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What is Cloud Computing? A Layman's Guide for Executives

1. What is Cloud Computing?

Today, even the biggest technophobe has some passing familiarity with the concept of cloud computing. And while many executives casually refer to it in day-to-day business conversation (“just put it in the cloud!”), some may not quite understand just what cloud computing is and how it works. Today, with CEOs and CFOs beginning to have much more involvement in a company’s technology path (a Deloitte survey reveals that more than 60% of 500 mid-market executives engage in technology decisions), it’s more important than ever to understand cloud technology.

So what is cloud computing in simple terms?

Cloud computing is all about delivering a variety of services online, from data analytics to data security and storage. In fact, most people use the cloud every day whether they realize it or not. Sharing a file through the internet, watching Netflix, playing an online video game, using a banking mobile app...these are all services that exist in the cloud. Now, it’s important to understand that the “cloud” is not a nebulous concept but a physical space, such as a data center, where data is housed on servers. However, unlike storing data on a desktop hard drive or thumb drive, it’s now accessible from just about any web-connected computer thanks to the cloud.

2. What Makes a Cloud a Cloud?

Now that we’ve defined a cloud, it’s necessary to take a look at the characteristics of a cloud, i.e., what makes a cloud a cloud. The National Institute of Standard and Technology (NIST) has determined five characteristics that define cloud computing. 

  • On-demand self-service. Service is available any time, anywhere, without requiring human interaction with the provider. Users “pay as they go,” much like a utility. This turns the service into an operating expense versus a big-ticket capital expense.
  • Broad network access. Service must be accessible on any internet-connected device, from workstations and laptops to tablets and smartphones.
  • Resource pooling. Multiple employees or consumers can share the same space and resources with others if they have internet access, and physical and virtual resources can be assigned and reassigned as needed.
  • Rapid elasticity or expansion. A cloud’s capabilities must be able to expand or shrink based on consumption and demand without affecting users; for example, it may need to expand at times of peak traffic, such as the holidays.
  • Measured service. A cloud administrator must have access to information about who is using the cloud and when. Pay-as-you-go models also offer transparency and help to ensure users get exactly what they pay for—no more, no less.

3. Types of Cloud Computing Services

You may be wondering, what are cloud services? There are essentially two types: service models and deployment models. 

Service Models

  • Software as a Service (SaaS). This cloud-based service allows users to access applications through their internet browser without having to download software to their personal or company-owned device. SaaS advantages include accessibility, compatibility, and lower upfront costs than traditional software downloads, installations, and updates.
  • Platform as a Service (PaaS). PaaS is similar to SaaS, but rather than access software over the internet, PaaS offers a platform for software creation via the web. PaaS gives developers the freedom to concentrate on building the software without dealing with operating systems, software updates, storage, or infrastructure. PaaS allows for simple, cost-effective development and deployment of apps, and is highly scalable. 
  • Infrastructure as a Service (IaaS). This service model delivers cloud computing infrastructure, including servers, networks, operating systems, and storage, through virtualization technology. It is fully self-service for accessing and monitoring computers, networking, storage, and more, and it allows businesses to purchase resources as-needed without the need for hardware. The most common IaaS examples would be Amazon Web Service (AWS) and Microsoft Azure.

Deployment Models

  • Private cloud. The cloud infrastructure is utilized exclusively by a single organization. It may be owned, managed, and operated by the organization, a third party, or a combination of the two. In addition, it could be located on-premise or off-premise.
  • Community cloud. In this deployment model, cloud infrastructure is utilized by a community of users from various organizations that have the same concerns, such as security or compliance. It may be owned, managed, and operated by one or more of the organizations in the community, a third party, or some combination of them. As with a private cloud, it may be located on-premise or off-premise.
  • Public cloud. A large physical and virtual infrastructure shared with thousands or even millions of users that is operated by a cloud provider and resides on their premises (AWS and Microsoft Azure being two prime examples). Public clouds are available to anyone who wants to use or purchase them.
  • Hybrid cloud. This cloud infrastructure is a combination of two or more distinct cloud infrastructures (private, community, or public) with orchestration between them which enables data and application portability, such as cloud bursting for load-balancing between clouds. Many organizations choose a hybrid cloud to maintain control of sensitive data in their private cloud while offloading less sensitive data into a public cloud.

4. Benefits of Cloud Computing

Cloud technology can benefit organizations of every size, in almost any industry (we’ll dive deeper into the specific industries in Chapter 5), and so many are rapidly moving their workloads. Why are these organizations making the move? There are nine key benefits they are hoping to realize.

Flexibility. Being locked into one level of capacity (or having to take on the expense of increasing it) can be a burden for many organizations. In fact, a recent Gartner survey reveals that “operational agility”—the ability of an organization to quickly adapt in response to changes in the market in order to compete or improve service—was one of the top-cited reasons for cloud migration. Through the cloud, it can take mere minutes to create instances compared to the weeks or months it could take an IT team.

Accessibility. Most cloud providers are very reliable, offering 99.99% uptime or greater to keep applications available to employees and consumers at just about any given time. By providing constant access to mission-critical resources, there is less disruption and downtime, along with greater consumer satisfaction.

Try Our Downtime Calculator to See What it May Be Costing Your Organization

Productivity. Today, many organizations operate with more than one location, departments may work in silos focused only on their specific tasks, and increasingly, many employees are working remotely. A cloud platform facilitates work all over the world between employees and clients by enabling better collaboration (which research shows increases productivity by more than 40%). For example, a team can access documents anytime, anywhere, editing and sharing them as necessary to improve workflow and receiving real-time updates and feedback. This also leads to higher participation levels and idea-sharing.

Lower operating costs. While migration to the cloud may involve some initial costs, it ultimately has eliminated the high costs associated with purchasing and maintaining hardware; it also eliminates the need for server storage space or having to build out data centers as an organization grows. In addition, the “pay-as-you-go” subscription-based model is kinder to any organization’s budget.

Better data backup and recovery. There are a number of factors conspiring to bring organizations down, including power outages, cyber-attacks, security breaches, human error, and Mother Nature herself. Any of these can result in a loss of data that can be devastating—potentially shutting down some operations for good. By storing data in the cloud, organizations enjoy improved business continuity; they’re able to access data no matter what happens to their equipment, and in the event of an attack or other event, data can be restored to the last uncompromised snapshot.

Better security. Reputable cloud providers have a highly-vested interest in keeping clients well-protected both virtually and physically by employing the most up-to-date security features available; after all, one breach can impact every client they have and potentially destroy the provider’s entire business. In addition, these reputable providers offer strict physical safety features, including Uninterrupted Power Supply (UPS), Computer Room Air Conditioning (CRAC), data encryption, safe proximity from flood zones, hurricane structure rated facilities, 24/7 surveillance, and security (HID card, PIN, biometric access).

Support. By working with a reputable cloud provider, organizations gain access to IT experts without having to employ an entire team (often, they are even available 24/7, making sure there are no operational failures). For companies with a solid IT team, this also frees them up to handle more important tasks that can grow the business, rather than just managing the day-to-day.

5. Cloud Technology Adoption by Industry

Just about every industry is benefitting from cloud adoption, so it’s no surprise that in 2020, nearly 85% of enterprise workloads operating in the cloud. Here’s a closer look at six types of organizations and individuals that are reaping the rewards of the cloud.

Government. While many federal agencies began using cloud services years ago, today many state and local government agencies are making the move. For many, the cloud allows for reorganization, enabling them to repurpose their time to better support the customers of their services. For these agencies, maintaining compliance with the guidelines in place from the Criminal Justice Information Services (CJIS) division of the FBI is also critical. By working with cloud providers that meet CJIS requirements, and remaining on top of their ever-changing regulations, government agencies—particularly law enforcement organizations—can take advantage of the benefits and avoid negative consequences.

Healthcare. Once known for housing mountains of analog records, today’s healthcare organizations are digitizing their data and moving it to the cloud to benefit providers, patients, and insurance organizations alike. Along with the nine key benefits identified earlier, healthcare organizations also benefit from research opportunities; the cloud allows providers to easily compare data, make predictions, prepare for outbreaks, develop new pharmaceuticals, and more through collaboration. Finally, compliance with the Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health Act (HITECH) can be time-consuming and confusing, with regulations always in flux. Working with a HIPAA-certified provider keeps everything in check.

Financial Institutions. Increasing confidence in cloud security and the benefits of data protection and disaster recovery have many financial institutions finally making the move to the cloud. In addition, consumer demand for mobile banking has also spurred this decision, as the cloud allows them to quickly scale up while giving consumers online access from anywhere. Get our Disaster Recovery ebook.

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Retailers. Server crashes are one big factor that continues to push retailers to the cloud. It comes down to scalability. Consider some of the Black Friday crashes that major retailers like Macy’s, Lowes, and J. Crew experienced in past years; these brief crashes cost them hundreds of thousands of dollars in revenue, forced them to extend sales to appease customers, and lost them a lot of business and goodwill. The cloud, with its ability to handle greater amounts of traffic and transactions during busy times, is a perfect solution. Compliance with the Payment Card Industry Data Security Standard (PCI DSS), which is necessary for any retailer accepting credit cards, can also be complicated; working with cloud providers compliant in PCI DSS gives retailers peace of mind.

Educational Institutions. Colleges and universities have become a big target for cybercriminals because they house a wealth of valuable information that can be sold on the dark web, different systems are often used across departments making security difficult to monitor, and network traffic is extremely high, allowing them to slip through unnoticed once a vulnerability is discovered. The cloud helps to elevate security protocols to keep students and staff better protected; it also offers many non-security benefits, including revolutionizing online learning by offering face-to-face instruction in a virtual environment to students across the globe.

Hospitality. The hospitality industry has always lacked a scalable data management solution, which is why today, many in the industry still run on antiquated IT solutions, enabling aggregator sites like Hotels.com, Expedia, and Travelocity to eat away at margins. Not only is the cloud helping hoteliers compete with these sites, but it’s also improving staff collaboration, which in turn, improves the guest experience by tending to their needs quicker.

These are just a handful of industries benefiting from cloud services that we wanted to spotlight; of course, it’s no surprise that there has been rapid cloud technology adoption in other industries, such as electronics, telecommunications, manufacturing, aerospace and defense, automotive, energy, and entertainment.

6. Choosing a Cloud Provider

Every organization will have different needs when considering cloud computing, so you want to be sure to choose carefully. We’ve put together “6 Questions to Ask When Selecting a Cloud Provider” which you can read here

At DSM, we offer bundled and customized cloud services for CJIS, Government, and Commercial Business. No matter which path you choose, our goal is to put you on an operationally and financially safe path and to have you up and running in no time. To learn more about DSM for your cloud journey, visit us online or contact us today.