Most organizations use many forms of cloud computing today. But what is cloud computing and what are the benefits for enterprises?
In this article you’re going to learn the answer to these questions, from both the technical and business perspectives of cloud computing, and the benefits that companies can gain from using cloud computing services. By the end of this article you’re also going to understand the difference between “legacy” IT and cloud computing.
Before we get started, a quick definition of cloud computing is required: Cloud computing is the on-demand delivery of IT services from a third-party provider over the Internet. That means you consume a service provided by another company (aka the “service provider”), typically on pay-as-you-use pricing model.
There are multiple cloud computing service models (e.g. IaaS, PaaS, and SaaS) and deployment models (e.g. Public Cloud, Private Cloud, Hybrid cloud, and Multicloud), and these are discussed in detail in other articles; the scope of this article is to explore the key benefits of cloud computing and how it is often advantageous to “legacy IT”.
Perhaps the best way to start off is to compare cloud computing to legacy IT. What I mean by legacy IT is self-managed systems deployed within a company’s own data center (on-premises), or in a shared data center (co-location) where the company leases space. This equipment is typically purchased and owned by the company and may also be fully or partially managed by the company’s IT staff.
This model requires large amounts of capital expenditure (CAPEX) to pay for data center costs, equipment purchase, software licensing, maintenance contracts, staff wages and more. Typically equipment is then depreciated over the course of 3-5 years, and must then be replaced.
Your CFO may not be a big fan of this model as it’s not so great for cashflow. Another disadvantage of this model is that it constrains a company’s ability to scale. If your company grows quickly it may be hard to find the capital needed, lead times for purchasing equipment may be too slow, and delivery of the extra capacity may put a huge strain on IT operations staff.
It’s even harder if your company’s growth is unpredictable. Worse still, if your company’s growth contracts, you still have to pay the ongoing costs of the extra equipment you purchased (possibly including loan repayments).
So how does cloud computing help? Let’s explore several of the many advantages of cloud computing, and discuss how cloud computing solves many of the challenges of legacy IT.
Variable instead of capital expense
With cloud computing you consume on-demand computing resources as services. In this self-service model the service is metered so you pay only for what you use. This is an operational (OPEX) cost to the business which is often preferred by the finance team.
Economies of scale
With cloud computing you also benefit from economies of scale. Large cloud service providers such as Microsoft Azure and Amazon Web Services (AWS) purchase huge amounts of equipment and have thousands of customers. This enables these cloud computing providers to offer very competitive costs.
Elasticity – bring speed and agility to your business
One of the key benefits that differentiates cloud computing from legacy IT is its elasticity. With cloud computing you are able to scale your consumption of services to meet the demands of the business – no matter how fast your business grows. This is how companies such as Uber and NetFlix were able to grow so quickly.
Of course, if you hit hard times and your business shrinks your consumption, and therefore costs, will shrink along with it. This is a massive benefit, especially to smaller companies and so it’s no surprise that cloud adoption is strongest with startups.
Eliminate guessing from capacity decisions
Organization’s often find themselves guessing how much computing capacity they need to purchase and provision. It’s often the case that IT operations teams err on the side of caution and overestimate their capacity requirements to ensure they don’t get into trouble later on when the server hits peak capacity and fails. There can be a significant cost to this extra capacity that often goes unused.
With cloud consumption being delivered on-demand, and charged based on what you use, wasted capacity can be largely eliminated which can have a favourable impact on a company’s cashflow.
Reduce maintenance costs – focus on business growth instead
As you reduce the costs and operational overhead of managing data centers and IT equipment, you are able to focus more on projects that differentiate your business. In the modern business landscape you either innovate or die, so moving to cloud computing services can literally enable a company to survive in this competitive environment.
Cloud Computing Security
Lastly, I’d like to cover the extremely important topic of cloud computing security. Many organizations are concerned about putting their data and applications into the public cloud, as they lose some of the visibility and control they have today. But what are the security risks of cloud computing?
With the public cloud, you need to understand the concept of the “shared responsibility model“. This model defines the boundaries and responsibility between the service provider and the customer. You are responsible for encrypting your data, patching of operating systems, and configuration of firewalls. The service provider is responsible for the hardware, software, networking, and facilities that run the cloud services.
It depends heavily on which services you consume, but you must always understand what you are responsible for and what the cloud service provider is responsible for. Using AWS as an example, AWS is responsible for the hardware on which your data sits, but it’s up to you not to enable public access and share it with the world!
Another key fact to note is that the major cloud providers such as Amazon Web Services, Microsoft Azure and Google, have stringent security requirements, and compliance with many security compliance programs, certifications and attestations. In fact, in many cases the public cloud is secured way better than most organization’s on-premises IT.
This article is part of a series, please also check out:
- What is Cloud Computing? Cloud vs Legacy IT
- Cloud Computing Service Models – IaaS, PaaS, SaaS
- Cloud Computing Deployment Models – Public, Private & Hybrid
- Cloud Computing Basics – Compute
- Cloud Computing Basics – Storage
- Cloud Computing Basics – Network
- Cloud Computing Basics – Serverless