According to research from the European Commission, on-demand cloud computing could generate up to €250 billion (£197 billion) to European Union GDP in 2020, as well as 3.8 million jobs.

This HP whitepaper charts the development of the cloud on-demand computing concept and shows how important it is for addressing the demand for business agility and growth.

The generally accepted definition of cloud computing comes from the National Institute of Standards and Technology (NIST), which says that the cloud model should enable convenient, on-demand network access to a shared pool of configurable computing resources - such as networks, servers, storage, applications and services.

Read more: 10 major cloud computing terms you need to know

Under this definition, cloud services can be rapidly provisioned and released with minimal management effort or service provider interaction. The cloud represents a fundamental change in the way computing power is generated and distributed, transforming the delivery of IT tools and products into elastic, on-demand services characterised by flexible "pay as you go" payment models.

The types of on-demand cloud services

Cloud services are built around the on-demand software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) delivery models. SaaS applications are designed for end-users and delivered over the web, while PaaS is based around a set of tools and services designed to make coding and deploying applications as quick and efficient as possible. IaaS is the hardware and software that powers everything, including servers, storage, networks and operating systems.

With SaaS, users can get software applications through subscriptions or through a "pay-as-you-go" model. Increasingly, they can also get SaaS services at no charge when the applications are bundled with advertising or other marketing features - further fueling cloud uptake.

PaaS is a computing platform that supports the creation of applications quickly and easily, and without the complexity of buying and maintaining the software and infrastructure to deliver those applications. This is particularly useful when multiple developers are working on a development project or where other external parties need to interact with the development process.

IaaS is a way of quickly delivering cloud computing infrastructure as an on-demand service. Rather than purchasing servers, software, data centre space or network equipment, organisations can instead buy those resources as a fully outsourced and managed service. It is particularly useful in meeting volatile or big spikes or troughs in demand for computing processing capacity, and for organisations without the necessary capital to invest in hardware.

Overcoming the barriers for growth

Well over half of EU businesses, according to the aforementioned European Commission research, already use some cloud services, but full adoption of the cloud model is still far away, hindered by a wide range of bottlenecks and barriers. These barriers include unclear legal jurisdiction and data location issues, complex security and data protection regulations, uncertain trust in suppliers and a lack of guaranteed data access and portability between cloud systems.

But according to the research, policy actions aimed at removing barriers could make sure the cloud reaches its potential on growing EU GDP and helping to create jobs. Such policy actions could cover security standards and recommendations, improved competition, standardised contracts and service level agreements, and encouraging public sector bodies to take up cloud services.

Business benefits

Business agility, flexibility, lower costs and ease of use are still the main attractions for using the cloud. The European Commission research, which questioned almost 500 companies, showed that over 80 per cent of those who were already using the cloud saw a reduction in IT costs of between 10 and 20 per cent. 12 per cent of participants saw an impressive reduction of at least 30 per cent.

Other business benefits include more effective mobile working (46 per cent of those questioned), higher productivity (41 per cent), more use of standard processes (35 per cent), better ability to enter new business areas (33 per cent) and the ability to open up in new locations (32 per cent).

Expanding your cloud strategies

The uptake of on-demand cloud computing is also shown from research published by ICT trade industry association CompTIA. With 90 per cent of companies claiming some form of cloud usage, many organisations have moved to the next step, leveraging multiple cloud models in different combinations to optimise benefits and efficiencies. According to CompTIA's "Fourth Annual Trends in Cloud Computing" study, more companies are relying on cloud computing for business processes such as storage (59 per cent), business continuity and disaster recovery (48 per cent) and security (44 per cent).

"Once companies hit a stage where they are using cloud systems as a standard part of IT architecture, they weigh up the pros and cons of various providers and models and continually shift to achieve the optimal mix," said Seth Robinson, the director for technology analysis and market research at CompTIA. "A healthy percentage of companies are moving from one public cloud provider to another, moving from a public cloud provider to their own private cloud, or moving applications back on-premise."

Mix and match

CompTIA's study found that more than 60 per cent of cloud users have made secondary shifts of infrastructure or applications, following their original transition to the cloud. In the future, companies are expected to have their architecture spread across multiple clouds along with on-premise systems, choosing the option that best suits their needs for a particular application.

"This is no different than a traditional data centre with servers that are configured for different purposes, but the management challenges are much greater," warned Robinson.

Illustrating the challenges, in the CompTIA research among 500 companies, nine per cent are not tracking costs and another 12 per cent are finding savings to be lower than estimated. Higher usage costs, staff training and network upgrades can contribute to financial surprises.

Read more: The top five latest trends in cloud computing

Also, companies involved in the research that have three or more years of cloud adoption history are finding that modifying cloud policies has become a greater challenge than integration, showing that transforming business practices is just as difficult as a technical migration, according to CompTIA.

Cloud uptake is clearly widespread, enabled by the on-demand and flexible nature of the services on offer, but organisations will have to carefully plan their next steps to carry on benefitting.