What is Cloud Computing? Types and Examples
What is Cloud Computing?
More and more, technology is moving to the cloud. It’s not just a fad — the shift away from traditional software models to software as a service, or Saas, has steadily gained momentum over the last 10 years. Looking ahead, the next decade of cloud computing promises even more ways to collaborate from anywhere, using mobile devices.
So what is cloud computing? Essentially, cloud computing is a kind of outsourcing of software, data storage, and processing. Users access applications and files by logging in from any device that has an internet connection. Information and programs are hosted by outside parties and reside on a global network of secure data centers instead of on the user’s hard drive. This frees up processing power, facilitates sharing and collaboration, and allows secure mobile access regardless of where the user is or what device is being used.
Cloud computing is a more efficient way of delivering computing resources. With cloud computing, software and service environments are subscription-based — users pay a monthly fee instead of buying licenses. Software and platforms are managed by the providers and are updated continuously for maximum performance and security. Computing power is remote instead of centralized, so users can tap into extra capacity if business spikes. Multiple people can access a shared program or file and collaborate in real time from different locations.
Life before cloud computing
Younger workers might find it hard to imagine that there was a time when employees could only access work files, messages, and systems from a terminal at the office that was daisy-chained to other computers in the network via physical cables. Software had to be installed manually on each computer. Company data was stored on large machines in a room or closet that had to be kept well-ventilated to prevent overheating. The loss or failure of a single device could be catastrophic.
Cloud computing has streamlined or eliminated many former office characteristics:
Large servers — Businesses no longer need to house banks of servers in well-ventilated closets or equipment rooms.
Dedicated in-house IT support — Tech talent is as prized as ever, but businesses no longer need dedicated in-house workers to troubleshoot their hardware and software systems. Tedious tasks like updating computers one by one have been eliminated.
Data storage devices — Employees don’t have to manually back up data on hard drives, discs, or external devices.
Limited geographic access — Employees and managers are no longer tethered to the office. They can be just as productive when traveling or working remotely as they can from the business’ headquarters. Access to processes and information is not tied to a particular geographic location.
Outdated off-the-shelf software — Software updates used to require major expenditures every few years to buy the latest version of important programs. Applications had to be manually installed and maintained on every device. Only the largest enterprises could hire developers to create customized software. Bugs and security problems might go unaddressed for years.
Information loss — Managers used to fear that an emergency or natural disaster could wipe out all of a company’s records. Data that is stored locally on office computers is vulnerable to loss or failure, but data stored in the cloud has multiple safeguards.
Duplicate versions of documents — Employees no longer have to email files back and forth, with one person making changes at a time and different versions of work products stored locally on multiple devices. Cloud-based files with shared access are always up-to-date. Colleagues can be confident that they are all seeing the same thing and working with the same information.
Traditional business applications have always been complicated and expensive. The quantity and variety of hardware and software required to run them were daunting. Organizations needed a whole team of experts to install, configure, test, run, secure, and update them.
When you multiply this effort across dozens or hundreds of apps, it’s easy to see why, historically, only the biggest companies with the best IT departments got the customized solutions they needed. Small and midsize businesses didn’t stand a chance. Advances in cloud computing have changed that.
Cloud computing: a better way
Cloud computing eliminates the headaches that come with storing your own data, because you’re not managing hardware and software — that becomes the responsibility of an experienced vendor like Salesforce. Shared infrastructure works like a utility: You only pay for what you need, upgrades are automatic, and scaling up or down is easy.
Cloud-based apps can be up and running in days or weeks, and they cost less. With a cloud app, you just open a browser, log in, customize the app, and start using it.
Why cloud computing is better:
Accessible from anywhere — Applications and data are not tied to a device. They are accessible from anywhere, enabling real-time collaboration by remote teams.
Flexible and scalable — Cloud-based applications are infinitely customizable. It is easy to increase power, storage, and bandwidth as users’ needs change.
Cost-effective — Businesses only pay for what they use, usually on a per-month, per-seat basis. There is no hardware taking up space and using electricity 24/7.
Hassle-free updates — Web-based software is constantly updated. The vendor handles maintenance, backups, and troubleshooting.
Fast — Service is delivered on demand through a global network of secure data centers that are constantly upgraded for maximum efficiency and performance.
Secure — Information is not vulnerable to a flood, fire, natural disaster, or hardware failure in one location. Security protocols and infrastructure are constantly analyzed and updated to address new threats.
Businesses are running all kinds of apps and for many purposes in the cloud, like customer relationship management (CRM), human resources, accounting, and much more. Salesforce was a pioneer in delivering cloud-based software. Some of the world’s largest companies moved their applications to the cloud with Salesforce after rigorously testing the security and reliability of our infrastructure.
A word of caution: As cloud computing grows in popularity, thousands of companies are simply rebranding their non-cloud products and services as “cloud computing.” Always dig deeper when evaluating cloud offerings and keep in mind that if you have to buy and manage hardware and software, what you’re looking at isn’t really cloud computing but a false cloud.
The origin of the cloud
The first commercial computer, the UNIVAC I, hit the market in 1951 for a whopping $159,000 in today’s dollars. The United States government and large corporations, its first customers, were eager to get their hands on this state-of-the-art technology. The UNIVAC I’s price tag, along with its large size and electricity consumption, required substantial care and maintenance. They were not only expensive to purchase, but they were expensive to operate.
The first computers were shared by many people, which required the user to travel to the computer's location to use it. By the early 1960s, a solution was developed called remote job entry (RJE). This meant that a computer user could send data requests to a computer from a remote location, making it the first time a person did not have to be in the presence of the computer to operate the machine. It also meant that multiple users could have access to the computer from different locations at the same time.
This was an incredibly important development in computer technology. Providing multiple users access to an expensive piece of equipment made economic sense, given the large price tag of these units.
In the mid-1960s, computer scientist J.C.R. Licklider developed the concept of a computer network. While working for ARPA (Advanced Research Projects Agency), he came up with the idea of an “Intergalactic Computer Network” that would allow multiple computers to communicate with each other.
Upon Licklider’s departure from ARPA, computer scientists Bob Taylor and Larry Roberts used his Intergalactic Computer Network idea to create ARPANET, a precursor to the internet. This was the first time that users could access data from computers that weren’t their own.
While the term "cloud computing" wasn’t in use at the time, its concepts were already in play. Technological developments in the 1970s and 1980s saw the use of the cloud in different forms. By the early 1990s, the internet was depicted as a cloud in patent diagrams.
It wasn’t until 1996, when Compaq Computer Corporation used the term in a business plan, that the phrase was coined.
It didn’t take long for Salesforce.com to become a pioneer in cloud-based computing. In 1999, Salesforce launched CRM (customer relationship management) software in the cloud designed to replace traditional desktop CRM software.
This revolutionary new software was accessible to anyone with an internet connection. Unlike traditional CRM software, this new cloud-based software did not have to be installed on every computer in a company’s inventory. It was also a much cheaper alternative.
This groundbreaking new approach set the stage for cloud computing as we know it today. Salesforce set the example for other popular cloud-based software like Google Drive, iCloud, and Dropbox.
In the mid-2000s, Amazon developed a cloud-based application to manage its own internal operations. After building an infrastructure of web services for its own use, Amazon moved to offer this cloud-based system as a commercial service in 2006 with the launch of Elastic Compute Cloud (EC2). This system gave users access to computers for the purpose of running their own applications from the cloud.
Amazon later released Simple Storage Service (S3), which introduced a pay-as-you-go model, a model which has become standard practice.
By the late 2000s, Google had released Google Docs, a cloud-based word processing software, as a free service. Google Sheets, Google Slides, and Google Forms soon followed.
The cloud continues to evolve, and Salesforce continues to be a leader in remote delivery of computing solutions for businesses.
Commonly asked questions
If it’s not on my computer hard drive, where is my information stored?
Your information is housed in a network of servers. Major providers such as Google, Microsoft, and Apple maintain server farms around the world to avoid a single point of failure.
What can businesses use the cloud for?
The cloud is used to back up data, deliver software, and provide extra processing capacity in a secure, scalable way. Cloud-based services are used for processes like accounting, inventory control, human resources, and customer relationship management.
Why is the cloud better than the systems already in place?
The cloud is cost-effective. It eliminates the need for large capital investments in infrastructure and shifts costs to the operating budget. It is convenient, providing easy access to data for workers and managers regardless of location. It is secure, with vendors typically handling security, backups, upgrades, and maintenance.
When shifting to the cloud, what are some things businesses should do to prepare?
Cloud services are delivered over the internet, so it’s important to have fast, reliable, secure service with enough capacity to accommodate your business’ needs. Bandwidth is a core component of cloud services. If your network specs are insufficient, consider upgrading.
Is the cloud secure?
Although no system is completely foolproof, cloud data is probably more secure than information stored on conventional hard drives. With hard drives, information can easily be lost or corrupted. With cloud services, information is encrypted and backed up continuously. Vendors monitor systems carefully for security vulnerabilities.
How is data accessed once it’s stored on the cloud?
This will vary depending on what servers you use, but access is generally based on login credentials and user permissions.
Three types of cloud computing
Software as a Service (SaaS)
SaaS is the most common type of cloud computing. It delivers complete, user-ready applications over the internet. These typically do not have to be downloaded and installed on each individual user’s computer, saving technical staff lots of time. Maintenance and troubleshooting are handled entirely by the vendor.
Software programs perform specific functions and are generally intuitive to use. Examples include Salesforce’s suite of customer relationship management tools, Microsoft Office 365 products, Google Apps, QuickBooks, Dropbox, Zendesk, and Slack. These are fully functional productivity tools that can be customized to the users’ needs without coding or programming. SaaS provides the greatest amount of customer support.
Infrastructure as a Service (IaaS)
IaaS is the most open-ended type of cloud service for organizations that want to do a lot of customization themselves. The greatest benefit of IaaS is extra capacity, which can be accessed on demand for long-term or short-term needs. IaaS makes it possible for tech-savvy businesses to rent enterprise-grade IT resources and infrastructure to keep pace with growth, without requiring large capital investments.
With IaaS, a third party hosts elements of infrastructure, such as hardware, servers, firewalls, and storage capacity. However, users typically bring their own operating systems and middleware. A business that is developing a new software product might choose to use an IaaS provider to create a testing environment before deploying the program in-house. Clients typically access cloud servers through a dashboard or an API. IaaS is fully self-service.
Platform as a Service (PaaS)
PaaS provides the building blocks for software creation, including development tools, code libraries, servers, programming environments, and preconfigured app components. With PaaS, the vendor takes care of back-end concerns such as security, infrastructure, and data integration so users can focus on building, hosting, and testing apps faster and at lower cost.
With a platform like Salesforce, resources are standardized and consolidated so you don’t have to reinvent the wheel each time you build a new app. Multiple developers can work on the same project simultaneously. In many cases, people without coding skills can create problem-solving business applications with drag-and-drop page layouts, point-and-click field creation, and customizable reporting dashboards.
Public, private, and hybrid clouds
There are several types of platform services. Every PaaS option is either public, private, or a hybrid mix of the two.
Public PaaS is hosted in the cloud, and its infrastructure is managed by the provider.
Private PaaS, on the other hand, is housed in onsite servers or private networks and is maintained by the user.
Hybrid PaaS uses elements from both public and private, and is capable of executing applications from multiple cloud infrastructures.
PaaS can be further categorized depending on whether it is open or closed source, whether it is mobile compatible (mPaaS), and what business types it caters to. Businesses are taking advantage of new PaaS capabilities to further outsource tasks that would have otherwise relied on local solutions. This is all made possible through advances in cloud computing.
When choosing a PaaS solution, the most important considerations beyond how it is hosted are how well it integrates with existing information systems, which programming languages it supports, what application-building tools it offers, how customizable or configurable it is, and how effectively it is supported by the provider.
Glossary: The anatomy of business cloud computing
Customer relationship management (CRM): CRM or customer relationship management is a strategy for managing an organization's relationships and interactions with customers and potential customers. A CRM system helps companies stay connected to customers, streamline processes, and improve profitability.
Public cloud: A public cloud is generally thought of as simply the cloud. This type of cloud is available to the public and is provided by a third party.
Private cloud: A private cloud is owned and operated by one organization. An organization like a corporation or a university can create its own infrastructure for a private cloud either onsite or at a remote location. Private clouds are not accessible to the public. These can also be called a corporate cloud, internal cloud, or on-premises cloud.
Hybrid cloud: A hybrid cloud uses both a private cloud and a public cloud for its computing needs. Generally, an organization will use its private cloud for critical functions while using a public cloud when its computing needs are in higher demand.
Multicloud: A multicloud is when a user or organization uses multiple clouds from various third parties. This is sometimes done to minimize risk or test new clouds for cost and functionality.
Authentication mechanisms: There are various ways users can prove their identities to gain access to systems or programs. These are called authentication mechanisms and typically include something a user knows — like a password and user ID — or something a user has — like a token or a device with a recognized IP address.
Single sign-on (SSO) authentication: This provides users with access to multiple services with one login method. For example, logging once into Gmail will provide users access to Google Drive without having to log in separately.
Federated authentication: This is similar to SSO, but federated authentication verifies a user’s identity across more than one network or organization based on agreed-upon security standards.
Virtual machine (VM): A virtual machine is a program that mimics the functions of an actual computer. For example, a VM could be the Windows operating system functioning within the operating system of a MacBook, or vice versa. Multiple VMs can operate on a single server, mimicking multiple computers simultaneously.
Front end: This includes data and dashboards that are seen and interacted with by end users or clients.
Back end: This is the data, coding, and infrastructure that operates applications or websites. It works behind the scenes. A user does not see this information.
Service level agreement (SLA): An SLA is a contract between a business owner and a cloud services provider that serves as a blueprint and a warranty. It covers everything from security measures and data handling to service interruptions and data breaches.
Examples of cloud computing
Most consumers and businesses are already using the cloud, whether they realize it or not. If you stream music, shop online, have social media accounts, or use mobile banking, you’re using the cloud. As digital technologies grow ever more powerful and available, apps and cloud-based platforms are becoming almost universally widespread. Here are some of the ways the cloud has transformed modern life.
Entertainment — Movies and music that used to take up space in cupboards or on shelves are now accessed from afar through cloud-based streaming services like Netflix or Spotify.
Social media — The photos and comments you post on Facebook, Instagram, Twitter, and other social platforms are stored remotely in the cloud.
Documents, spreadsheets, and slide presentations — Files like these used to be maintained exclusively on local hard drives — vulnerable to a crash or power outage if not saved regularly. Now they are commonly kept in the cloud (think of Google Docs and Dropbox), accessible from anywhere and recorded in real time.
Mobile banking — Banks like Chase, Wells Fargo, and Bank of America all rely on the cloud. Customers can transfer money to co-workers in seconds from their mobile phones or take pictures of checks and deposit them virtually, without ever setting foot in a bank. Transactions are searchable, and statements are stored in the bank’s database, accessible on demand, eliminating the need for paper files.
Customer relationship management — Customer relationship management (CRM) software enables businesses to personalize communications with customers, manage leads, and fine-tune marketing efforts across departments. Intelligent software can send follow-ups such as cart abandonment emails. Every step of the customer journey across all of a business’ touchpoints can be linked, coordinated, and analyzed.
Human resources and payroll — When the cloud is used for human resources functions, businesses see an increase in productivity and cost advantages over businesses utilizing older technology. Recruiting, onboarding, and employee data management are all more efficient. HR teams can easily view resumes, sort candidates, monitor performance, and access records with single-point tracking.
Accounting — Cloud-based accounting applications do most of the same things as desktop accounting software but they run on remote servers and are accessed via the internet. The benefits include integration across departments, so all stakeholders have access to instantly updated figures and projections. Cloud accounting applications streamline data entry, eliminate redundancy, and reduce the chance of errors.
Inventory management and logistics — Ordering, stocking, selling, and delivering goods is much more efficient when inventory is managed with cloud-based applications. Products with barcodes can be scanned every step of the way. Vendors, managers, and logistics coordinators can see inventory levels and know where products are in real time. Reordering can be automated.
The advantages of cloud computing
Over the past two decades, cloud computing has become a staple in business and private life. As tech-savvy businesses can attest, there are many benefits of cloud computing. Among the most important, cloud computing is:
Cloud computing centralizes information for fast and efficient storage and retrieval. Data is readily accessible to all stakeholders.
Cloud computing allows for adaptable programs and applications that are customizable, while allowing owners control over the core code.
Cloud software provides the opportunity to provide personalized applications and portals to a number of customers or tenants.
Because cloud systems are hosted by third parties, businesses and other users have greater assurance of reliability, and when there are problems, easy access to customer support.
With the Internet of Things, it is essential that software functions across every device and integrates with other applications. Cloud applications can provide this.
Cloud computing can also guarantee a more secure environment, thanks to increased resources for security and centralization of data.
Misconceptions about the cloud
Despite all of the benefits, some business owners are reluctant to move to the cloud because of misconceptions. Here are some common ones.
Misconception: The cloud is risky and untested.
✅Fact: The cloud is often safer for your data than your own computer. Security in the cloud is likely to be tighter than your existing system.
Cloud vendors are always working to improve the security of their systems. Through the use of encryption and security protections, the cloud is becoming increasingly safer. Top cloud vendors like Salesforce employ experts in computer science and cybersecurity to keep their systems updated with the latest encryption technology.
This makes the cloud much less vulnerable to a hack than your home or work computer. Another way to look at it is to think of the cloud like a bank. Your money is safer in a bank account than it is if it were stored in a cookie jar in your kitchen. The cloud provides this type of security for your data.
Misconception: Cloud services are complicated
✅Fact: Cloud vendors design their interfaces to be easy to use and familiar.
The cloud offers features that simplify the use of vendors’ services. With intuitive menus, automatic updates, storage flexibility, and the seamless migration of data, the cloud is easy to use.
Misconception: The cloud is unreliable.
✅Fact: The cloud is more reliable than your computer.
The cloud not only stores your data but it backs up your data with additional copies. Many cloud services automatically create backups without you having to prompt them. Cloud vendors use the latest hardware and software to operate their systems in a way that smaller companies cannot.
Data stored in the cloud means you can work from anywhere, as long as you have an internet connection. If the power in your building is out and the internet goes down, you can still get access to the cloud by moving to a place with internet access. As long as you have a working computer and an internet connection, you will have access to your data stored in the cloud.
Misconception: Stormy weather can affect the cloud
✅Fact: The cloud is not an actual cloud, and it’s not located in the sky.
The cloud has nothing to do with the weather. Data centers are all inside climate-controlled buildings. The cloud is simply a phrase used to describe a network of computers that operate programs or applications that run on connected servers instead of on a local computer or smartphone.
Misconception: Transitioning to the cloud is expensive and time-consuming.
✅Fact: Cloud vendors make data migration quick, easy, and cost-effective.
The best cloud vendors will provide the proper tools and education needed to migrate your data with ease.
Migrating to the cloud is cost-effective since it does not require you to purchase any new hardware or software. This minimizes up-front costs from the start. Cloud services also save money by eliminating the need for your organization to employ IT personnel to manage your servers.
Misconception: Cloud services are an all-or-nothing proposition.
✅Fact: You choose what you use the cloud for.
Many organizations use a hybrid cloud, which combines both a private cloud and a public cloud. Generally, an organization will use its private cloud for critical functions while using a public cloud when its computing needs are in higher demand. The cloud can even be used for backup purposes only. Given the flexibility of the cloud, how you use it is up to you.
Misconception: Cloud providers are at fault for most security breaches.
✅Fact: Keeping the cloud secure is a full-time endeavor for cloud vendors.
The cloud is safer than your own system, given the personnel dedicated to securing your data and preventing breaches. RapidScale claims that 94% of businesses saw an improvement in security after making the switch to the cloud.
Most data breaches are due to human error, like having a password that is easy to break, accidentally opening a phishing or malware email, or by simply losing an unsecured laptop. Cloud vendors like Salesforce use two-factor authentication to confirm a user’s identity to prevent data breaches.
Misconception: Customers don’t trust businesses that use the cloud.
✅Fact: Customers already trust the cloud, as well as businesses that use the cloud.
Popular services like email, social media, and ecommerce sites all use the cloud to store customer data. Photos, credit card information, and personal messages are stored in the cloud.
Misconception: There is no customer service or support if something goes wrong.
✅Fact: Reliable cloud vendors like Salesforce have dedicated customer service teams ready to help.
Salesforce provides online help 12 hours a day, 5 days a week. Additional services like 24/7 direct phone access, access to Accelerators (quick, focused work sessions), proprietary apps, on-demand admins, and more are available at an added cost.
Misconception: The cloud provider can see all of my data.
✅Fact: Cloud vendors isolate and encrypt your data so that only you can see it.
Cloud vendors encrypt your data in transit when you send it to the cloud. They also encrypt the data when it’s stored on their servers.
Misconception: The cloud gives you less control over your data and processes.
✅Fact: The cloud is flexible and can be used on a pay-as-you-go basis. It’s also accessible anywhere you have an internet connection.
The cloud can be used on a pay-as-you-go basis. So you only pay for what you use. This gives you more control and flexibility over the cloud as a resource. You can easily scale your usage based on your data needs.
The cloud also makes it easy to migrate your data to and from vendors’ servers. So you can easily download all your data whenever you need.
How to have a best-in-class cloud
When it comes to cloud computing, best practices for businesses start with screening potential vendors carefully. Your network is only as good as the providers you work with. Good data management, security protocols, and service are crucial.
1. Choose cloud service providers wisely.
Reputation matters when choosing a provider, but there are tangible assets that will affect how secure and reliable their service is. Top-notch cloud service providers have multiple data centers that are geographically dispersed. This provides defense against natural disasters and geopolitical turmoil. Data centers should also be close to internet backbone connections.
Be sure that you use vendors with the highest security, privacy, and regulatory compliance standards. They should have clear data classification policies and procedures. Most services are on-demand and pay-as-you-go. Vendors should be able to accommodate variable demand or seasonality.
Think about the long-term relationship. You want to choose a company that is fiscally healthy and likely to stay in business. It’s important to have migration support, but you also want to avoid vendor lock-in — a situation where proprietary technology is incompatible with other systems and makes it hard to change vendors.
2. Negotiate the terms of your service level agreement (SLA).
A cloud service level agreement is a contract, blueprint, and warranty all rolled into one. Take care to define key terms and clearly delineate the roles and responsibilities of all parties. Your agreement should spell out:
Where your data is located
Who owns the data
What data controls are in place
How your data is protected in transit
How your data is protected once it’s in the cloud
Who in the service provider’s organization has access to different types of data
What password policies and authentication procedures will be used
How accounts are provisioned and deprovisioned
Your SLA should identify performance measures so you can monitor service. Typical indicators include capacity — the number of users who can access the cloud at any given time — and the response time for processing customer transactions. What log information will be provided, and will it be in a format that you can import into operational analysis software? Your agreement should spell out consequences and penalties. It should also address exit planning.
3. Optimize your security.
Before entering into a relationship with a cloud service provider, it’s important to evaluate your current IT security controls and vulnerabilities. Then review the vendor’s security and data protection policies. Look for suppliers with certifications like ISO 27001, ISO 27017, DoD IL4, HIPAA, and the UK’s Cyber Essentials. Salesforce has all of these accreditations and many more.
Most cloud service providers have more cybersecurity expertise and better controls than traditional IT departments. Monitoring cloud infrastructure is their full-time job, and the success of their service depends on keeping it secure. Data breaches are much more commonly caused by human error than by problems with cloud infrastructure, but no system is infallible. Discuss how and when the cloud service provider is to report failures, outages, or security breaches. Have a risk mitigation plan and measures to prevent downtime.
4. Protect your data.
Make sure your data is classified by sensitivity with access restricted accordingly. Tiers of data should be handled differently based on how much risk unauthorized disclosure would present to the company and affected users. Know how and where your data is backed up and who can access it. In the unlikely event of a disaster, have a plan for how your data will be recovered and restored.
5. Monitor your cloud services rigorously.
It is important to monitor your cloud services rigorously. Most problems are much easier to solve if caught early. Unusual spikes in activity can alert you to security threats. Similarly, dips in activity could be the result of a glitch and result in lost sales. Any anomalies should be investigated promptly. Most cloud vendors offer lots of service and support.