Ironically, what we know as the cloud, the shared pool of resources online, is not very cloud-like. It comprises hundreds of tonnes of computers in data centres around the world. If you look up at a cloud like that above you then you’d better run.

The cloud is a concept rather than a real thing.

Back in the 1980s computing moved from the mainframe to the PC. We started connecting those PCs to larger PCs called servers and within two decades almost every business had PCs and servers and it made Bill Gates richer than God.

As we became increasingly connected via the internet, we started caring less about having applications on servers and more about having services available to us wherever we were. The explosion in smartphone usage accelerated this. They gave us apps powerful enough to be useful on a device that could be used anywhere.

Cloud computing was born.

The connectivity afforded by the internet also changed the economics of computing. To illustrate this, I’ll look at the management process for mowing my lawn.

It’s a big lawn, and ideally I would like a ride-on mower, which costs from $10,000 to buy, and a few hundred dollars per year to run and maintain.

Should I instead pay someone $100 per month to mow the lawn every fortnight?

Your firm’s computing requirements are the lawn. Your servers are the ride-on mower. Ten years ago ride-ons were your only option. The cloud lets you pay others to care for your lawn.

The future impact of this cannot be overstated. Most companies are still buying ride-on mowers, but the practice is becoming more difficult to justify.

‘The cloud’ is a catch-all term for two things – IaaS and SaaS.

Infrastructure as a Service (IaaS)

IaaS comprises servers and other computing infrastructure running in someone else’s data centre.

It’s for organisations who still want or need to have servers, but are smart enough not to own them.

There are a myriad of domestic IaaS providers, but they’ll soon be swept away by behemoths like Google, Microsoft and Amazon AWS.

Local providers won’t even come close to their economies of scale in a cutthroat industry where scale is everything.

Software as a Service (SaaS)

These are cloud-based apps like Xero, Netflix, Uber and gmail. SaaS apps are generally accessed via a web browser and/or smartphone app.

Not only do you no longer need a ride-on mower, you don’t even need a lawn. The SaaS provider takes care of all the ‘IT stuff’ so all you have to do is use the app or service. As they are connected to the internet by definition, these apps also provide features that were impossible in the days of distributed computing.

Soon the only companies that use IaaS will be the SaaS software providers.

Is the cloud secure?

Cloud providers generally do a better job of securing their products and services than you can manage yourself. But there are always risks.

Issues such as data sovereignty and confidentiality also need to be carefully considered.

The cloud is secure, not just from bad people, but from bad events. The November earthquake is a good reminder of how quickly Mother Nature can mess stuff up and how we need to be prepared for the unexpected.

Should we move to the cloud?

Yes, but in a way that suits your organisation.

Typically, it makes sense to move the easy stuff first, such as file storage and email, working up to your business apps over time. Many large practices are already well on the way to moving completely to the cloud.

What are the benefits?

In case you haven’t guessed, cost reduction is an obvious benefit. And good cloud products are quicker and easier to deploy.

They also allow practically unlimited scalability at linear prices, which means you never run out of capacity and don’t have to pay for unused capacity.

My company deploys SaaS apps like Vend and Xero in days or weeks, rather than the months or years that legacy ‘client/server’ apps used to take to deploy. This means less cost, and less disruption. And it also means less money for IT service providers, but that’s what happens when industries are disrupted.

Unfortunately, this outflow of revenue from IT companies and IT departments tends to mean that your IT professional will try and dissuade you from moving to the cloud for their own reasons.

Generally speaking, the larger the customer, the less likely they are to have adopted cloud products and technologies.

This has created an interesting situation where most of my smaller customers who have moved to the cloud have better, cheaper and more secure IT systems than the larger ones who have not.

Where does your firm sit?

Damian Funnell is a technologist and founder of Choice Technology (an IT services company) and PanaceaHQ.com (a cloud software start-up).