One of the greatest challenges to organisations is how to manage their many critical IT assets, including skills. This has led to the explosive growth development of cloud services, which includes everything from infrastructure-as-a-service (IaaS) to platform-as-a-service (PaaS), to fully-managed software-as-a-service (SaaS), the critical applications used by organisations. IT capabilities used to be a significant capital investment for companies, who looked to gain competitive advantage by the constantly evolving capabilities of both hardware and software. IT is now a very large area where scalable service delivery models (so called pay-as-you-go) are challenging formerly capital expenditure-based models.

Organisations embracing cloud services can benefit from the ability to uptake the latest technology, instead of being bogged down by maintaining out-of-date, not-yet-capitalised equipment (some of which may be past its end-of-life). Furthermore, their IT resources can be used on innovation rather than up and down lifting. In many cases, innovation is directly enabled by cloud services with flexible, scalable workloads (a company can ‘rent’ the extra capacity needed), the provision of highly proficient data analytics, and the ability to analyse vast volumes of data.

Cloud service adoption is evolving from tentative trials to managing mission-critical data in the cloud. Cloud adopters increasingly believe that placing data in the cloud makes it easier to secure, and ultimately enables them to be more secure organisations.

We are entering an unprecedented time of change as digital technologies disrupt entire industries and customer expectations, and the cloud is critical in helping companies cope with this change. A growing number of companies can foresee a time when they move all of their IT to the cloud, though with UK businesses steadily adopting a ‘cloud-first approach’, this change will take time. While smaller businesses are able to make the logical step to remove their depreciated hardware assets and move entirely to the cloud, this is less feasible for larger organisations with heavy infrastructure investments. Total cloud use remains many years away, but the vast majority of companies are developing hybrid IT environments.

This Report is concerned with cloud computing, which is defined as a type of computing that relies on sharing computing resources rather than having local servers or personal devices to handle applications. In cloud computing, the word cloud (also frequently phrased as "the cloud") is used as a metaphor for "the Internet," so the phrase cloud computing could also be defined as "a type of Internet-based computing," where different services, such as servers, storage and applications, are delivered to an organisation's computers and devices through the Internet. Effectively, cloud computing is taking services outside of a company or organisation’s firewall on shared systems.

The goal of cloud computing is to apply high-performance computing power, normally used by military and research facilities, to perform tens of trillions of computations per second, in consumer-oriented applications such as financial portfolios, to deliver personalised information, provide data storage or power large, immersive online computer games. To do this, cloud computing uses networks of large groups of servers, typically running low-cost consumer PC technology with specialised connections, to spread data-processing chores across them. This shared IT infrastructure contains large pools of systems linked together, and virtualisation techniques are often used to maximize the power of cloud computing.

Cloud computing is gaining mass appeal in corporate data centres as it allows them to operate like the Internet, enabling computing resources to be accessed and shared as virtual resources in a secure and scalable manner. The benefits of cloud computing for small and medium size enterprises (SME) are currently driving adoption. There is often a lack of time and financial resources in the SME sector to purchase, deploy and maintain infrastructure, such as software, servers or storage. In cloud computing, small businesses can access these resources, and expand or shrink services as their business needs change. The common pay-as-you-go subscription model is designed to let SMEs easily add or remove services, and cost competitiveness is created since companies are only paying for what they use.

Cloud computing denotes a cloud computing platform that is outside of an organisation’s firewall on shared systems. In this scenario, the cloud service provider is in control of the infrastructure. A private cloud is the same platform but implemented within the corporate firewall, under the control of the organisation's IT department. A private cloud is designed to offer the same features and benefits of public cloud systems, but removes a number of objections to the cloud computing model, including control over corporate and customer data, worries about security, and issues connected to regulatory compliance.

Private cloud services are delivered from a business' data centre to internal users. This model offers versatility and convenience, while preserving management, control and security. Internal customers may or may not be billed for services through an IT chargeback.

In the public cloud model, a third-party provider delivers the cloud service over the Internet. Public cloud services are sold on-demand, typically by the minute or hour. Customers pay for the CPU cycles, storage, or bandwidth they consume.

Hybrid cloud is a combination of public cloud services and on-premise private clouds, with orchestration and automation between the two. Companies can run mission-critical workloads or sensitive applications on the private cloud, while using the public cloud for major workloads that need to scale on-demand. The goal of a hybrid cloud is to create a unified, automated, scalable environment which takes all of the advantages of public cloud infrastructure, while maintaining control over mission-critical data.

Although cloud computing has changed over time, it has always been divided into three broad service categories: infrastructure as a service (IaaS), platform as a service (PaaS) and software as service (SaaS).

IaaS providers supply a virtual server instance and storage, as well as application program interfaces (APIs) which let users migrate workloads to a virtual machine (VM). Users have an allocated storage capacity and start, stop, access and configure the VM and storage as desired. IaaS providers offer small, medium, large, extra-large, and memory- or compute-optimized instances, in addition to customized instances, for various workload needs.

In the PaaS model, providers host development tools on their infrastructures. Users access those tools over the Internet using APIs, web portals or gateway software. PaaS is used for general software development, and many PaaS providers host the software after it's developed.

SaaS is a distribution model that delivers software applications over the Internet; often called web services. Users can access SaaS applications and services from any location using a computer or mobile device with Internet access.