The Cloud-Based Business Model: A Guide for Entrepreneurs


The cloud.  It’s the much-talked-about, often misunderstood darling of the tech world.  But, despite how much the cloud is talked about, it still remains a bit of a mystery to many.  It’s often not clear just what “the cloud” actually is, how it helps existing businesses or how entrepreneurs can use it to start or augment a new business.  Curious to learn more and get some help building a business using this enigmatic cloud?  Read on as we take you through the basics, discuss the pros and cons, help you get started and offer some useful suggestions for reading material all about, you guessed it, cloud-based business.

What is the cloud?

If you have only a vague idea of what the cloud actually is, you’re not alone.  Oracle’s Larry Ellison publicly asked what the heck people meant by “the cloud.”  As it is, people often use the term without having any idea (or perhaps only a very vague one) of what it actually means.  Luckily, there’s a pretty simple explanation, though it encompasses a lot of different things.  Essentially, cloud computing is using hardware and software that’s delivered over the Internet.  Instead of using in-house or nearby computers, cloud computing takes advantage of servers located elsewhere, accessing products and information remotely.  There are numerous ways this can take place.  Cloud computing can not only involve infrastructure, but also software, platforms, storage, security, data, databases, test environments, API, backend and probably a dozen other things under development as this is being written.  In short, the cloud allows businesses and individuals to access services and information from anywhere at any time, so long as there is an Internet connection.  Still confused?  Check out this explanation from PC World for a more in-depth definition.

Why the cloud?

Nearly everyone uses some kind of cloud service in their everyday life, from photo sites like Flickr, to music streaming sites like Pandora, to webmail like Gmail.  In fact, it’s nearly impossible to avoid some kind of remote data storage or software usage as a computer user in today’s world.  Why is it so important that businesses and entrepreneurs take advantage of the opportunities it has to offer?  The short explanation is that because, quite simply, it’s the future of computing.  It’s just where things are going, and businesses that don’t keep up may be left behind.  Of course, the long answer is a bit more complicated.  Basically, cloud-based business offers entrepreneurs the chance to deliver products immediately.  Even just taking advantage of cloud-based services to run your business can save you time, money and makes it simple to access data from anywhere employees need to access it.  Not convinced?  Here’s a short look at some of the pros and cons of getting into the cloud.

The Pros and Cons of Cloud-Based Business

Learn more about the pros and cons of the cloud-based business model here so you can make an informed decision about changing your business model or using cloud-based services.


There are some serious advantages to doing business in the cloud.  Here are just a few of the big ones you should consider.

  • Fewer operational issues.

When your servers, infrastructure and even software are located somewhere else, you’re no longer responsible for all of the operational issues that come along with running and hosting them yourself.  For many small or mid-size companies, this can be a huge relief and can free up time and resources to dedicate to other things, like responding to new market opportunities, for instance.

  • Cost.

Generally speaking, doing business in the cloud is considerably less expensive than taking the more traditional route, especially for those in small and mid-size companies.  With fewer up-front costs, businesses have more capital to invest in developing their own products and services, which can also offer a lot more flexibility in the marketplace.

  • Reliability.

Despite a few well-publicized outages, most cloud-based software vendors have created an incredibly reliable product.  While reliability is often cited as a key concern for those looking to move business into the cloud, it may not be as big of an issue as you think.  In fact, some have suggested that SaaS providers deliver products that are even more reliable than those a small business could maintain in-house.

  • Greater flexibility.

When you use cloud-based services, you can run your business from just about anywhere.  Employees can stay in touch, work remotely and check up on projects via smartphones.  Additionally, it’s easier to implement new software or services needed for a client project.  Instead of taking weeks or months, cloud-based options can be set up in a day, allowing businesses to have an edge over competitors who can’t deliver in the same time frame.

  • Innovation.

The cloud opens up a wide range of opportunities for innovation and creative business models, especially with the growing number of readily available cloud-based services out there for entrepreneurs to use.  The cloud is a relatively new and exciting frontier in the tech and business worlds, offering those with great ideas the opportunity to find their own niche in the market with very little competition.

Security is also another major concern that many business owners and operators have with working in the cloud.  In reality, many types of data are actually safer and more secure in the cloud.  Cloud security is stronger and smarter.  Working in the cloud makes security compliance easier and more cost-effective, and it’s relatively simple to create backups of any cloud-stored data.  Even better, all this is often available at a much lower cost than traditional services.

  • Ease of collaboration.

Working in the cloud makes it incredibly easy to share information with coworkers, teams and clients.  Things don’t need to be emailed in a bulky digital file, but can instead be showcased right from the web, whether you want to show off a spreadsheet, presentation or new design idea.  Cloud-based applications also make it possible for multiple employees to work on the same project at the same time, all from a shared web address.


Not every part of cloud-based business is rosy.  Give these negative aspects of the practice some thought, too.

  • Operational complexity.

One of the things that makes cloud services more difficult from traditional ones is that there’s a lot of operational complexity that comes along with the shift, some of which is still uncharted water.  Building the capabilities, software and systems required to maintain a business in the cloud isn’t always easy, which can make it difficult to scale and deliver products and services to an ever-growing market.  This may not apply to those who just want to take advantage of cloud-based services, but is a serious concern for those starting a cloud-based business.

  • Lack of customization.

While cloud-based software can be great for getting things done, it may lack one feature that some businesses demand: customization.  Generally, cloud-based software providers deliver a great product, but it’s also a generic one meant to serve the needs of a wide range of businesses and individuals.  For some companies who need customized software to do business, this may simply not be an option.

  • Reliance on technology.

Whether your business is cloud-based or just uses a lot of cloud computing services, you’ll be heavily reliant on your technology working in order to function.  If you should lose Internet access or a major malfunction occurs in a provider’s servers (or they simply go under), then your company could lose valuable time, money and customers.  It’s rare, but it could happen, and is a legitimate concern all entrepreneurs need to consider before heading to the cloud.

  • Data security and privacy.

The cloud can provide amazing security, if done right, but not every vendor is of the same quality.  Some may not offer services that can provide you with the level of security you need for sensitive data, and major leaks can occur anywhere, cloud or otherwise, if proper precautions aren’t taken.

  • Performance.

Some cloud-based applications aren’t quite as robust as their traditional competitors.  Before committing to a service, learn more about what it has to offer and consider the features you’ll need to be able to run your business efficiently.  If they don’t match up, you might be better off staying where you are.

Getting Into the Cloud

Now that you’ve learned a bit more about some of the advantages and risks that come along with moving your business into the cloud, here are some tips you can use if you’re ready to embrace cloud-based services or want to start your own cloud-based business.

Take it slow and prepare for roadblocks.  When getting into cloud computing, it’s smart to take things slow and to start small.  It’s a different way of working than some are used to and can have a bit of a learning curve for less tech-savvy employees.  Start out with just a few cloud-based services and evaluate your experience.  Then, if you’re happy, add more.

Understand that even tech-savvy companies struggle with cloud businessFeeling like you’re in the dark about how to move forward with cloud computing?  Don’t feel bad.  According to recent research from Accenture, even high-tech companies are still struggling to find their way using the new business model.  While there are many ways that cloud-based business is easier, there are many other aspects that are quite complex and haven’t quite been puzzled out yet even by those leading the industry.  That’s both good and bad.  Good, because there’s room for new players in the market, and bad because, well, it does make things a bit more difficult for those entering into cloud-based businesses.  So, if you’re new to the game, take it easy on yourself.  Some old pros are struggling, too.

Look to successful cloud-based companiesIf you’re unsure of what it means to be a successful cloud-based business, whether a provider or a user, there are loads of examples out there that can inspire and educate you.  You can look at the big boys like Salesforce.com or concentrate on small businesses.  There are ample examples of both.

Locate services for each part of your business.  If you’re going to go all in on the cloud, you’ll need to find services that will work for every part of your business.  That means not only getting the basics like word processing and CRM taken care of, but also finding tools that those in HR and accounting will appreciate as well.

Decide the level of cloud services that are right for your business.  Of course, not every business is cloud-ready.  Everyone will have their own level of comfort with working in the cloud and some may just be better off providing what they offer in a more traditional format.  There’s nothing wrong with that if that’s what’s working, but make sure to do a careful analysis before deciding.

Find help.  If you’re not sure how to start moving into the cloud, ask for help.  Other entrepreneurs, tech professionals and business experts may be able to offer some valuable insights and guidance that can ease your transition or help you understand certain services.

Have a plan.  While you may only be employing a small number of cloud services now, you want to have a plan for the role cloud-based computing will play in your business in the future.  If you’re seeking to start your own cloud-based business, then a plan is obviously a must as well.

Be creative.  Look for ways to use free or low-cost cloud programs to cut down on your operational costs.  There are a lot of really great services out there that won’t cost your company a dime to use.  Give them a try.  You have nothing to lose.

Evaluate the options.  Before committing to any cloud-based service, try it out first.  Most companies will give you a free trial period, allowing you to give several options a look before committing to the one that works the best.

Just go for it.  Making a big change is always scary, but with cloud-based services appearing to be the next wave of high-tech must-haves, there’s no better time than now to make the transition.

Cloud-Based Programs You Can Use Now

If you’re looking to get a taste of what business in the cloud is like, try out one of these cloud-based programs right now.  You’ll learn if it’s right for your business and may even be inspired to start your own cloud-based service.

Google Docs.

While nearly every service Google provides exists on the cloud, Google Docs is just one of several services available (free of charge) that let users create and store documents, spreadsheets and presentations right from the web.  For a fee, businesses can upgrade to Google Apps, which offers souped-up versions of all of these services more suitable for enterprise.

Box or Dropbox.

The cloud is becoming an increasingly popular choice for data storage.  Box and Dropbox are 2 options that allow users to store and share documents, music, movies or whatever else they want to on a remote site, accessible from anywhere with an internet connection.

QuickBooks Online.

A subscription to this cloud-based service will buy businesses access to powerful accounting software over the cloud.  One of the biggest benefits?  All team members can look at data in real time, making it simple to make smart financial decisions for the company.


You can save big on travel costs by conference calling over this popular service.  It’s been a leader in free or low-cost domestic and international video communication for years, but Google’s new offering to the market, Hangouts, is also worth a try.


Basecamp is a project management tool that makes it a cinch to assign tasks, communicate with a team and ensure that everything will arrive on time and completed.  You can get a free trial to start, and if you like what you see, you can sign-up and try out other services like Highrise and Backpack that are also cloud-based.

Essential Reading

We’ve only just scratched the surface of everything you’ll need to know to make a smart decision about using cloud services or switching to a cloud-based business model.  These books and articles can help fill in some of the gaps and ensure you make smart, informed decisions for yourself and your business.


Add these books to your reading list to learn more about what the cloud is, why doing business in it could work for you and a whole lot more.

This book is one of the most popular on the subject and is a great introduction to understanding cloud computing’s transformational role in modern business.  Give it a read if you want to learn more about why you should get involved with cloud computing, how it can change business structure and what it means for the future of IT as an industry.

One easy way for businesses to use the cloud for their operations is to take advantage of a service like Microsoft Office 365.  Through this book, you can learn more about what that offers and how to use it to boost small business productivity in a variety of ways.

Need a guide to understanding the value cloud computing can offer your business?  This book may be just what you’re looking for.  It explains the economics of cloud business, explores the future of the cloud and explains how business owners and operators can use it to provide better products and services to customers.

Get an introduction to what the cloud means for business and beyond in this great book that explores cloud computing today and makes some predictions about where it will go in the future.

This book offers an explanation as to how cloud computing will change business, focusing on the benefits it can offer to business owners and entrepreneurs.

If you’re an innovator, a must for entrepreneurs, then this book is an important read, offering tips and guidance for innovating new products and businesses in the cloud.

This book is perhaps one of the best on the list for finding business models based on cloud computing.  Written by industry professionals, it will show you not only how, but why to make the move into cloud computing sooner rather than later.

Geared towards techies and IT professionals, this book is an excellent primer on cloud computing that explains what it is, its ramifications and the benefits and challenges that it presents.

Those contemplating moving their business into the cloud should give this book a read.  It offers some basics that can ease the transition as well as laying out some of the concerns any business owner should address before making the leap.

Still not sold on the cloud?  This may be the book for you, offering a fair and balanced look at the pros, cons, benefits and challenges of doing business in the cloud.

One of the most well known cloud-based companies in the world today is Salesforce.com.  This book explores how the business got its start and what it does right to make it so successful.

If you’re looking for cloud-based business models, here they are.  Based on a series of lectures from Stanford University, this easy-to-read book will share some examples of businesses and leaders in the field who are taking it to the cloud.

Feel like a dummy when it comes to cloud computing?  Then this book is for you!  It breaks down the basics of cloud computing and explains everything so that even the non-technically inclined can understand.

Get advice on planning, implementing, using and/or maintaining a cloud-computing project from this must-have reference book on the topic.


These helpful articles from major publications will ensure you know all you need to know about business in the cloud.

Let Wired share some of the biggest benefits of cloud computing with you, from increased efficiency to fewer expenses.

Here, Entrepreneur magazine shares some of the reasons why you should consider doing business in the cloud.

Worried about the safety of your data in the cloud?  Your fears may be unfounded, as you’ll learn here.

Many businesses are now running through cloud-based services.  Learn about some big names in the biz taking it to the cloud, and what they’re getting out of the experience from this article on Forbes.

Here you’ll find an excellent and highly informative article on cloud-based business.  It offers up pros and cons, shares some stories of success and gives you a well-balanced look at the subject.

Those debating whether or not to move to the cloud can hear stories from real business owners and operators and learn a lot about cloud applications and cloud-based business.

The most comprehensive collection of information on this list, this site will give you ample reading material on cloud computing and cloud-based business.  You’ll even find case studies that can help you understand the true impact of cloud services and operations.

Reprinted by permission.

About the author: OnlineMBA

OnlineMBA.com is dedicated to helping students, prospective students and recent graduates develop into influential and innovative business leaders by providing tips, articles, tools and conversation about the business world, MBA programs, the college experience, online degrees and a lot more.

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