers owned and managed onsite.
• Offsite server: Data is stored in a third-party data center, but its servers are dedicated exclusively to that organization.

In contrast, cloud computing uses the internet to open that loop so users can house data, access processing power and run applications on a server where they essentially rent rather than own space. Cloud-based tools — such as the best customer relationship management (CRM) software, word processing solutions and accounting software — take advantage of this remote infrastructure. Think of the cloud as a large, offsite server farm connected to local users through providers such as Amazon Web Services or Microsoft Azure.

Organizations that use the cloud don’t have to manage their own storage and power. They can access applications from anywhere at any time and only pay for what they use.

Cloud service example

Many retailers use point-of-sale (POS) systems to accept customer payments. Today, many of the best POS systems are cloud-based and offer a clear example of how cloud services can be a convenience game-changer for SMBs. Cloud-based POS software allows you to access back-office features from any browser, so you can view your store’s sales performance and run POS reports wherever you are.

With cloud POS systems, business owners can quickly get up to speed on sales, inventory and other data without interrupting workflows or even stepping inside the store.

What are the types of cloud services?

The three primary cloud service layers include infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS). Some consider business process outsourcing (BPO) to be a fourth layer. The term “moving up the stack” refers to progressing through these layers.

Here’s a brief overview of these cloud service types.

IaaS

IaaS is the bottom and most foundational layer of the stack. It provides essential computing resources, such as servers, storage, hardware and networking. Organizations that want to develop and manage their own applications rely on IaaS providers for these elements, as well as underlying security and maintenance support.

There is an IaaS provider for almost every use case. Amazon Web Services (AWS), Microsoft Azure and Google Cloud are among the most popular offerings.

PaaS

Moving up the stack, we come to PaaS. This layer provides a platform for building, testing and deploying software applications. If you buy a PaaS offering, you’ll pay a provider to manage most of the servers, operating systems and network infrastructure so your team can focus on creating and refining the actual application. AWS Elastic Beanstalk, Microsoft Azure App Service and Google App Engine are examples of PaaS providers.

SaaS

SaaS is the next layer of the stack. While they’re similar to traditional on-premises software, SaaS applications are cloud-based and run on remote servers. These servers are accessible via the internet to anyone with a subscription.

SaaS applications are fully managed solutions that companies don’t have to worry about maintaining. Businesses typically use them in a pay-as-you-go model instead of paying a high upfront cost. Salesforce, Microsoft 365, Google Workspace and Dropbox are all examples of commonly used SaaS applications. (Read our Salesforce CRM review to learn more about this cloud-based SaaS solution.)

BPO

When BPO is considered part of cloud services, it is sometimes said to be at the top of the stack. However, it’s crucial to understand that BPO is not a technology layer — it’s a business model. In this model, entire processes, such as procurement and accounting, are outsourced to vendors.

BPOs can be:

• Horizontal offerings: Services that apply across multiple industries, such as outsourced payroll or human resources (HR) outsourcing. (Read our overviews of the best HR outsourcing services to learn about specific BPO examples.)
• Vertical offerings: Industry-specific services that require specialized knowledge.

What are some pros and cons of cloud services?

Cloud computing’s pay-as-you-go nature is transformative, helping businesses increase productivity and profits. However, cloud migration comes with challenges and requires research, careful planning and thoughtful change management. The benefits can be significant, but poor execution can be costly. Here’s an overview of the cloud’s pros and cons.

Cloud service pros

• Upfront savings: Since organizations don’t have to build and support their own IT infrastructure, they save substantially on the front end.
• Application freedom and agility: With no significant investment in infrastructure, SMBs can quickly develop, test and scale new applications. If an application is a dud, not much is lost in terms of IT spend. However, if it’s a hit, the company can scale easily to accommodate demand because the cloud provider handles all resource-intensive operations.
• Scalability and flexibility: Cloud services help businesses scale their operations up or down quickly. They can match demand without costly hardware purchases or delays.
• Automatic updates: Cloud service providers handle software updates, security patches and maintenance, ensuring businesses always have access to the latest features without disrupting operations.

Cloud service cons

• Long-term costs: While upfront savings can be significant, renting cloud resources can be costly over time, particularly if you depend on cloud applications heavily or experience rapid usage growth.
• Migration costs: Moving your legacy applications to the cloud can be complex and expensive, especially if they weren’t built for a cloud environment.
• Security concerns: The cloud’s shared infrastructure model means sharing storage space, operating systems and security protocols with potential competitors. If you aren’t comfortable with that idea or have concerns about trusting a cloud provider with your proprietary data, a public cloud solution might not be for you.
• Dependency on internet connectivity: Cloud services need access to reliable, robust business internet service. If your internet goes down, so does your access to the cloud, which means you may not be able to access important data or applications until you’re back online.

How can you start using the cloud?

If you decide your SMB will benefit from cloud services, it’s time to create an implementation plan with clear, sequential steps:

1. Evaluate your current IT spend: Consider how much you spend to run your server or rent space in a data center, hardware costs and what you pay for mission-critical applications. You must be able to calculate accurately whether it’s more cost-effective to buy and manage an application or procure it on a subscription basis in the cloud.
2. Test the cloud with a noncritical application: You don’t have to move your entire operation to the cloud at once. Start with less critical applications to get a feel for how cloud processes and billing work. For example, consider launching with cloud-based backups; your daily business operations don’t depend on backup and disaster-recovery applications.
3. Set up your employees for success: Your employees must understand what’s happening and be alerted to any job function changes caused by cloud migration. It’s crucial to invest in employee training as part of your change-management strategy.
4. Establish a migration strategy: A migration strategy outlines how and when you’ll move from premises-based processes to cloud-based ones. Determine which workloads are suitable for migration and how existing applications will be adopted in the cloud.
5. Choose the right cloud partner: Understand your needs and budget, and look for a vendor with experience in your industry who understands your business’s nuances. This can make migration easier because the partner will understand your goals and cloud capabilities.

Best cloud service providers

Numerous vendors provide cloud computing services, and selecting the right one for your business can be confusing. Here are a few top contenders in various cloud service categories to consider as you conduct your research.

Google Drive

Google Drive is a widely used cloud service that integrates seamlessly with Google’s suite of business tools, including Google Docs (word processing), Sheets (spreadsheets), Gmail (email), Slides (presentations), Drive (storage and collaboration), Calendar and Meet (video conferencing) — all available for free with a Google account. Users can share documents within Google’s cloud-based apps for real-time collaboration or send large files that can’t be emailed.

Businesses must pay for premium features through Google Workspace, such as custom email domains and enhanced security controls. Google provides 15 GB of free storage across Gmail, Drive and Photos. Individual users can upgrade their storage through Google One starting at $1.99 per month, while businesses that need custom email domains, administrative controls and advanced collaboration tools must subscribe to Google Workspace, which starts at $7 per user, per month.

Microsoft Azure

Microsoft Azure is a comprehensive cloud platform that allows businesses to build, manage and deploy applications. It offers a wide range of tools for data analysis, AI, app development and infrastructure management. Azure provides more than 25 services that are always free, including Azure App Service and Azure Functions, while other offerings — such as virtual machines and SQL databases — are free for the first 12 months with usage limits.

Microsoft also offers Microsoft 365 (formerly Office 365), which includes popular business software tools like Word, Excel and PowerPoint, as well as OneDrive for cloud storage and file sharing. Microsoft 365 is a separate paid subscription, with business plans starting at around $6 per user, per month when billed annually.

OpenDrive

OpenDrive is a cloud storage and file-sharing platform that works across iOS, Android and Windows devices, making it easy for teams to store documents, collaborate and stay organized. In addition to file storage, OpenDrive includes built-in Notes and Tasks modules that help remote teams manage projects and shared work.

OpenDrive offers personal and business plans, with business pricing starting at $7 per month (or $70 per year) for 500 GB of storage, and $29.95 per month (or $299 per year) for unlimited storage.

Intuit QuickBooks Online

Businesses benefit enormously from using the best accounting software to manage their finances, track taxes and monitor accounts payable and receivable. Cloud-based accounting software enhances these functions with better security, accessibility and scalability.

QuickBooks Online is a leading cloud-based accounting solution for SMBs. It allows you to manage core accounting and bookkeeping tasks and access real-time financial data, helping your business stay agile and make more informed strategic decisions. Pricing for the Simple Start plan is $38 per month, though Intuit frequently offers promotions that can significantly reduce the cost. Our detailed QuickBooks Online review outlines this platform’s full pricing structure and numerous cloud-based features.

Constant Contact

Email is a critical part of any business’s marketing strategy, and the best email marketing services help remove the guesswork from creating and running campaigns. Constant Contact is a strong example of a cloud-based email marketing platform. It offers numerous templates to help you build lead nurturing campaigns, email newsletters and promotional emails. It also supports A/B testing to optimize performance and includes analytics tools that show what’s working and what needs improvement.

Pricing starts at around $12 per month, but actual costs depend on your contact list size and email volume. Check out our comprehensive Constant Contact review for more details.

Clover

Earlier, we touched on the benefits of cloud-based POS software. Clover POS is a top option, particularly for businesses that need a customizable and easy-to-use system. As our Clover POS review explains, Clover’s feature-rich platform helps small business owners manage customer communications, payments, marketing, employee scheduling and inventory. It also offers industry-specific POS systems for retailers, service providers and restaurants with specialized features. Clover’s pricing varies by hardware type, software tier and industry. 

How cloud service usage is accelerating

Cloud adoption is accelerating as businesses of all sizes look for more flexible, scalable and cost-effective technology solutions. Recent market data shows a clear shift, as organizations continue increasing their budgets and rely more heavily on cloud platforms to power more of their core operations.

Here’s what’s driving the acceleration:

• Modernization and AI demand: Gartner reports that the worldwide IaaS market grew 22.5 percent in 2024, reaching $171.8 billion, fueled by AI infrastructure needs and ongoing cloud migration efforts.
• Sustained long-term growth: Gartner also forecasts that public cloud services will expand by another 21.3 percent in 2026, with the global market expected to reach $1.48 trillion by 2029.
• Rising cloud budgets: Flexera’s 2025 State of the Cloud Report shows that cloud budgets continue to grow as organizations rely more heavily on cloud resources. According to the report, 33 percent of organizations now spend more than $12 million annually on public cloud, and 84 percent cite managing cloud spend as a top challenge. Businesses also expect their cloud spending to increase by an average of 28 percent this year, reflecting both rising demand and the complexity of managing expanding cloud environments.

What was once a strategic advantage reserved for large enterprises is now becoming accessible to small and midsize businesses. Pay-as-you-go pricing, lower upfront costs and user-friendly cloud tools give SMBs the ability to operate more efficiently, innovate faster and scale with confidence.

SMBs can tap the cloud for business benefits

The expensive hardware and software once required to run sophisticated business applications are now within reach for SMBs. This is the true beauty of cloud computing: It levels the playing field. With research, thoughtful planning and a little faith in the process, SMB owners can implement enterprise-grade solutions that help them work smarter, operate more efficiently and strengthen their businesses.

Jennifer Dublino contributed to this article.