More than a third (36%) of UK businesses with revenues up to £500m are planning or are considering using cloud hosting, according to a survey.
The most likely reasons for using cloud hosting, according to the 600 companies surveyed, was for extra server capacity to boost processing and distribute workload.
Cloud hosting can provide extra capacity faster and at a lower cost than traditional hosting, said Lew Moorman, chief strategy officer at Rackspace Hosting.
Traditional hosting needs more pre-planning and does not have the cost advantages of using pooled resources that are managed automatically by software, he said.
Data storage and backup was the next likely use for cloud hosting identified in the survey, followed by application hosting.
Cloud hosting is able to cut storage costs by up to 80%, but Moorman said it was best suited to non-sensitive data and large audio and video files.
Traditional hosting still has a role to play because it offers greater controls around personal data and that is why some companies are choosing a hybrid model, he said.
Lower cost is the most likely reason for adopting cloud hosting in the credit crunch, but 57% of UK companies do not understand the concept, the survey found.
The reasons UK companies gave for not adopting cloud hosting were concerns about reliability (15%), untested technology (14%), and security (10%).
Moorman said there is a need for education on the topic as well as standard terminology, pricing and application programming interfaces to spur greater adoption.
"More UK companies will also look to using cloud hosting in their IT mix as the technology matures and positive case studies begin to emerge," he said.