Cloud Basics
Last updated
Last updated
Cloud technology refers to the delivery of computing services—such as servers, storage, databases, networking, software, analytics, and intelligence—over the internet (“the cloud”) to offer faster innovation, flexible resources, and economies of scale. Instead of owning their own computing infrastructure or data centers, organizations can rent access to anything from applications to storage from a cloud service provider. This allows them to access data and applications from anywhere with an internet connection, scale resources up or down according to their needs, and only pay for what they use.
Not Just Remote Storage: Many people think the cloud is just a place to store files, but it's much more. The cloud enables a wide range of services, including computing power, databases, networking, and software deployment.
Not Inherently Less Secure: There's a misconception that the cloud is less secure than on-premises solutions. In reality, cloud providers often have advanced security measures in place, sometimes exceeding what an individual company could implement on its own. However, security in the cloud is a shared responsibility between the provider and the user.
Not Always Cheaper: While cloud services can be cost-effective, especially when it comes to scaling resources, they aren't always cheaper in the long run. Costs can add up if resources are not managed efficiently, and for some workloads, on-premises solutions may be more economical.
Not Just for Big Businesses: The cloud is often associated with large enterprises, but it's equally valuable for small businesses and startups. It allows them to access advanced technologies without the need for significant upfront investments.
Not a One-Size-Fits-All Solution: The cloud is versatile, but it's not the best option for every scenario. Some applications or industries may require on-premises solutions due to regulatory, latency, or specific performance needs.
When running an on-premises (on-prem) information system, your organization is responsible for managing and maintaining all aspects of the IT infrastructure. This includes everything from the physical environment to the software and services that run on the virtual machines. Here's a breakdown:
Physical Facility
Space & Security: You must allocate and secure physical space for servers, including cooling systems and security measures like surveillance and access controls.
Personnel: Staff is needed to manage and maintain the facility and equipment.
Physical Infrastructure
Power & Network: Reliable power and networking setups, including backup systems, are essential to keep servers and connections running smoothly.
Racks & Storage: Servers are housed in racks, and storage solutions must be installed and managed to meet data needs.
Virtualization
Platform & Maintenance: Virtualization software (e.g., VMware, Hyper-V) is used to run VMs on physical servers. Regular updates and maintenance are necessary to ensure security and performance.
Licensing: Costs for virtualization software licenses must be managed.
Virtual Machines
VMs host your applications and services, requiring their own operating systems, updates, and performance monitoring.
Services
Applications, databases, and middleware running on VMs need to be installed, configured, and maintained to ensure security, reliability, and efficiency.
Workload
Managing workloads involves ensuring that system resources (CPU, memory, storage)
In the cloud, these components are similar to those in an on-prem environment. The difference is that there is a management plane in between, which helps manage the resources, services, and workloads. The components below the management plane are handled by the cloud providers.
Workload Level (SaaS): All services, especially the workload, are managed by the cloud provider. We use and manage the workload, while the rest are handled by the cloud. Example: Software applications delivered over the internet as a service (e.g., MS365, Salesforce).
Services Level (PaaS): Provides a complete runtime environment for developers to build, deploy, and manage applications. Example: Hosting web applications, databases; using these services, the cloud runs the code.
Virtual Machine Level (IaaS): Virtualized computing resources (virtual machines, storage, networking components) are provided by the cloud provider to users over the internet as a service.
Lift & Shift - On-prem to Cloud: "Lift & Shift" refers to the process of moving existing on-premises applications and workloads to the cloud with minimal or no changes. This approach involves taking an application running in a traditional data center and migrating it to a cloud environment, typically by replicating the on-prem infrastructure in the cloud.
Cloud Increases the ease of administration and decreases our control. - Cloud computing simplifies administration by automating many tasks, such as infrastructure management, scaling, and updates. This ease of use allows organizations to focus on higher-level functions and reduces the need for extensive in-house IT resources. However, this convenience comes at the cost of decreased control. When using the cloud, you often rely on the cloud provider to manage the underlying infrastructure, security, and certain configurations, which can limit your ability to customize or directly influence certain aspects of the environment.
Cloud services can be accessed through various methods, each offering different levels of security, performance, and control:
Public IPs: Direct access over the internet using public IP addresses. This method is straightforward but may expose services to the public internet, requiring strong security measures.
Gateways: Specialized gateways, like API gateways or load balancers, route traffic between users and cloud services. They offer controlled access, security, and performance optimizations.
VPN Tunnel (Tunneled Communication): A secure, encrypted connection between your on-premises network and the cloud. VPN tunnels protect data in transit and are commonly used for secure communication with cloud resources.
Private Circuit Communication: Direct, private connections between your infrastructure and the cloud (e.g., AWS Direct Connect, Azure ExpressRoute). These provide higher security, lower latency, and more consistent performance compared to public internet connections.
The cloud computing market is dominated by a few major providers, each offering a range of services across various sectors:
Amazon Web Services (AWS): AWS is the largest cloud provider, holding the largest market share. It offers a comprehensive suite of cloud services, including computing power, storage, databases, machine learning, and more. AWS is known for its extensive global infrastructure and wide range of service offerings.
Microsoft Azure: Azure is the second-largest cloud provider, rapidly gaining market share. It integrates seamlessly with Microsoft's software ecosystem, making it popular among enterprises that already use Microsoft products. Azure offers services across compute, storage, networking, AI, and IoT.
Google Cloud Platform (GCP): GCP ranks third in the cloud market. It is known for its strengths in data analytics, machine learning, and AI, leveraging Google’s expertise in these areas. GCP is also recognized for its innovative services and developer-friendly tools.
Alibaba Cloud: Alibaba Cloud is a major player in the Asia-Pacific region, particularly in China. It provides a wide range of cloud services similar to AWS and Azure and is growing its global presence.
IBM Cloud and Oracle Cloud: While smaller in market share compared to the top three, IBM Cloud and Oracle Cloud are significant players, especially in specialized enterprise markets. IBM focuses on hybrid cloud solutions and AI, while Oracle is strong in cloud databases and enterprise applications.
As of the most recent data, AWS holds the largest market share, typically around 32-34%, followed by Microsoft Azure with about 22-23%, and Google Cloud with approximately 10-11%. Alibaba Cloud generally has a market share of around 5-6%, with the rest of the market split among smaller providers like IBM, Oracle, and others.
These numbers reflect the competitive landscape and the growing demand for cloud services across industries worldwide.
The global cloud computing market is experiencing rapid growth. In 2023, the market size was estimated at USD 602.31 billion and is expected to grow at a CAGR of 21.2% from 2024 to 2030. By 2024, the market size is projected to reach USD 0.68 trillion and is expected to double to USD 1.44 trillion by 2029. In terms of market share, Amazon Web Services (AWS) leads with 31% of the global cloud infrastructure market, followed by Microsoft Azure at 25%, and Google Cloud at 10%. Together, these three providers account for 66% of the total market. Is there a specific aspect of the cloud market you're particularly interested in?
AWS
200+
Millions
31
Azure
200+
Millions
60+
GCP
100+
Millions
35
These numbers are approximate and can vary as new services are added and regions are expanded.
Cloud economics refers to the financial principles and considerations associated with using cloud computing services. Key aspects include:
Pay-as-You-Go: Cloud services often operate on a pay-as-you-go model, where you pay only for the resources and services you use, rather than investing in upfront capital expenditures.
Scalability: Costs can scale up or down based on usage, allowing organizations to efficiently manage expenses based on demand without over-provisioning.
Cost Efficiency: Cloud providers often achieve economies of scale, passing on cost savings to customers through lower prices and shared infrastructure.
Operational Expenses: Cloud services shift costs from capital expenditures (CapEx) to operational expenditures (OpEx), freeing up capital for other investments and potentially improving financial flexibility.
Flexibility: Cloud economics offer more flexibility and cost control with pay-as-you-go models, while on-premises systems involve significant upfront costs and less flexibility in scaling.
Cost Management: Cloud allows for easier cost management and optimization based on usage, whereas on-premises setups require more extensive planning and management of fixed costs.
Capital vs. Operational Expenditures: Cloud shifts costs from CapEx to OpEx, reducing the need for large initial investments and potentially offering better financial agility compared to on-premises setups.
CapEx: Requires significant capital expenditure.
Purchase Equipment & License Upfront: You must buy hardware and software licenses upfront.
Depreciate and Replace Equipment: Equipment depreciates over time, and you need to plan for replacement or upgrades.
Renew License: Licenses may need periodic renewal or upgrading, incurring additional costs.
OpEx: Involves operational expenditure, billed based on usage.
Billed Monthly for What is Used: Costs are incurred monthly, based on the resources and services used.
No Equipment Purchase: No need to buy physical hardware; resources are provided by the cloud provider.
May or May Not Require License: Licensing is typically included in the service cost or may be handled differently, depending on the cloud provider and services.
Costs are based on the maximum capacity or resources provisioned, regardless of actual usage. You pay for the entire allocated capacity upfront or on a fixed basis.
If you purchase a server with a certain amount of storage and compute power, you pay for the full capacity of that server, even if you use only a fraction of it. For instance, buying a 10TB storage array means you pay for all 10TB, regardless of how much storage you actually use.
In some cloud scenarios, you might choose to reserve a certain amount of resources for a fixed term (e.g., reserved instances or reserved capacity). For example, reserving a database with a specified amount of storage and compute power for one year, paying for the entire reserved capacity upfront.
Costs are based on actual usage of resources. You pay only for what you consume or use, which allows for more flexible and potentially cost-effective spending.
Traditional on-premises environments typically don’t have a direct equivalent of consumption-based spending, as they require purchasing and managing fixed capacity. However, some software services or utilities may offer consumption-based pricing.
Most cloud services follow a consumption-based model. For example, with AWS S3 storage, you pay only for the amount of data stored and the data transferred. Similarly, with AWS Lambda, you pay for the actual compute time used by your functions rather than pre-purchasing server capacity.
Cost Flexibility
Often involves higher upfront costs and less flexibility. You pay for the entire capacity regardless of usage.
Provides more flexibility and cost efficiency, as you only pay for what you use. It can be more cost-effective if usage patterns are variable or unpredictable.
Financial Planning
Requires significant upfront investment and can lead to over-provisioning or under-utilization.
Allows for more accurate cost forecasting based on actual usage, but can be harder to predict costs if usage fluctuates significantly.
Scalability
Scaling up or down requires purchasing new hardware or adjusting capacity, which can be time-consuming and costly.
Easily scalable with immediate adjustments based on usage, allowing for more agile responses to changing needs.
Assess Usage: Identify excess capacity.
Adjust Equipment: Upgrade, decommission, or repurpose hardware.
Manage Licensing: Adjust or cancel software licenses.
Cost Impact: Potentially high, with some fixed costs remaining.
Assess Usage: Review resource metrics.
Scale Down: Resize or terminate resources.
Update Subscriptions: Adjust or cancel plans.
Cost Impact: Immediate adjustments, often leading to cost savings.
Provision in Minutes: Cloud services can be set up and deployed rapidly, often within minutes, without the need for capital expenditure on physical equipment.
Streamlined Provision Process: The process of provisioning resources is simplified and automated, reducing complexity and speeding up deployment.
Built-In Access and Allocation Management: Cloud platforms offer integrated tools for managing user access and resource allocation, making it easier to control and monitor usage.
Reduced Admin Overhead: The cloud reduces administrative tasks related to hardware management and maintenance, as these responsibilities are handled by the cloud provider.
Data Fencing: Cloud providers often include features for isolating and securing data, ensuring it remains separate from other users' data.
Regulatory Compliance: Many cloud providers offer built-in compliance with various regulatory standards, helping organizations meet legal and industry requirements.
Existing Investment: Significant capital has already been invested in on-premises infrastructure, making it costly to switch to cloud.
Ongoing OpEx: Transitioning to the cloud means shifting costs from CapEx to OpEx, which may impact financial planning and budget management.
Data Fencing: Concerns about data isolation and security in a shared cloud environment might deter some organizations from moving to the cloud.
Regulatory Compliance: Meeting strict regulatory and compliance requirements may be challenging in a cloud environment, particularly if the cloud provider’s compliance does not align with specific industry regulations.
