What is cloud computing?

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  • The cloud is a critical business enabler, but the term “cloud” doesn’t mean the same thing to everyone.
  • What is cloud adoption? (Hint: It’s not a synonym for the internet.)
  • Understanding the types of cloud services, as well as the four main cloud configuration options, prepares your company to reap tangible benefits from a cloud transformation.

Like “digital,” “cloud” has become a ubiquitous label in the business and tech world. Want to garner board interest? Rebrand an offering? Signal efficiency or innovation? Say it’s part of your cloud transformation strategy. And in the wake of the pandemic, when it became clear that companies doing business in the cloud were better positioned than those that weren’t, cloud became even more of a corporate buzzword. 

And rightfully so. But what is cloud computing? Cloud is the engine that can bring almost any business strategy to life. Where it used to mean only data centers and software applications, today it’s all about growth. This can mean powering digital revenue streams, reimagining how you operate, engaging with customers in new ways, and the list goes on. Whatever your industry pain points or aspirations, cloud is part of the solution.

In fact, cloud has become so pervasive (and multifaceted) that executives in the same company may not even be talking about the same thing when they begin digging into how cloud can accelerate strategy. To get everyone on the same page, you’ll want to understand the basics and different solutions that make up the sprawling cloud ecosystem. 

Defining cloud computing

“The Cloud” is a term sometimes used incorrectly as a synonym for the internet or when referring to some giant nonexistent storage center in the sky. In the real world, the cloud often communicates via the internet and is composed of hundreds of thousands of separate clouds supported by millions of servers globally.

Cloud products for businesses have been available for approximately 15 years, and the term “cloud” was introduced in the 1990s. Despite its prevalence, cloud computing is still evolving rapidly. But in a nutshell, cloud computing is a collection of hardware and software services such as servers, storage, networking, applications, development environments and capabilities like artificial intelligence that customers purchase as on-demand services.

The hallmarks of hardware cloud services are easy provisioning, no server maintenance and instant scalability. (Scalability is the ability to dial up more servers and storage whenever you want to and have that change take effect immediately.) Cloud-based software-as-a-service applications usually have subscription license models and are served via the internet.

Types of cloud computing services

The cloud industry divides cloud functionality into three groups of services that provide data center replacement or expansion, business applications and software development environments. Any offering from a technology vendor that uses the “as a service” nomenclature is most likely cloud-based.

Infrastructure as a Service

Infrastructure as a service (IaaS) describes the hardware services — compute, storage, networking and virtualization — that previously required server farms and data centers. IaaS gives you a scalable way to use the capabilities of the hardware over the internet without owning or maintaining the server hardware itself. Some of the leading brands of IaaS products are Amazon AWS, Microsoft Azure and Google Cloud’s Compute Engine. IaaS is often what people are referring to when they say cloud computing.

Software as a Service

Software as a service (SaaS) is just another way of saying applications designed to run in the cloud which you access via the internet and typically run in a web browser or lightweight application. SaaS was the earliest type of cloud service to grow to popularity. It has completely changed how we access and pay for software. There are thousands of SaaS companies now. Salesforce was among the earliest to market with its customer relationship management (CRM) product. But now virtually every business application category is teeming with SaaS offerings, including accounting software, business process management, e-commerce software, enterprise resource management, HR software, payroll software and so on.

Platform as a Service

Platform as a service (PaaS) is a set of cloud services designed to support software engineers who can develop, test and manage applications without having to build out a hardware/operating system/framework/software environment. In other words, it’s a development platform. PaaS offerings vary significantly, but most start off with IaaS storage, networking and compute services. They layer in the specific software development tools, languages and frameworks their customers want. PaaS providers specialize: Several are focused on deployment via containers. Others look for ways to offer a unique advantage. SAP’s Cloud PaaS, for example, provides a feature that helps you integrate on-premises and cloud applications.


Four types of cloud configuration

Other cloud terminology you’ll hear has to do with how your cloud is set up. These four terms can be misleading: public cloud, private cloud, hybrid cloud and multi-cloud. For example, “public cloud” does not refer to end-user-oriented clouds like the personal-use versions of Google Drive, Microsoft OneDrive or Dropbox. And public clouds may be no less private in terms of access than “private clouds.” The public and private designations derive from the way they are hosted. And hybrid and multi-cloud are strategies for how an organization uses multiple clouds.

Still with us? Dig into the details below:

Public cloud

Public cloud describes IaaS services like Alibaba Elastic Compute, Amazon AWS EC2, Digital Ocean Droplets, Microsoft Azure Virtual Machines and Google Compute Engine, to name a few. The providers all have multiple customers and deliver their services over the internet. Public cloud customers share the compute, storage and networking hardware with their cloud provider’s other customers. It’s similar to the way web hosting works: Public cloud is like shared web hosting and private cloud correlates to dedicated web hosting. (In cloud, both types are “managed.”)

Private cloud

Private cloud is the cloud terminology for scenarios in which the hardware and software resources underlying the cloud services are used exclusively by one business or organization. In private cloud, the hardware may be on-premises or off-site. It may be generated by the enterprise itself or provided physically or offered over the internet by a cloud service provider. The key point is that the hardware and software required to generate a private cloud are dedicated to or owned by one business and not shared by other businesses. This provides an added level of security that may be required for sensitive data.

Hybrid cloud

Hybrid cloud environments are those in which an organization uses two or more cloud types — public, private or community clouds — in a coordinated way, usually on a common goal. (A community cloud is a cloud resource shared by two or more organizations working together on the same concern, such as related governmental departments and agencies, industry standards working groups and joint corporate/academic efforts.) One of the chief benefits of hybrid cloud is a good deal more flexibility and agility to get things done efficiently and quickly. 


Multi-cloud means nothing more than using two or more cloud services from different cloud service providers. Why would you do this as opposed to sticking with one main provider? After all, it adds complexity, including a more challenging security environment. But there are good reasons why some enterprises intentionally use two or more IaaS vendors. Not placing all your eggs in one basket makes some sense, but there are better benefits to multi-cloud. 

Cloud computing providers offer unique services, capabilities and pricing that you might want to leverage, possibly for different segments of your business. Using two or more cloud providers is one way to combat vendor lock-in, too. Finally, multi-cloud is about having the flexibility to move an application to a different cloud or run it across multiple clouds to get a job done faster. The advantage is similar to the benefits of hybrid cloud, but not every organization needs to incorporate a private cloud. 

At the same time, there are benefits to sticking with a single cloud service provider. For some companies, going wide and deep with one vendor may give you opportunities you wouldn’t get otherwise. Bottom line? Each company’s cloud migration strategy will be unique and highly dependent on their business goals, current and future tech roadmap, and industry, among other factors.

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Prakash Venkata

Principal, PwC US


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