What is cloud computing?

Cloud computing is the delivery of computing services—servers, storage, databases,

networking, software, analytics, intelligence and more—over the internet (the cloud),
enabling faster innovation, flexible resources, and economies of scale. You typically pay
only for cloud services you use, helping lower your operating costs, run your infrastructure
more efficiently, and scale as your business needs change.

Cloud services is a big shift from the traditional way businesses think about IT resources.
Cloud services have particular characteristics and considerations, some of which are
outlined and explained below:

 High availability. The ability to keep services up and running for long periods of time, with
very little downtime, depending on the service in question.

 Scalability. The ability to increase or decrease resources for any given workload. You can
add additional resources to service a workload (known as scaling out), or add additional
capabilities to manage an increase in demand to the existing resource (known as scaling
up). Scalability doesn't have to be done automatically

 Elasticity. The ability to automatically or dynamically increase or decrease resources as

needed. Elastic resources match the current needs, and resources are added or removed
automatically to meet future needs when it’s needed, and from the most advantageous
geographic location. A distinction between scalability and elasticity is that elasticity is done
automatically

 Agility. The ability to react quickly. Cloud services can allocate and deallocate resources
quickly. They are provided on-demand via self-service, so vast amounts of computing
resources can be provisioned in minutes. There is no manual intervention in provisioning or
deprovisioning services.

 Fault tolerance. The ability to remain up and running even in the event of a component or
service no longer functioning. Typically, redundancy is built into cloud services architecture
so if one component fails, a backup component takes its place. The type of service is said to
be tolerant of faults.

 Disaster recovery. The ability to recover from an event which has taken down a cloud
service. Cloud services disaster recovery can happen very quickly with automation and
services being readily available to use.
 Global reach. The ability reach audiences around the globe. Cloud services can have
presence in various regions across the globe which you can access, giving you a presence in
those regions even though you may not have any infrastructure in that region.

 Customer latency capabilities. If customers are experiencing slowness with a particular

cloud service, they are said to be experiencing some latency. Even though modern fiber
optics are fast, it can still take time for services to react to customer actions if the service is
not local to the customer. Cloud services have the ability deploy resources in datacenters
around the globe, thus addressing customer latency issues.

 Predictive cost considerations. The ability for users to predict what costs they will incur for
a particular cloud service. Costs for individual services are made available, and tools are
provided to allow you predict what costs a service will incur. You can also perform analysis
based on future growth.

 Technical skill requirements and considerations. Cloud services can provide and manage
hardware and software for workloads. Therefore, getting a workload up and running with
cloud services demands less technical resources than having IT teams build and maintain
physical infrastructure for handling the same workload. A user can be expert in the
application they want to run without having to need skills to build and maintain the
underlying hardware and software infrastructure.

 Increased productivity. On-site datacenters typically require a lot of hardware setup

(otherwise known as racking and stacking), software patching, and other time-consuming IT
management chores. Cloud computing eliminates the need for many of these tasks, so IT
teams can spend time on achieving more important business goals.

 Security. Cloud providers offer a broad set of policies, technologies, controls, and expert
technology skills that can provide better security than most organizations can otherwise
achieve. The result is strengthened security, which helps to protect data, apps, and
infrastructure from potential threats.

 Economies of scale
 The concept of economies of scale is the ability to do things more cheaply and more
efficiently when operating at a larger scale in comparison to operating at a smaller
scale.

 Cloud providers such as Microsoft, Google, and AWS are very large businesses, and
are able to leverage the benefits of economies of scale, and then pass those benefits
on to their customers.
  This is apparent to end users in a number of ways, one of which is the ability to
acquire hardware at a lower cost than if a single user or smaller business were
purchasing it.


 Storage costs, for example, have decreased significantly over the last decade due in
part to cloud providers' ability to purchase larger amounts of storage at significant
discounts. They are then able to use that storage more efficiently, and pass on those
benefits to end users in the form of lower prices.
 There are limits to the benefits large organizations can realize through economies
of scale. A product will inevitably have an underlying core cost, as it becomes more
of a commodity, based on what it costs to produce . Competition is also another
factor which has an effect on costs of cloud services.

In previous years, startup companies needed to acquire a physical premises and

infrastructure to start their business and begin trading. Large amounts of money were need
to get a new business up and running, or to grow an existing company. They would have to
buy new datacenters or new servers to allow them build out new services, which they could
then deliver to their customers. That is no longer the case.

Today, organizations can sign up for a service from a cloud provider to get up and running.
This enables them to begin selling or providing services to their customers more quickly,
without the need for significant upfront costs.

These two approaches to investment are referred to as:

 Capital Expenditure (CapEx): This is the spending of money on physical infrastructure up

front, and then deducting that expense from your tax bill over time. CapEx is an upfront
cost which has a value that reduces over time.
 Operational Expenditure (OpEx): This is spending money on services or products now and
being billed for them now. You can deduct this expense from your tax bill in the same year.
There is no upfront cost, you pay for a service or product as you use it.

Companies wanting to start a new business or grow their business do not have to incur
upfront costs to try out a new product or service for customers. Instead, they can get into a
market immediately and pay as much or as little for the infrastructure as the business
requires. They also can terminate that cost if and when they need to.

If your service is busy and you consume a lot of resources in a month, then you receive a
large bill. If those services are minimal and don't use a lot of resources, then you will receive
a smaller bill.

A business can still use the CapEx expenditure strategy if they wish, but it is no longer a
requirement that they do so.

Consumption-based model
Cloud service providers operate on a consumption-based model, which means that end users
only pay for the resources that they use. Whatever they use is what they pay for.

This consumption-based model brings with it many benefits, including:

 No upfront costs

 No need to purchase and manage costly infrastructure that they may or may not use to its
fullest

 The ability to pay for additional resources if and when they are needed

 The ability to stop paying for resources that are no longer needed