What is Cloud computing and how is it revolutionizing how organizations conduct business?
By Michael Megarit
What is Cloud Computing and why is it Growing so Quickly?
In the old days, businesses had to buy, own, operate and maintain physical data centers and servers. As you can imagine, this was very costly and time consuming.
Now, the Internet enables businesses to outsource these expensive and tedious tasks to third-parties, who provide offsite computing power on an as-needed basis. This is called cloud computing: the on-demand delivery of IT resources over the Internet with pay-as-you-go pricing.
While that definition may sounds complicated, it’s very easy to understand once we present concrete examples.
Think of your emails.
Most of the email data you send and receive is not stored on your physical computer. In reality, it is stored on the servers of the company who provides you with the email address. For example, your Gmail data is stored on Google’s servers and your Hotmail’s data is stored on Microsoft’s servers. When you consult your inbox, you are accessing data that is stored in a remote location. Furthermore, you can access this same data anytime, no matter which device you are using or where you are in the world.
The same holds true for the apps and software we use on a daily basis. The data we access on Facebook, Instagram and Twitter is not stored on our own personal servers but the either servers of the companies who created and operate the apps, or the servers of providers specialized these companies pay.
Simply put, cloud computing consists of remote computers and servers.
Just like individuals, businesses also use cloud computing to perform their daily tasks.
In fact, organizations across virtually every industry are using it to implement disaster recovery processes, manage email and virtual desktops, develop, test and implement apps and software, collect, store, backup and analyze data and develop customer-facing web applications.
With the rise of digitization, individuals and businesses require ever greater computing power. As a result, the cloud computing market is booming: it is expected to reach $1.25 trillion by 2028, growing at a CAGR of 19.1% over the forecast period.
What is Cloud Computing and why is it growing so quickly?
What is Cloud Computing: The 3 Types of Cloud
As mentioned, cloud computing is the on-demand delivery of IT services over the Internet with pay-as-you-go pricing. This means that clients can pay to access the amount of computing power they need to run their IT operations.
There are three main types of cloud computing: public, private and hybrid.
- Public Cloud
Public clouds are owned and operated by third-party cloud service providers. These providers are typically very large companies, such as Amazon, Microsoft or Google, who deliver their computing resources, like servers and storage, over the internet.
Microsoft Azure and Amazon Web Services are two of the main cloud computing providers in the world. On their public clouds, all hardware, software and supporting infrastructure is owned and managed by them. There are a number of other important cloud computing providers who all grant access to remote servers and datacenters.
Clients can access cloud services and manage their accounts using a web browser, such as Google Chrome, Microsoft Edge or Mozilla Firefox.
- Private Cloud
Private clouds refer to cloud computing resources used by a single business or organization. A private cloud can be located on the company’s premises, such as an on-site datacenter. They can also be hosted by third-party providers, who set up a private cloud accessible only for that client.
As the name suggests, a private cloud means that services and infrastructure are maintained on a private network. Only authorized personnel will be able to access the data contained on a private cloud.
- Hybrid Cloud
A hybrid cloud combines elements of both public and private clouds. They are bound by technology that allows data and applications to be shared between them. Hybrid clouds offer great flexibility, various deployment options and optimize existing infrastructure, security and compliance.
The 6 Benefits of Cloud Computing
Cloud computing is popular because it offers incredible benefits to its users:
One of Cloud computing’s greatest benefits is the elimination of in-house IT capital expenses. Businesses no longer have to invest in expensive hardware and software. Indeed, paying for racks of servers, 24h electricity and IT professionals who manage the infrastructure adds up. Thanks to cloud computing, they don’t need to pay IT experts to set up and run on-site datacenters.
Cloud computing outsources all of these costs to the provider and the customer simply pays a yearly subscription fee. Since the service is on-demand, the customer can cancel his subscription at any time and resume paying whenever he sees fit. Since the provider has thousands of clients, he can invest to improve his cloud computing capacities and achieve incredible economies of scale.
This is impossible with traditional on-site datacenters.
2. The Speed
Companies who specialize in cloud computing invest heavily in infrastructure and software. They are continually improving their capacities in order to deliver the highest quality service available.
Thus, they are able to achieve incredible economies of scale, allowing clients to have access to vast amounts of computing in minutes. Companies such as Google, Microsoft and Amazon have the most advanced hardware in the world, ensuring continuity and speed of service no matter how many people are connected at the same time.
What’s more, businesses can scale up or down anytime according to their needs, which provides great flexibility and eliminates the need for capacity planning.
3. Global Scale
Cloud computing is a global service. Large cloud computing providers have worldwide presence and datacenters in every major continent so clients can access just the right amount of resources they need from exactly the right geographic location.
4. Increased Productivity
Traditional IT management requires lots of human and capital resources: hardware setup, software patching, security checkups, bug fixing… Cloud computing removes these redundant IT tasks and enables businesses to focus on delivering their products and services – not spending time and money on troubleshooting their IT setups. The gain of time is incredible and significantly boosts productivity. Not to mention that the money saved on IT expenses can be invested directly into crucial business operations.
On-site datacenters are very risky. A short-circuit, a power outage or other unfortunate events (flooding, fires, natural disasters, sabotage, etc) can lead to the breakdown of the entire system, and irreparable loss of data.
Cloud computing, on the other hand, is highly reliable because all of the data is backed up on multiple sites on the provider’s network. As alluded to earlier, major providers have datacenters all over the world, so client data is spread out across its network. Even if one datacenter shuts down, the data remains accessible elsewhere.
For clients, this means that data backup, disaster recovery and business continuity are guaranteed.
Cloud providers provide quality network security for all clients. They have teams of engineers who implement efficient policies, the latest technologies and strict processes that strengthen the network’s overall security. Thus, client data, apps and infrastructure is protected against potential threats.
How is Cloud Computing Used?
While cloud computing technology is relatively young, it offers a myriad of possibilities.
- Create Cloud Applications
One of the cloud’s features is the ability to quickly build, deploy and scale a wide variety of web, mobile and API applications. Further, cloud computing allows these apps to interconnect with each other.
- Test and Build Applications
Thanks to the cloud, developers can save time and money by using cloud infrastructures that can scale up or down, as needed.
- Store, Back Up and Recover Data
Cloud computing services make protecting data cost-efficient. By transferring data over to offsite cloud storage systems, clients can access it from any location and any device, anytime they need.
- Analyze Data
- Embed Intelligence
Cloud computing offers the possibility of using intelligent models to provide insight from data collection.
- Deliver Software on Demand
Software as a Service (SaaS) enables businesses to offer their clients the latest software versions and updates instantly.
Why is Cloud Computing Growing so Quickly?
The phenomenal growth of cloud computing can be attributed to multiple interconnected factors:
- Digital transformation of the economy
- Rapid adoption of 5G, Internet of Things (IoT) and Artificial Intelligence (AI).
- Worldwide surge in internet penetration in the Asia-Pacific Region
The COVID-19 pandemic has accelerated digital transformation and the adoption remote work.
More business is being conducted through email and collaboration tools, which is driving investments in cloud computing technology. Service providers are investing massively to improve their solutions and strengthen their market positions.
In 2020, consulting firm McKinsey published a study revealing that “hybrid models of remote work are likely to persist in the wake of the pandemic […] More than 20 percent of the workforce could work remotely three to five days a week […] If remote work took hold at that level, that would mean three to four times as many people working from home than before the pandemic”.
If this prediction holds true, the cloud computing market is possibly still in its infancy.
In addition, the increased adoption of technologies such as Artificial Intelligence, Machine Learning, 5G and the Internet of Things (IoT) will drive the growth of cloud computing.
Technologies such as AI, Machine Learning, 5G and the IoT rely on interconnectivity of devices and software. These devices need to communicate with each other to collect, share and analyze data efficiently.
This leads to increased scalability, because IoT devices need a lot of storage to share information, and increased performance, because the large amounts of data produced by IoT devices need extreme performance to interact and connect with one another.
Finally, the rapid surge in Internet penetration in the Asia-Pacific region is a major catalyst for cloud computing.
The Asia-Pacific region is growing at a phenomenal rate. In 2020, Asia’s GDP was bigger than the rest of the world’s combined. By 2030, the World Economic Forum believes that Asia will contribute nearly 60% of the world’s GDP. This continent is the next internet frontier.
Indeed, large swaths of its population are just connecting to the internet for the first time, and millions more are expected to connect over the next 10 years.
The majority of these new internet users will have a smartphone as their first device. They will immediately connect to websites, platforms and apps that rely heavily on cloud computing services. Thus, the demand for cloud services will drastically increase as these populations enter the digital economy.
Conclusion: What is Cloud Computing and Why is it Growing so Quickly?
Cloud computing is a cornerstone of the digital economy.
As internet usage increases, the demand for remote datacenters and servers will continue increasing.
This means that there are tremendous business opportunities for tech entrepreneurs interested in developing products and services that are in great demand.
Industries such as cloud computing, cybersecurity, hardware and software development, among others, are poised for massive growth over the next decade.
ABOUT THE AUTHOR
Michael Megarit is a partner with Cebron Group.
With over 25 years of domestic and international corporate finance experience,
he provides M&A and capital advisory to high-growth technology companies.