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What is cloud computing? All you need to know about cloud computing

Updated: A brief introduction to cloud computing, starting with the basics and moving on to PaaS and IaaS, hybrid cloud, AWS, Azure, and public cloud.

December 13, 2018 — 12:24 GMT (04:24 PST)

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In simple terms, what is cloud computing?

Cloud computing refers to the provision of computing services on-demand, including applications, storage and processing power. This is typically done over the internet and on an as-you-go basis.

What is cloud computing?

Instead of owning their computing infrastructure, data centers or storage facilities, companies can rent access from a cloud service provider to any application and storage.

Cloud computing services offer a way for firms to avoid the initial cost and complexity associated with maintaining and operating their IT infrastructure. Instead, they can simply pay for what they need, when and where they need it.

Providers of cloud computing services, on the other hand, can enjoy significant economies of scale by providing the same services to many customers.

What cloud computing services do you offer?

Cloud computing services offer a wide range of options, including storage, networking, processing power, and natural language processing. Almost any service that does not require you to be physically near the computer hardware can be delivered through the cloud.

What are some examples of cloud computing?

Many services are powered by cloud computing. This includes services for consumers like Gmail and the cloud backup of your photos from your smartphone. However, large companies can also use cloud computing services to store all their data and run their applications in the cloud. Netflix relies on cloud computing services to run its its video streaming service and its other business systems too, and have a number of other organisations.

Cloud computing is now the default choice for many apps. Software vendors are offering their software as services over the Internet rather than as standalone products, as they attempt to move to a subscription model. Cloud computing can have some downsides. It can introduce new risks and costs to companies that use it.

It is called cloud computing.

Cloud computing is based on the principle that the service’s location and details, such as its hardware or operating system, are not important to the user. This is why the cloud metaphor was borrowed from old telecoms network schematics. In which the public telephone network, and later the internet, was often depicted as a cloud to indicate that it didn’t matter. It was simply a collection of stuff. Although this is a simplified explanation, many customers still find it crucial to have their data and services located.

What’s the history of cloud computing technology?

Cloud computing as a term has been around since the early 2000s, but the concept of computing-as-a-service has been around for much, much longer — as far back as the 1960s, when computer bureaus would allow companies to rent time on a mainframe, rather than have to buy one themselves.

These “time-sharing” services were mostly overtaken by PCs, which made it more affordable to own a computer. Then came the rise in corporate data centers, where large amounts of data could be stored by companies.

The idea of renting computing power has been reintroduced in the form of utility computing, application service providers, grid computing and grid computing. This was in the late 1990s and early2000s. Cloud computing followed, with the emergence and use of software-as-a-service and hyperscale cloud computing providers like Amazon Web Services.

What is the importance of the cloud?

Building the infrastructure to support cloud computing now accounts for more than a third of all IT spending worldwide, according to research from IDC. As computing workloads shift to the cloud, spending on traditional IT in-house continues to decline.

451 Research predicts that around one-third of enterprise IT spending will be on hosting and cloud services this year “indicating a growing reliance on external sources of infrastructure, application, management and security services”. Analyst Gartner predicts that half of global enterprises using the cloud now will have gone all-in on it by 2021.

Gartner predicts that global cloud service spending will rise to $260 billion this year, up from $219.6 billion last year. It’s also growing at a faster rate than the analysts expected. It’s unclear how much of this demand comes from businesses who want to migrate to the cloud, and how much is created by vendors that only offer cloud versions (often because they want to shift from selling one-off licenses to more lucrative and predictable subscriptions).

From 451 Research, Predictions of cloud computing revenues up to 2021

Image: 451 Research

What is Infrastructure-as-a-Service?

There are three types of cloud computing. Infrastructure-as-a-Service (IaaS) refers to the fundamental building blocks of computing that can be rented: physical or virtual servers, storage and networking. This is a great option for companies who want to create applications from scratch and manage almost all elements of the infrastructure. However, it requires firms to have the technical skills necessary to organize services at this level. Oracle research found that online infrastructure made it easier to invent, cut down on time and significantly reduced maintenance costs. However, half said IaaS isn’t secure enough for most critical data.

What is Platform-as-a-Service?

Platform-as-a-Service (PaaS) is the next layer up — as well as the underlying storage, networking, and virtual servers this will also include the tools and software that developers need to build applications on top of: that could include middleware, database management, operating systems, and development tools.

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What is Software-as-a-Service?

Software-as-a-Service (SaaS) is the delivery of applications-as-a-service, probably the version of cloud computing that most people are used to on a day-to-day basis. End users don’t need to know about the operating system and hardware behind the service. They can access it via an app or web browser. Often, the price is per seat or per user.

According to researchers IDC SaaS is — and will remain — the dominant cloud computing model in the medium term, accounting for two-thirds of all public cloud spending in 2017, which will only drop slightly to just under 60% in 2021. SaaS spending consists of both applications and system infrastructure software. IDC predicts that applications purchases will dominate cloud computing spending, accounting for more than half of all public cloud spending in 2019. More than 60% of cloud application spending will be accounted for by customer relationship management (CRM), and enterprise resource management applications (ERM). There are many applications that can be delivered through SaaS, including CRM like Salesforce and Microsoft’s Office 365.

Cloud computing benefits

Although the exact benefits of each cloud service will vary, companies don’t have to purchase or maintain their own computing infrastructure.

It is no longer necessary to buy servers or update operating systems or applications, nor decommission or dispose of outdated hardware or software. This is all done by the supplier. It can be a good idea to use a cloud provider for commodity applications such as email. Cloud services can be more cost-effective and secure for small businesses than small ones. A company that is skilled in managing and protecting these services will likely have more experience and better skills than a smaller business.

Cloud services allow companies to move more quickly on projects and test new concepts without having to pay upfront large amounts. This is because they only pay for what they use. Cloud advocates often refer to this concept as “business agility” because it is a major benefit. It is possible to quickly start new services by leveraging the cloud’s ability to create new services in a fraction of the time it takes to procure traditional IT services. The cloud’s elastic nature makes it easier to scale up new applications quickly, even if they become extremely popular.

A company that uses an application frequently, such as for email or CRM, may find it more economical to host it in the cloud than having dedicated hardware and software lying idle. Cloud hosting for applications like CRM or email could reduce the IT staff’s workload. If such applications do not generate competitive advantage, it will have little impact. Some companies may find it useful to shift spending from capex into opex when they move to a service model.

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Cloud computing benefits and disadvantages

Cloud computing does not always come at a lower cost than other computing methods. Renting is also not always more affordable than purchasing long-term. It may be cheaper to provide the service in-house if an application has a predictable need for computing services.

Some companies might be reluctant to store sensitive data in a service that is used by other competitors. If you move to SaaS, it may mean that your company is using the same applications as another competitor. This could make it difficult to gain any competitive advantage if this application is critical to your business.

Although it is easy to use a cloud application, migrating data and apps to the cloud can be more difficult and costly. And it seems there is now something of a shortage in cloud skills with staff with DevOps and multi-cloud monitoring and management knowledge in particularly short supply.

In one recent report a significant proportion of experienced cloud users said that they thought upfront migration costs ultimately outweigh the long-term savings created by IaaS.

You can access your applications only if you have internet access.

How does cloud computing adoption impact IT budgets?

Cloud computing can shift spending away from capital expenditure (CapEx), to operating expenditures (OpEx), as companies purchase computing as a service, rather than as physical servers. This could allow companies to avoid huge increases in IT spending that would normally be associated with new projects. Using the cloud to make space in the budget might be easier than going directly to the CFO to request more money.

“CIOs are increasingly turning to cloud infrastructure and services in order to increase flexibility and relieve pressure on capital budgets,” notes ZDNet’s survey of IT budget predictions. This doesn’t necessarily mean that cloud computing will always be or necessarily cost less than keeping your applications in-house. However, applications that have a predictable and steady demand for computing power may find it cheaper to keep them in-house (at least from a processing power perspective).

Cloud computing spending is growing even faster than expected

How can you make a case for cloud computing in your business?

To build a business case for moving systems to the cloud you first need to understand what your existing infrastructure actually costs. There are obvious factors like the cost to run a data center, as well as extras like leased lines. The cost of physical hardware, servers, and specifications such as CPUs, cores, RAM and storage. The cost of applications will also be needed to be calculated. Each option has its own cost implications. People costs are often second to infrastructure costs, and more abstract concepts such as the ability to offer new services quicker must be considered in the cloud business case. Cloud business cases should consider the possible downsides. For example, the risk of being tied to one vendor for your technology infrastructure.

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Cloud computing adoption

Although cloud computing is growing rapidly, it’s difficult to find data on how companies use the services. One set of research suggests that around 12% of businesses consider themselves to be ‘cloud-first’ organisations, and about a third run some kind of workloads in the cloud — while a quarter of firms insist they will never move on-demand.

It is possible that the numbers on cloud adoption depend on who you speak to within an organization. Cloud spending is not all controlled by the CIO. Cloud services are easy to sign up and business managers can use them without having to notify the IT department. While this can help businesses move more quickly, it can also pose security risks if apps are not properly managed.

The adoption rate will vary depending on the application. For example, cloud-based email is easier to adopt than new financial systems. Research by Spiceworks suggests that companies are planning to invest in cloud-based communications and collaboration tools and back-up and disaster recovery, but are less likely to be investing in supply chain management.

What about cloud computing security

Although cloud security is a concern for many companies, breaches are very rare. Cloud computing security will depend on the security of your current systems. Systems managed in-house by people who have many other concerns are more likely to leak than those that are monitored by engineers from a cloud provider.

However, concerns do remain about security, especially for companies moving their data between many cloud services, which has leading to growth in cloud security tools, which monitor data moving to and from the cloud and between cloud platforms. These tools can detect fraudulent use of cloud data, unauthorised downloadings, and malware. These tools have a negative impact on performance and financial returns. They can decrease the return-on-investment of the cloud by 5-10% and affect performance by 5-15%. Some organisations are also concerned about the country of origin for cloud services (see: Is geography irrelevant when referring to cloud computing?). Below are some examples.

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What is a public cloud?

The classic cloud computing model of public cloud allows users to access large amounts of computing power via the internet. This model offers significant advantages, including the ability to quickly scale up a service. Cloud computing suppliers have huge amounts of computing power that they share with a large number customers. This is called the multi-tenant architecture. Because of their large scale, they have sufficient spare capacity to easily handle any customer who requires more resources. This is why they are often used for less sensitive applications that require a different amount of resources.

Image by Gartner

Businesses will spend $128 billion on public cloud this year, says IDC

What is private cloud?

Because it is hidden behind corporate firewalls, private cloud gives organizations the opportunity to reap the benefits of public cloud. However, they don’t have to give up control of data or services. Companies have control over where their data is stored and can create the infrastructure as they wish. This is mainly for IaaS or PaaS projects. Developers can access a pool computing power that can scale on-demand without putting security at threat. This extra security comes at a price, however, because few companies have the scale of AWS or Microsoft, and therefore cannot create the same economies. Private cloud can still be useful for companies who require extra security. It will allow them to learn cloud services and build internal applications before moving them into public cloud.

What is hybrid cloud?

Hybrid cloud is perhaps where everyone is in reality: a bit of this, a bit of that. There are some data in the cloud, others in private cloud. Some projects can be hosted in the cloud. According to research by TechRepublic, the main reasons for choosing hybrid cloud include disaster recovery planning and the desire to avoid hardware costs when expanding their existing data center.

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Migration costs to cloud computing

It is easy to get started for start-ups that plan on running all their systems in the Cloud. It is difficult for most companies to get started. They need to assess their existing data and applications to determine which systems should be left as they are and which ones to move to the cloud infrastructure. Migrating to cloud infrastructure can be costly and risky. Companies could also lose more money if they underestimate the size of these projects.

A survey of 500 businesses that were early cloud adopters found that the need to rewrite applications to optimise them for the cloud was one of the biggest costs, especially if the apps were complex or customised. One third of the respondents cited high fees to transfer data between systems as a problem in moving mission-critical applications.

Forrester’s report also revealed that skills needed for migration are difficult to find and costly. And that even if organisations do find the right people, they could be taken away by cloud computing companies with deep pockets. A third of respondents said that their software database licensing costs would rise dramatically if they moved apps.

The majority of respondents were also concerned about the performance and reliability of critical apps. One third of respondents cited this reason for not moving critical applications.

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