What is Cloud Computing? Everything You Need to Know

The idea of the cloud is no longer a total mystery. It’s a term used so much in every aspect of digital transformation and modern technology that we’ve accepted that the cloud is going to be a part of everyday life – even if the implications of the cloud shift are not yet fully grasped. But not understanding cloud infrastructure and what it affords us means we’re taking this essential technology for granted.

And to better appreciate the cloud requires a better comprehension of cloud computing: What is it and how does it work?

What is Cloud Computing?

A few years ago, the basic concept of the cloud was derided by reducing it to the idea of “someone else’s computer,” a saying that decorates the coffee mugs of quite a few IT professionals. Oracle CTO Larry Ellison was equally skeptical, complaining that “we’ve redefined cloud computing to include everything that we already do.”

In the simplest terms, however, the definition of cloud computing is this:

A distributed digital infrastructural resource that delivers hosted services by way of the internet.

And while there are several different ways to define cloud computing, it all comes down to these five key aspects:

1. Networking

2. Data management

3. Storage

4. Services

5. Devices

Types of Cloud Services

The cloud computing service sector has become a rapidly growing multibillion-dollar industry. To put this into perspective, Gartner estimates cloud spending will reach $260 billion by the end of 2018. And Gartner is not alone in highlighting cloud computing’s growing prevalence in the market.

In their Cloud Vendor Revenue Projection Project, 2017, Wikibon estimates that all categories comprising the enterprise cloud will expand at a compound annual growth rate (CAGR) of 19 percent from 2016 to 2026. Whereas, traditional infrastructure, on-premise software, and legacy methods of business process outsourcing will experience a negative 3 percent CAGR.

The dynamic effects of cloud adoption are already playing out and are most evident in the three wide-ranging and common models of cloud computing services: software-as-a-service (SaaS), infrastructure-as-a-service (IaaS), and platform-as-a-service (PaaS).

Another defining cloud characteristic is that the computing, storage, networking, and integration capabilities of each SaaS, IaaS, and PaaS offering are effectively owned by the vendor and delivered as a service on an on-demand, subscription basis to the customer.

These three categories are designed to be stacked on top of another, which means they can work independently of each other or in a combination. Imagine a three-tiered pyramid with SaaS sitting on top benefiting end users, PaaS in the middle aiding developers and serving integration requirements, and IaaS at the base assisting system administrators.

1: Software-as-a-Service (SaaS)

Commonly referred to as the “on-demand software,” SaaS is the most commonly implemented cloud computing service for business customers. With a wide variety of application and service types, SaaS is replacing or augmenting traditional enterprise systems including ERP, accounting, human resources management, content management systems, supply chain and inventory management, and customer relationship management (CRM) programs, among others. Since SaaS doesn’t require purchasing an expensive licensed program, users can access numerous cloud applications on an as-needed basis. According to the 2017 State of the SaaS-Powered Workplace Report, the average business has 16 SaaS applications deployed, a 33 percent jump over the previous year. For more information on SaaS, read our top SaaS FAQ roundup.

2: Platform-as-a-Service (PaaS)

Think of PaaS as the middleman of cloud services as it sits central, linking SaaS and IaaS. This cloud service provides users with all the tools needed to create a digital platform. It features the groundwork for storage, networking, and virtual servers with software and hardware necessary to design, develop, test, implement, manage, and operate applications while integrating, analyzing, and sharing data.

3: Infrastructure-as-a-service (IaaS)

The IaaS layer offers essential building blocks, database storage, and a virtual platform. By building cost-saving and scalable IT solutions, the complex and expensive hardware is outsourced to a third-party cloud vendor. All of these IT components are automated for customers who are able to self-provision the storage or processing power of the IaaS platforms. Vendors are also responsible for ongoing maintenance, including system upkeep, backing up data, and business steadiness.

Types of Cloud Deployments

How an organization handles and secures business assets and needs can be reflected in how it deploys its cloud service. But cloud deployment is more than just a “private cloud vs. public cloud” debate. The rise of hybrid cloud deployment has added a whole different flavor.

1. Public Cloud

A public cloud is maintained through a third-party IaaS cloud provider. Servers, storage, and other digital resources are delivered through the internet. Since the provider absorbs all infrastructure and bandwidth costs, a customer only needs a web browser to access service and manage accounts.

Pros: Reliable service, cost-effective through economies of scale, no maintenance, elastic scalability

Cons: Often deemed unsafe for handling highly private and sensitive data; must comply with strict security regulations

2. Private Cloud

In a private cloud, cloud computing services, infrastructure, and networking are operated solely by an organization independent of other enterprises or public platforms. A private cloud can be maintained in one of two ways: A company’s data center is physically located in-house, or a third-party vendor is paid to host everything on a private instance.

Pros: More control, customizable, scalable, flexible, secure

Cons: More expensive and maintenance (if kept on-site)

3. Hybrid Cloud

As assumed, a hybrid cloud deployment is a blend of private and public clouds. This infrastructure allows data, information, and apps to be shared and transferred interchangeably. The private side can be used for sensitive processes such as finances and data recovery, whereas the public side can run high-volume applications

Pros: Enhanced agility, accessibility, security

Cons: More maintenance, complex compatibility

Cloud Computing Examples

In this day of the digital age, it’s almost impossible for anyone not to be impacted by the cloud. Some of the most common (and even mundane) everyday tasks rely on cloud computing. Here are a couple of simple examples:

Email: It’s used for personal reasons and business responsibilities. But this standardized communication method has fully shifted from a downloaded and stored method to one that’s cloud-based. That goes for any device, from a desktop computer to smartphone.

Credit/debit cards: Fewer and fewer people are using cold hard cash nowadays to finalize in-person purchases. Credit and debit cards are more abundant and convenient mostly because every bank and credit card company database is integrated with the cloud. And that’s especially true for emerging payment apps like Venmo and PayPal.

Leading Cloud Computing Companies

The biggest and most well-known tech brands wouldn’t exist without ongoing advancements in cloud computing. In fact, the top cloud computing companies have created what’s known as the “cloud wars” with never-ending one-upmanship and extensive strategic SaaS, PaaS, and IaaS deployments. And the two enterprises below have taken the wheel at dominating the IaaS cloud market thus far.

Microsoft: Deeply invested in all three levels of the cloud, Microsoft cloud computing – with its Microsoft Azure and Dynamics 365 products – is still frontrunner as a global enterprise-cloud provider. Microsoft continues to develop and deploy products around artificial intelligence (AI), machine learning (ML), and Blockchain. The company saw a $6 billion profit in Q1 this year, more than half $1 billion ahead of any other cloud computing companies.

Amazon: The massive e-commerce brand isn’t far behind Microsoft in the cloud service space. it’s $5.44 billion 2018 Q1 is still second, but Amazon cloud computing, Amazon Web Services (AWS), is making strides in the cloud services movement, and still ahead of Google’s cloud computing ventures.

Benefits of Cloud Computing

Today’s business environment relies more and more on devices with Internet of Things (IoT) capabilities (especially smartphones and tablets). As a result, a majority of offices are essentially becoming virtual workspaces. Therefore, easier and more efficient access to data is possible through cloud computing.

A recent study by market research company Vanson Bourne revealed that cloud computing is having a measurable business impact. Companies that have implemented cloud services have seen a nearly 21 percent increase in speed to market, a 19 percent jump in process efficiency, and a 20 percent uptick in company growth. Here are even more advantages of cloud computing:

1. Flexible costs: Cloud computing spins the table on traditional capital expenditure (capex) spending, instead the majority of cloud spend is operational expenditure (opex). Since a third-party vendor will take care of maintenance, a company doesn’t have to fund a support team to fix problem servers. The upfront costs of infrastructure needs like local server purchases are reduced.

2. Improved mobility: With the cloud, apps and data are accessible anywhere, anytime. And that’s all due to the ever-increasing number of mobile devices like smartphones and tablets. The “anywhere, anytime” benefit also certainly applies to business. Employees gain flexibility, becoming more efficient with workflows and customer service.

3. Increased collaboration: Cloud computing is essentially built for improving work processes, and that includes data flows between coworkers and business partners. Organizations demand more apps for file sharing and streamlined workflows. Remote workers can instantly connect and communicate with fellow employees and important clients.

4. Economies of Scale: Cloud computing reduces cost by leveraging economies of scale. A Booz Allen Hamilton study found that the cloud approach could reduce costs by 50 to 67% for a deployment of 1000 servers. Cloud customers can take advantage of lower costs from vendors’ economies of scale, reducing their investments in on-premises infrastructure.

5. Operational: Technology will never be perfect, but some are just less complex. That includes the infrastructure of cloud computing, which usually runs on separate servers through a third-party vendor. So, when problems do arise, it’s the vendor’s job to promptly fix the problem instead of having on-site IT staff spend time and resources file claims or updating servers.

Disadvantages of Cloud Computing

But that’s not to say that cloud computing doesn’t have its shortcomings (technology will never be perfect, remember?) There will still be some level of downtime, albeit minimal, and there’s always the chance of a data breach and leaky security. The disadvantages of cloud computing aren’t all doom and gloom, though. There are ways to mitigate risks.

1. Downtime 

As more companies rely on third-party cloud service vendors, these providers can become overloaded with excessive client requests and may face technical stoppage. Just like any cloud-related outage or lost internet connection, a business can come to a halt with inaccessible apps, data, and servers.

How to minimize the problem: Demand a service level agreement (SLA) from your provider guaranteeing uptimes in excess of 99.55 percent.

2. Security

Even the biggest and most well-known brands with the best security practices aren’t completely protected from having their data compromised. And storing important, sensitive information on external service clouds aren’t foolproof measures, either. There are always loopholes in susceptible systems, especially in public clouds where accessibility is wide open to hackers, careless users, and other vulnerabilities.

How to minimize the problem: Limit data access based on user context.

3. Limited control

The cloud offloads much traditional IT maintenance to the cloud service. However, this also leads to less control over IT process. A company’s application leader will only have access to the frontend management tooling for apps, services, and data, but not the backend infrastructure.

How to minimize the problem: Total control might not be an option on the backend, but there’s always a possibility for more visibility into how critical data is being handled by the cloud services provider.

Future of Cloud Computing

The International Data Corporation (IDC) estimates that already in 2018 at least half of IT spending is cloud-based and only set to grow over the coming years. In fact, it is likely that virtually all enterprises worldwide will consume some form of cloud service, signaling that inevitably most applications and enterprise information flows will be cloud-based.

The cloud will become more that than just a consumption model – it will be central to shaping business IT strategy.

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