What is cloud computing? Benefits, uses and examples

Published Thursday 2 April 2026

Table of contents

• What is cloud computing?
• How cloud computing works
• Types of cloud deployment models
• Types of cloud services
• Benefits of cloud computing
• Who uses cloud computing
• Examples of cloud computing
• How cloud computing helps your small business
• FAQs on cloud computing

Key takeaways

• Choose Software as a Service (SaaS) solutions like cloud accounting, email, and communication tools to access ready-to-use applications through your web browser without installing software or managing technical maintenance.
• Use public cloud services to reduce costs by sharing infrastructure with other users while still accessing your business data and applications from any device with an internet connection.
• Implement cloud computing to enable real-time collaboration with your team and accountant, allowing multiple people to work in the same system simultaneously without exchanging files.
• Follow the 3-2-1 backup rule when using cloud services by maintaining at least three versions of your data on two different media types, with one copy stored offsite to protect against data loss.

What is cloud computing?

Cloud computing is the delivery of computing services over the internet, letting you store data, run software, and access files from any device, anywhere, at any time. The U.S. National Institute of Standards and Technology (NIST) provides a formal definition that outlines the cloud model's five essential characteristics, three service models, and four deployment models. Instead of keeping everything on a single computer, you use remote servers managed by a provider.

This changes how you work, bank, communicate, and run your business.

Cloud computing isn't tied to a single company. While Apple offers iCloud, many providers deliver cloud services, including Google, Dropbox, and Xero.

How cloud computing works

Cloud computing works by storing your data and running your software on remote servers instead of your local computer. When you access a cloud service, your device connects to these servers through the internet.

When you use cloud computing:

• Remote servers: Your data lives in secure data centres managed by the cloud provider
• Internet connection: You access your files and software through a web browser or app
• Automatic maintenance: The provider handles updates, security patches, and backups
• On-demand resources: You use only the computing power and storage you need

For small businesses, this means you don't need to buy expensive hardware or hire IT staff. The cloud provider takes care of the technical infrastructure while you focus on running your business.

Types of cloud deployment models

Cloud computing comes in different deployment models based on who manages the infrastructure and who can access it. The three main types:

Public cloud

Third-party providers own and operate public cloud services, delivering computing resources over the internet. This is the most common model for small businesses because you share infrastructure with other users, which keeps costs low. Supporting this, a 2022 report found that among organisations using the cloud, there were 91% using public cloud services.

Examples include Google Workspace, Microsoft 365, and Xero.

Private cloud

One organisation exclusively uses private cloud infrastructure. It offers more control and security but requires greater investment in hardware and IT resources. This model suits larger enterprises with strict compliance requirements.

Hybrid cloud

Hybrid cloud combines public and private cloud environments, letting businesses keep sensitive data on private servers while using public cloud for other operations. Most small businesses don't need this complexity.

Types of cloud services

Cloud providers offer different levels of service depending on how much infrastructure they manage for you. Understanding these models helps you choose the right solutions for your business.

Software as a Service (SaaS)

SaaS delivers ready-to-use applications over the internet. You access the software through a web browser without installing anything on your computer. The provider handles all maintenance, updates, and security.

This is the most widely adopted cloud service for small businesses, with its market size projected to reach $307.3 billion by 2026. Examples include:

• Xero for accounting
• Gmail for email
• Slack for team communication
• Shopify for e-commerce

Platform as a Service (PaaS)

PaaS provides a platform for developers to build and deploy applications without managing the underlying infrastructure. Small businesses rarely use PaaS directly unless they're developing custom software.

Infrastructure as a Service (IaaS)

IaaS offers virtualised computing resources like servers, storage, and networking. Businesses rent these resources instead of buying physical hardware. Examples include Amazon Web Services and Microsoft Azure.

Benefits of cloud computing

Cloud computing transforms how you manage your business by removing the limitations of traditional desktop software. Key advantages include:

• Accessibility: Access your data anytime, anywhere, on any device with an internet connection
• Security: Protect your data with professional teams using advanced security. Note that managing security can be complex—a 2024 report from Flexera found that 74% of SMBs consider compliance their biggest cloud computing challenge
• Cost savings: Pay only for what you use without expenses for hardware, maintenance, or manual upgrades
• Automatic updates: Keep software current without installations or version management on your end
• Reliability: Rely on high uptime with built-in redundancy across multiple servers
• Control: Decide who accesses your data and revoke permissions instantly when needed
• Scalability: Add users or storage as your business grows without buying new equipment
• Ease of use: Log in and start working without technical expertise or IT support

Who uses cloud computing

Cloud computing has become standard for businesses of all sizes and industries. Cloud services support:

• Small business owners: Manage finances, invoicing, and payroll from anywhere using cloud accounting software
• Accountants and bookkeepers: Collaborate with clients in real time and access records without exchanging files
• Retailers: Process payments, track inventory, and sell online through cloud-based point-of-sale systems
• Professional services: Store client documents securely and work remotely with cloud storage and communication tools
• Tradespeople: Send invoices on-site, track job costs, and manage schedules from mobile devices

Cloud adoption continues to grow across every sector, with some projections showing the global market will surpass $1 trillion by 2030. What started with email and banking has expanded to nearly every business function.

Examples of cloud computing

You likely use cloud computing every day without realising it. Common examples include:

• Internet banking: Access your financial data anytime, anywhere, on any device instead of visiting a physical branch
• Web mail: Send and receive emails from any location rather than collecting correspondence at a single address
• Cloud storage: View and edit files online instead of being tied to one office computer
• Online shopping: Let customers browse and buy products around the clock rather than during limited store hours
• Cloud accounting software: Access your financial data from anywhere with an internet connection, and let multiple people work in the system at once

How cloud computing helps your small business

Cloud computing gives you the flexibility to run your business from anywhere while reducing the time you spend on admin tasks. Learn more in our mobile office guide.

In practice, this means:

• Real-time financial visibility: Check your cash flow, invoices, and expenses from your phone or laptop
• Seamless collaboration: Share access with your accountant or bookkeeper without sending files back and forth
• Automatic backups: Stop worrying about data loss from computer crashes or theft. To minimise risk, it's a best practice to follow the 3-2-1 rule of secure backups: maintain at least three versions of your data on two different media types, with one copy stored offsite
• Less IT hassle: Focus on your business instead of managing software updates and hardware

Bring all these benefits to your financial management with Xero's cloud accounting platform. Get one month free and see how easy managing your books can be.

FAQs on cloud computing

Find answers to common questions about cloud computing for small businesses.

What's the difference between cloud computing and traditional software?

Traditional software installs on your computer and stores data locally, limiting access to that device. Cloud computing stores your data online, so you can access it from any device with an internet connection.

What are the main types of cloud computing I should know about?

The three main deployment models are public cloud (shared infrastructure, lowest cost), private cloud (dedicated infrastructure, higher control), and hybrid cloud (a combination of both). Most small businesses use public cloud services.

What are everyday examples of cloud computing?

Common examples include internet banking, web-based email like Gmail, cloud storage like Dropbox, streaming services like Netflix, and cloud accounting software like Xero.

Do I need technical expertise to use cloud computing?

No. Providers design cloud services to be user-friendly. You simply log in through a web browser or app and start working. The provider handles all technical maintenance behind the scenes.

What happens if my internet connection goes down?

Your data remains safe in the cloud while you wait for your connection to return. Internet outages are typically brief, and many cloud apps let you work offline and sync changes later.