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A guide to cloud computing, the multibillion-dollar industry that powers your favorite apps

  • Cloud computing is the delivery of on-demand computing services over the internet. 
  • Cloud computing can include online data storage, writing apps, media streaming, and more.
  • Popular apps like Spotify, Netflix, and DropBox all run using cloud computing.
  • Visit Insider’s Tech Reference library for more stories.

You may have heard of “the cloud” countless times, but only have a general idea what it means. Cloud computing is the delivery of “on-demand” computing services — whether it’s storage, software, processing power, or other resources — over the internet. You typically pay as you go, billed only for the resources you use or the storage amount you’re subscribed to. 

Though cloud computing isn’t an especially new innovation (it’s been around for decades), it’s become increasingly important to the most popular apps around today.

What to know about cloud computing

Types of cloud computing

The term “cloud computing” masks a lot of complexity. Where is the server? “In the cloud” — most users generally don’t need to know more than that.

The name obscures the fact that there are several different kinds of cloud computing architectures.

Types of cloud applications

Not only are there distinctions between the architecture of cloud services, but there are some key differences in the kind of applications that cloud computing is used for.

Cloud computing services tend to fall into one of three main categories, and you can read more about this in our guide to cloud applications

  • Software as a service (SaaS): This is often the simplest kind of cloud computing platform to understand; with SaaS, the cloud computing operator offers software (running on the SaaS operator’s computing hardware) you can access remotely. Microsoft 365 is a common example of SaaS. 

GettyImages 854090620

The Microsoft 365 subscription service is a cloud-based SaaS platform.

Steve Parsons – PA Images / Contributor/Getty Images


  • Infrastructure as a service (IaaS): In this case, a third party provides the computing hardware to run your software. For example, a software developer might rent space on an Amazon Web Services (AWS) server instead of owning and maintaining a large server locally.
  • Platform as a service (PaaS): Slightly different from IaaS, PaaS includes the hardware, operating system, and middleware needed to host the software you want to run in the cloud. Google’s App Engine is an example of PaaS.

Common uses for cloud computing

While cloud computing was a novelty in years past, the proliferation of online services, web apps, broadband, massive commercial data centers, and other technologies have made cloud computing a core part of today’s technological landscape. Here are some of the most common applications for cloud computing today.

  • Data storage: It’s common today to rely on cloud storage for data storage, backup, and recovery solutions. Not only is data backed up to the cloud, but the cloud is commonly an extension of local storage as well. 
  • Software-on-demand: Many businesses and individuals now rent software using SaaS rather than purchasing it outright — like Microsoft 365 and Google Docs
  • Streaming audio and video: Services from Spotify to Netflix to HBO Max are all examples of streaming services that operate from the cloud. They’ve essentially replaced local media playback, making the cloud an integral part of most people’s daily life. 

Netflix

When you watch something on Netflix, you’re accessing content from the cloud.

Photo by Britta Pedersen/picture alliance via Getty Images


  • Analyzing business data: Many businesses now store their critical business data in the cloud. They then use cloud services to analyze that data for business intelligence solutions. 

The advantages and disadvantages of cloud computing

While cloud computing has become a critical part of the modern computing landscape, it’s not without its disadvantages. 

For example, despite the appeal of “renting” rather than “buying,” cloud computing isn’t necessarily cheaper. Long-term, it can be more cost-effective to own and operate your own computing resources, especially if you need those resources indefinitely. If the company hosting your cloud computing service of choice shuts down, you could lose all your data.

Additionally, there are security concerns. If a third party is hosting your data, it’s a potential risk vector for hackers and corporate espionage. 

Companies may also want to own their own computing resources as a way to differentiate their capabilities. If you are using the same third-party services as the competition, for example, it’s difficult to offer capabilities that are better than, or even different than what they offer. 

On the other hand, cloud computing is popular today because it still offers significant advantages over local computing. It’s less costly, at least in the short term, compared to owning your own servers.

It also allows for greater mobility and portability of your data — it’s already in the cloud and can be accessed from anywhere. And it moves responsibility for factors like security and disaster recovery to a third party that theoretically has that expertise.

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