What Is Cloud Computing?

Cloud computing is a model for delivering computing services, including infrastructure, software, storage, databases, development platforms and more, over the internet. The remote data centers where these services run are referred to as “the cloud,” while the companies that maintain them are called cloud service providers, or CSPs. Instead of owning their own IT infrastructure or systems, companies access the resources they need from these providers, typically paying only for what they use. Providers may keep costs lower by leveraging economies of scale.

The cloud model offers benefits including scalability, lower capital costs, and reduced operational overhead. When an organization chooses to use cloud computing, its employees, customers, partners, and suppliers access the IT tools they need over the internet. From their perspective, cloud computing looks like any other current tech they can access from a desktop, laptop, phone, or other device. CSPs offer a huge array of options, including HR, sales management, engineering, logistics, and finance apps, along with infrastructure services to support your own apps. To infrastructure users, the cloud simply resembles a remote data center that can be managed using familiar system administration tools, such as dashboards and consoles. A critical difference, however, is that the CSP owns and maintains that remote data center, as well as all the hardware inside it, and is responsible for providing power, cooling, connectivity, and physical security. You, as a customer, choose the specific features and functions you need.

For customers, cloud computing offers agility, scale, and flexibility. Instead of spending money and resources on legacy IT systems, your staff can focus on more strategic tasks. Without making a large up-front investment, they can quickly access the computing resources they need—and pay only for what they use.

VIDEO: What is Cloud Computing?

Key Takeaways

The cost of cloud computing may be significantly lower than the cost of owning and managing a traditional on-premises data center that delivers comparable scalability and redundancy.
Many of an organization’s needs can be met with software-as-a-service (SaaS) cloud applications.
Businesses can design, write, test, and deploy custom applications in the cloud.
Cloud applications often support essential technologies, such as GenAI, blockchain, chatbots, and the Internet of Things (IoT).
Reduced barriers to entry enable the rapid deployment of cutting-edge technological capabilities.

Cloud Computing Explained

In simple terms, cloud computing allows you to rent instead of buy your back-end IT systems. Rather than spending your capital on application software, database software, management tools, servers, storage arrays, and data center infrastructure such as networking, computer racks, power supplies, and cooling systems, the cloud provider makes those investments. You, as the customer, rent those resources to run your business; with cloud computing, you pay only for what you use, and you can scale up and down as needed.

In some cases, you may use application software written and offered by the cloud provider, where you pay for access on a per-user or other consumption-based basis. In these cases, the cloud services provider maintains that software for you. In other cases, you may decide to host some or all of your own homegrown software in the cloud, using only the provider’s infrastructure systems. In both cases, the cloud provider owns the hardware, networks, security, power, and cooling—that’s essentially the entire infrastructure needed to host the software and deliver access to that software to you, your employees, and your customers. Cloud computing lets you focus on adopting the software and services your business needs while the provider handles the back end. It allows you to deploy and scale IT resources faster and with much greater flexibility than if you had to carry the entire IT burden yourself, in your own data centers, and provide all your own hardware, software, infrastructure, networks, tools, and support staff.

Types of Cloud Computing

As cloud computing continues to evolve, multiple deployment paradigms are emerging, but the four main categories of cloud computing are public, private, hybrid, and multicloud. Each type requires a different level of management from the customer and calls for different security practices.

Public Cloud: In a public cloud, all the networking, storage, and computing infrastructure is located at data centers owned by the cloud provider, and the CSP delivers services to you over the internet. Public cloud users don’t need to maintain data centers, which can be a tremendous benefit for startups and companies that are scaling to meet increased demand for their services. You can add more users or applications easily.

Most public clouds are multitenant—that is, more than one customer shares the cloud provider’s IT infrastructure. It’s the CSP’s responsibility to provide security so each customer’s data is kept private from other customers. The public cloud is often the most cost-effective cloud model because cloud providers can create large-scale data centers and share the resources with many customers.
Private Cloud: A private cloud is used exclusively by one organization and runs on dedicated servers and infrastructure. A private cloud might be hosted at one of the cloud provider’s data centers, or it might be hosted onsite at the customer’s facility. Because of their dedicated hardware and infrastructure, private clouds are generally more expensive and lack some of the flexibility of public clouds; they’re used when the customer requires the highest levels of security and control. Government agencies are an example.
Hybrid Cloud: As the name suggests, a hybrid cloud is when an organization uses a combination of public and private clouds. Often hybrid cloud customers choose to keep their most sensitive or business-critical applications on a private cloud located within their own facilities, giving them more control, while running less sensitive applications at the cloud provider’s location. A hybrid setup can also be used as an interim step for those moving their applications to the cloud.
Multicloud: In a multicloud scenario, a customer engages two or more cloud providers, perhaps to take advantage of specific technologies, software, or other features offered by each or to mitigate the risks associated with depending on just one CSP. Alternatively, a multicloud approach could be the legacy of a merger or separate technology initiatives in a large organization. Thanks to current interoperability standards, applications running in one provider’s cloud can work with resources in other providers’ clouds and in on premises data centers.

Cloud Computing Services

You can choose from several different types of cloud offerings and may, in fact, use many services to meet your needs. These offering might be from the same provider, or you may choose to use multiple cloud providers for different services.

The three main types of cloud services are software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS). The definitions of these services are straightforward, but in practice, it can be difficult to determine where infrastructure ends and platform begins. Often customers combine these services in fairly complex ways to meet their needs.

SaaS in Cloud Computing: Software as a service (SaaS) is a software delivery model in which the cloud provider creates and hosts the software and its data and you access those applications over the internet via a desktop, laptop, phone, or other device. Think about how you do online banking: The banking software, including the website and mobile app, were created by the bank, and you access them using your account name and login. The bank handles all the details, including storing your transaction data. That’s the same experience you would have when using a SaaS-based human resources or shipping logistics service.

SaaS offerings can be quite general, such as common employee productivity software, or highly technical and task-specific. There are countless providers of SaaS for businesses. Rather than paying a vendor up front for software and then implementing it in their own data center, SaaS customers subscribe to the service on a pay-as-you-go basis.

Many businesses find SaaS to be the ideal solution because it lets them get up and running quickly, usually with the latest and most innovative technology available. They don’t need to install and configure software for important functions, and the cloud provider takes care of adding new features, managing security updates, and scaling to handle increasing workloads. A modern cloud suite can provide software to meet every business’s needs. As SaaS has become highly popular, vendors often bring new features to the SaaS versions of their software first, and in some cases stop developing for on-premises versions all together.
Cloud Computing with PaaS: Platform as a service (PaaS) pprovides everything you need to write and deploy your own custom applications in the cloud. A cloud provider’s PaaS offerings typically include developer tools for mobile and web applications, as well as the resources to test those applications and then run them in the provider’s cloud data center. In addition to developer tools, the cloud provider may also offer advanced features you can build into your applications, such as artificial intelligence (AI), chatbots, blockchain, and the Internet of Things (IoT), as well as big data analytics, content management systems, databases and data management, system management, and robust security. Those features might be presented as modular libraries or as application programming interfaces (APIs).

To software developers, PaaS offers a known and predictable target platform for writing and testing applications and services. When the software’s ready, it’s easy for administrators to deploy it by using containers or virtual machines, without having to invest in buying new servers and infrastructure. The customer takes care of the application and its functionality; the cloud provider takes care of the servers, networks, connectivity, and other infrastructure needs, including security, scalability, and even disaster recovery. The PaaS model can allow customers to build and deploy applications that leverage shared services at a significantly lower cost, and it can be 100% customized to meet customers’ specific needs.
IaaS in Cloud Computing: In the internet-as-a-service (IaaS) model, the cloud provider physically hosts the infrastructure components that provide compute, storage, and network capacity so subscribers can run their workloads in the cloud. The cloud provider remains responsible for power, cooling, physical security, and hardware repairs, while the cloud subscriber is usually responsible for installing, configuring, securing, and maintaining software and handling digital security. Billing remains focused on consumption: For storage servers, you pay for the capacity in use; for compute servers, you pay for the processor resources used.

A major IaaS benefit is that the cloud provider can scale quickly and maintains the physical plant. Customers may find IaaS attractive when migrating existing legacy data centers to the cloud for two reasons: IaaS can be configured to be similar to a traditional on-premises data center, and on-premises resources can be readily adapted to the IaaS model, often by using virtualization techniques that let applications see and use a virtual environment that closely mimics the physical environment of the on-premises data center.

Cloud Computing Benefits

There are several upsides pushing organizations across all industries toward the cloud. For many, traditional on-premises data centers or small server rooms no longer deliver the agility and flexibility the business requires. The explosion of data created by an increasing number of digital systems is pushing the cost and complexity of data centers and the systems they hold to new levels and demanding new skills and analytics tools from IT.

Cloud solutions can help companies meet the challenges of the digital age. With cloud computing, instead of managing IT infrastructure, organizations can focus on the applications and services that support business success and let employees be more responsive to customers’ changing needs. With modern cost optimization, the cloud delivers measurable business value, helping businesses of every size achieve their full potential.

Here are a few areas in which cloud computing provides a compelling advantage over traditional IT:

Cost: Costs are not only lower but shifted from capital expenses to operational expenses.
Speed: Provision resources for development, testing, and deployment in hours, not months.
Global scale: Grow elastically using the vendor’s cloud data centers, typically located around the world.
Productivity: Spend less time installing, configuring, and managing systems and more time on fine-tuning services to meet your business needs.
Performance: Gain better price-performance for many business-critical workloads.
Optimization: Cloud native workloads, designed especially for cloud architectures, can be more efficient than traditional software.
Reliability: Cloud applications are designed to be fault-tolerant and scalable, and cloud vendors offer highly reliable systems and services.

What’s more, many organizations are already realizing these benefits:

Cloud-based applications can be accessed from anywhere, whether a corporate HQ, a home office, or a customer site.
There are cloud-based SaaS applications available that work with desktops, notebooks, mobile phones, and embedded devices.
Companies can save money by getting rid of most, or all, of their data center hardware.
While security is always a shared responsibility, major cloud service providers have cybersecurity teams monitoring their facilities and systems 24/7, offloading some of that work.
Business continuity and disaster recovery efforts can leverage the scale of cloud computing, using the cloud itself to provide backup services and sites with near-instantaneous failover.
Because cloud data centers are large, modern, and efficient, they can be greener, with a lower carbon footprint and energy consumption than traditional on-premises data centers.

Cloud Computing Use Cases

There are many ways to use the cloud; some, such as e-commerce, are familiar, while others are more niche and meet demanding technical and industry-specific needs. Here are some use cases that are common across organizations, regardless of their business segment.

Disaster Recovery and Business Continuity: Bad things happen, so every business needs to be prepared with a business continuity plan. Disaster planning and recovery is straightforward when using cloud IaaS and PaaS models: Data can be backed up and restored more easily than with on-premises data centers, and cloud service providers have provisions for failing over to a different cloud data center if needed. When using SaaS applications, the cloud provider handles all that for you, automatically.
Scalable Web Applications: Web applications are accessed via a web browser on a desktop or notebook, or using a mobile app. The cloud-based systems serving those applications can adjust their resources automatically based on the number of users and what those users are doing. As they get busy, the app adds servers and other resources, and when they aren’t busy, they give those resources back.
Remote Collaboration & Productivity: By providing a centralized, accessible workspace, the cloud enables teams to collaborate effectively, share documents, and communicate in real time, regardless of individuals’ physical locations. This helps foster a sense of connection and camaraderie, even when team members are geographically dispersed. Additionally, cloud-based tools often offer features that streamline workflows and improve productivity, such as version control, task management, and project management.
Software Development & Testing: The cloud is a convenient place for developers to design, create, and test software and then hand that software off for deployment. Cloud-based platforms offer incredibly robust, scalable, and efficient ways for developers to collaborate by sharing tools, libraries, and code, with ready-to-use setups and support for agile processes and rapid changes.
Data Analysis & Business Insights: Cloud platforms can process and analyze vast data sets, often based on real-time information, including user activity, transactions, inventory movement, and even what’s happening outside the organization. The result: Business leaders can see what’s happening and make smarter decisions faster.

Advanced Technologies: AI, Blockchain, and IoT in Cloud Computing

Cloud customers benefit from having the latest innovations and emerging technologies built into their IT systems. Cloud providers continuously develop new capabilities and features, and as soon as a SaaS provider releases a new feature, your organization can use it. With PaaS and IaaS, cloud providers are constantly adding to their hardware, software, and tool libraries, providing resources that you can incorporate into your existing software—or use to build new applications.

With the right cloud provider, you can leverage a modern cloud computing architecture to create faster, increase productivity, and lower costs. Better yet, choosing a cloud provider that offers an integrated cloud—SaaS, PaaS, and IaaS in one architecture—gives you the ability to deliver improved apps and services without needing to reinvent these emerging technologies.

Here are five examples:

Artificial intelligence: AI lets you surface insights within the context of each application by doing things such as detecting anomalies, spotting patterns, and making recommendations.
Generative AI: GenAI uses the power of large language models (LLMs) to interpret and process text to automate tasks and enhance your employees’ productivity.
Agents: New GenAI agents are computing systems that are trained to simulate human intelligence. Many use LLMs and natural language interfaces to take on tasks related to customer service, sales, help desks, HR, and task automation.
Blockchain: Blockchain is an emerging technology for digital ledgers that can record and validate transactions using fast, nonrepudiatable, programmable smart contracts. Blockchain for supply chains has a variety of benefits, for example.
Internet of Things: Connected sensors are everywhere, in medical devices, point-of-sale terminals, manufacturing, and inventory. Use the cloud to track and collect data from IoT devices and turn their telemetry into insights.

How Cloud Security Builds Trust

Moving to the cloud removes many of the headaches and costs of maintaining IT security. An experienced cloud provider continually invests in the latest security technologies and certifications—not only to respond to potential threats but also to enable customers to better meet their regulatory requirements.

The best cloud providers invest in every layer of cloud security across global data center regions as part of their cloud’s overall design and form a true partnership with you and your own technical staff. Such a multilayer approach offers security at the level your business needs, helping protect you and your customers while meeting regulatory and governance requirements.

How the Cloud Connects Business Processes

Business processes describe how work is done from beginning to end. They describe how people are working together today, how they would like to work together, and how their work will be shaped with the introduction of new cloud technologies. With an integrated cloud solution, organizations are better equipped to manage and assess the costs and benefits of technology projects that improve business processes.

For organizations that struggle with disconnected business processes and data silos, the cloud can transform their business operations. With the cloud, there’s no need reinvent processes. Complete cloud application suites are connected, eliminating data silos and enabling integration and intelligent business decisions.

Cloud Computing Challenges

Cloud computing provides many opportunities for businesses to become more efficient while lowering the capital outlay and ongoing costs of IT. But as you consider the cloud, keep these challenges in mind:

Security and compliance: Ensuring robust security for data and applications in the cloud is a shared responsibility between the company and the CSP. Considerations include managing who can access services, preventing data breaches, and adhering to compliance regulations. IT teams should ensure they understand their obligations under the shared responsibility model. Moreover, when data is stored in cloud data centers outside a company’s primary geographical locations, teams must be aware of data sovereignty laws and ensure compliance with regional regulations. Understanding where company data resides and who has access to it is crucial.

Cost management: While the cloud may deliver savings versus maintaining an on premises data center, because cloud services are generally priced using a subscription model based on utilization, organizations may struggle with unexpectedly large bills that blow the IT budget. To minimize this issue, be on the lookout for underutilized resources, and make sure you understand the CSP’s pricing structure to capture any savings opportunities. It can be easy to spin up services to meet a demand spike and then let them keep running even after they’re no longer needed, so put consumption monitoring in place to avoid paying for idle capacity.

Lack of expertise: The cloud landscape is constantly evolving, so finding professionals with the necessary skills to manage and optimize a complex cloud environment can be challenging.

Multicloud data management: Many organizations adopt multicloud or hybrid cloud strategies, which may introduce complexities in managing data across diverse environments. One way to minimize problems and maximize access to data is to ensure that your database of choice can reside in your cloud, or clouds, of choice.

Ensuring long-term application and data portability: Organizations are often challenged to avoid vendor lock-in so they can maintain flexibility and optimize costs by being able to move applications and data between different cloud environments, or back on premises. One answer is to prioritize cloud-native applications that use technologies like containers and microservices.

Other challenges include understanding various providers’ offerings, moving sometimes poorly documented legacy systems, and staying abreast of variations in offerings between a vendor’s cloud regions.

How to Migrate to the Cloud

The first step in a cloud migration is to take stock of the applications, data, and services you wish to move to the cloud.

In some cases, you may choose existing SaaS applications to replace your in-house software. In others, you may want to pack up your existing applications and move them as is to the cloud. And in still others, you may wish to write new cloud native applications that can leverage the advanced technologies and architectures in cloud computing.

One size rarely fits all. With the cloud, your business can preserve its existing investments in familiar tools, and you don’t have to rewrite code to migrate your software assets. Big savings often come from eliminating capital expenses by lifting and shifting entire workloads to the cloud and retiring legacy data center assets.

Oracle is ready to help. Organizations can access a complete set of business applications with embedded AI running on Oracle Cloud Infrastructure (OCI). Looking to build your own software or migrate existing systems to an IaaS or PaaS cloud? OCI gives you a full set of cloud services that you can run in Oracle’s data centers or on your own site, letting you harness your data, optimize without costly redesigns, and build cloud native applications.

Oracle has the cloud services you need, where you need them, and a value proposition that makes it well suited to help you solve your toughest business challenges.

The cloud computing revolution is here to stay, offering businesses of all sizes a scalable, cost-effective, and secure way to manage their data and applications. By embracing cloud services, you can free up valuable resources, enhance collaboration, and empower your organization to adapt and thrive in today's dynamic digital landscape.

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Cloud Computing FAQs

What are the types of cloud deployment models?

There are four main types of cloud computing services:

Public cloud: The entire computing infrastructure is located at data centers owned by the cloud provider and is shared by multiple customers. The cloud provider delivers services to you over the internet.
Private cloud: A private cloud is used exclusively by one customer organization and may be hosted at one of the cloud provider’s data centers or onsite at the customer’s facility.
Hybrid cloud: An organization uses a combination of both public and private clouds.
Multicloud: The customer uses two or more cloud providers, often to take advantage of specific technologies, software, or other features offered by each provider.

What are the benefits of cloud computing?

Here are a few of the many benefits of using the cloud:

Generally lower overall costs than maintaining your own data center
Shared security responsibility with a cloud services provider
Access to state-of-the-art hardware, software, and services
Deployment times for new technologies that are measured in hours or days—not weeks or months
Shifting costs from capital expenses to operational expenses
Owning less and being able to get rid of legacy IT hardware and infrastructures

What are the models of cloud computing?

There are three primary models of cloud computing. Small companies tend to use SaaS for most cloud computing needs. Large organizations generally use all three of them for different tasks.

Infrastructure as a service (IaaS) gives you the ability to control the components of the cloud, either the physical devices, such as servers and networks, or virtualized versions of those components.
Software as a service (SaaS) is a software delivery model in which the cloud provider creates and hosts the software and its data and you access those applications over the internet.
Platform as a service (PaaS) provides you with the systems for writing and deploying your own custom applications in the cloud.