In spite of significant cost savings, UK businesses are slow to adopt cloud computing services, new research shows.

The study of 1,300 cloud users, commissioned by cloud provider Rackspace, concluded that the cloud provides substantial cost benefits, and enables small businesses to expand smoothly.

Raj Patel, vice-chairman at online accounting software specialists Kashflow, concurred with the findings: “Cost benefits are one of the biggest advantages of the cloud. An average SME would spend £2,000 on an on-premise application, and then 20% of that initial investment every year on maintenance. The same service on the cloud costs £18 per month.”

Mr Patel continued that only 10% of the three million SMEs in the UK are actively using cloud for business applications, missing out on the reduced spending on staff, hardware and office space that the cloud affords.

More than one-fifth of small businesses participating in the study responded that the cloud had cut IT costs by 25-50%, while 23% of the large businesses claimed to be saving between £500,000 and £4 million a year.

In spite of the reduction in costs that the cloud provides, IT budgets look set to grow in 2013.

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