Cloud computing is the delivery of computing services, such as databases, servers, storage, networking, and analytics—over the internet. They are hosted remotely from a data center managed by a cloud services provider.
Cloud computing provides users with functions such as:
- App creation and testing
- Data analysis
- Video/audio streaming
- Software delivery
Cloud computing is one of the fastest-growing enterprise-based technologies, driven by the increasing need for digital business transformation. It offers numerous benefits compared to an on-premise environment, which involves physical, on-site IT infrastructure the user must manage and maintain.
Benefits of Cloud Computing
One of the most common reasons for a transition to cloud computing is cost savings. Through economies of scale, cloud service providers can offer lower prices because they purchase computing resources in massive quantities, which their customers share.
The service eliminates the need to find physical space and the cost and effort of purchasing, installing, and managing the infrastructure. IT teams can avoid these time-consuming IT tasks, providing them with more time to achieve other business goals. In addition, the user can start using enterprise applications in minutes from almost any device without worrying about running low on storage space.
Cloud computing services provide elasticity—the ability to scale capacity up and down in response to spikes and dips in demand with on-demand IT resources. Data backup, recovery, and business continuity are simplified because of data mirroring—the process of replicating data in real-time—at multiple sites on the network.
The data centers are regularly upgraded to the latest computing hardware. Cloud cloud computing services usually run on a worldwide network of data centers, allowing applications to be deployed in regions worldwide with minimal latency for users.
Finally, many cloud-based storage solutions offer integrated cloud analytics, making it easy to implement tracking mechanisms and build reports to analyze information.
Downsides of Cloud Computing
Despite stringent security and compliance regulations, security remains an ongoing concern for customers. Since every component is online, it exposes additional vulnerabilities, such as insecure APIs and misconfigured cloud storage security. Furthermore, the user needs reliable internet service, a fast connection, and sufficient bandwidth to realize the full benefits of cloud computing.
Servers can fall victim to natural disasters, bugs, and power outages. A failure in one area could affect users across the country. All three cloud computing giants (AWS, Azure, GCP) have experienced several significant outages over the past few years.
Overall, the pros of cloud computing greatly outweigh the cons. It performs better in most areas when compared to on-premise solutions due to redundancy built-in. Cloud service providers strive to address customer concerns and deliver the best experience possible.
Cloud Computing Deployment
There are three main ways to deploy cloud services: on a public cloud, private cloud, or hybrid cloud.
Public Clouds are computing services offered over the public internet. All public cloud customers of the service provider share its data center infrastructure.
Equinix Data Center report on Stratosphere.io
A user uses a web browser to access the services and manage the account. This deployment model is ideal in cases where cost savings is a priority. The cloud service provider usually bills according to subscription-based or pay-as-you-go pricing.
Public clouds relieve demand on IT resources while offering near-unlimited scalability, on-demand resources, and fast deployment. This deployment option is popular for web-based email, online office applications, and storage.
Private clouds, also known as internal or corporate clouds, refer to cloud computing services dedicated to select users. It is typically used exclusively by a single business or organization through a private network, hosted in their data center, and managed by their IT team.
This model requires substantial capital expenditures and ongoing management. However, some companies also pay third-party service providers to host their private cloud. Private clouds give organizations additional control and customization from dedicated resources with on-demand data availability.
Private clouds can deliver better reliability, security, and privacy through company firewalls and internal hosting. They make it easier to meet regulatory compliance requirements and protect sensitive data. It is well-suited for government agencies, financial institutions, and larger organizations seeking more control.
Hybrid clouds are combinations of public and private clouds and allow data and apps to move between the two environments. A combined approach to cloud services allows for more control and flexibility in terms of cost, security, and performance.
Organizations can take full advantage of on-premises technology by keeping the sensitive client or internal data in their own data center for security, safety, or regulatory requirements.
When computing and processing demand fluctuates, hybrid cloud computing allows businesses to seamlessly scale up their on-premises infrastructure to the public cloud to handle any overflow. In this deployment model, customers usually only pay for resources they temporarily use.
The hybrid cloud is used in regulated industries with sensitive data, such as banking, government, and healthcare. In these industries, certain types of data need to be stored on-premises. Meanwhile, less sensitive data can be stored in the cloud.
Types of Cloud Services: IaaS, PaaS, and SaaS
Infrastructure as a Service (IaaS)
IaaS is the most basic category of cloud computing services. It provides users with the least control over computing resources in the cloud compared to PaaS and SaaS.
IT infrastructure—servers, storage, and networks—is rented from a cloud service provider while the customer manages their software. IaaS lets the customer bypass the cost and complexity of physical servers and data center infrastructure, with the ability to gain real-time business insights and the flexibility to scale IT resources up and down with demand.
Common IaaS scenarios
- Migration of applications/workloads to the cloud
- Set up testing and development environments
- Data storage, backup, and recovery
- Web application deployment
- High-performance computing
Advantages of IaaS
- Reduces costs
- Increases scalability
- Faster deployment of new products on a worldwide network
- No need to maintain and upgrade software and hardware or troubleshoot equipment problems
Platform as a Service (PaaS)
PaaS is a complete development and deployment environment. It makes it easier for developers to create software as they do not need to set up or manage the underlying infrastructure.
In addition to everything included in IaaS, PaaS offers middleware, development tools, business intelligence services, database management systems, and more. The user manages the applications and services developed, while the cloud service provider manages everything else.
Common PaaS scenarios
- Develop or customize cloud-based applications
- Business intelligence
Advantages of PaaS
- Cuts coding time with pre-coded application components
- Development options for multiple platforms
- Affordable use of advanced development software and business intelligence and analytics tools
- Supports geographically distributed development teams—the development environment is accessed over the internet
- Efficient management of the web application life cycle—building, testing, deploying, managing, and updating within the same integrated environment
Software as a Service (SaaS)
SaaS provides a complete software solution, allowing users to connect to and use cloud-based apps over the internet. It is often end-user applications such as email, calendaring, and office tools (like Microsoft Office 365). The service provider hosts and manages the software application and underlying infrastructure and handles all maintenance.
Common SaaS scenarios
- Web-based email service
- Productivity applications
- Business applications, such as Customer Relationship Management and Enterprise Resource Planning software
Advantages of SaaS
- Allows a business/organization to quickly access software needed for its operations at minimal cost
- Users can run most SaaS apps directly from their web browser—no hardware, middleware, or software necessary
- Ability to access app data from anywhere, on nearly any device
Comparing the Giants
The selection of a cloud vendor will come down to the desires of each customer and the workloads they are running. At their core AWS, Microsoft Azure, and Google Cloud Platform offer similar basic capabilities around flexible compute, storage, and networking. They all share the common elements of a public cloud. However, several differentiating factors separate the approaches of the three firms, which can help end-users consider which one is the ideal candidate.
Amazon Web Services (AWS) is a subsidiary of amazon.com, which provides cloud computing on a paid-subscription basis. Amazon Web Services is the oldest and has been the most dominant player since it entered the cloud market in 2006.
Microsoft Azure (Azure) was launched in 2010, entering the cloud market when it took its on-premise services, such as Windows Server, Office, SQL Server, Sharepoint, to the cloud.
Google Cloud Platform (GCP) is a suite of cloud computing services that runs on the same infrastructure that Google uses internally for its end-user products such as Google Drive and YouTube. With the initial intent of strengthening the company’s products, Google began offering GCP to the general public in 2011. Now it is becoming a fast-growing powerhouse in the cloud computing industry.
To learn more about Amazon, Microsoft, and Alphabet (Google) business models, we have a full breakdown of each company, their financials, and competitive advantages for investors in the following:
Microsoft (MSFT): Leading Digital Transformation
Alphabet (GOOG): Tapping Markets from A to Z
Growth and Market Share
In the most recent quarter (Q2 2022), revenue from Amazon Web Services totaled $19.74 billion, up 33% from a year ago, while Microsoft’s commercial cloud revenue checked in at $25 billion, an increase of 28%. Google Cloud Revenue rose 36% to $6.23 billion, compared to the same period last year.
Data from stratosphere.io financial data platform
Amazon reports its web services revenue in its own segment, while Microsoft reports Azure revenue in its Intelligent Cloud segment, which consists of server products, cloud services, and enterprise services, including Azure; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (“CALs”), GitHub, Premier Support Services, and Microsoft Consulting Services. Google reports GCP revenue in its Google Cloud segment, which includes infrastructure and data analytics platforms, collaboration tools, and other services for enterprise customers.
Google reported Google Cloud revenue in its Google segment in 2016, as it did not meet the quantitative thresholds to qualify as a separate reportable segment. The Google segment includes main products such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube. The figure included is an estimate by Gartner, a technology research and consulting company.
According to Canalys, a global technology market analyst firm, worldwide cloud services spending was $55.9 billion for Q1 2022. Amazon Web Services is the leading cloud service provider, accounting for an estimated 33% of total cloud infrastructure services spending. It continued to expand its global presence, launching 16 Local Zones in the US and announced plans to add 32 more Local Zones across 26 countries.
Microsoft Azure comes in second place at a 21% market share. It reported success with global systems integrators, including Atos and Fujitsu. Furthermore, Microsoft announced its new Cloud Partner Program, launching in October, to boost Azure business through the channel.
Google falls behind, accounting for approximately 8% of the market, but is the fastest-growing. It continues to focus on digital sovereignty, analytics, AI and cybersecurity as key differentiators for GCP, advancing its security offerings with the acquisition of Mandiant.
Google Cloud released Google Distributed Cloud, which gives customers edge computing options. Edge computing refers to the literal geographic location of the computing. It happens at or near the source of the data instead of distant data centers, reducing latency.
AWS – First Mover Advantage
AWS had a 5-year head start on the competition, allowing it to build out its suite of cloud services to be the most evolved and functionally rich. It offers 200+ services and a comprehensive network of worldwide data centers.
AWS often wins on developer functionality due to the breadth of its services, platform configuration options, monitoring and policy features, security, and reliability. Its partner network is market-leading, and AWS Marketplace has a wide selection of third-party software services.
One area where AWS falls short is with its hybrid cloud strategy. It has tended to be dismissive of the benefits of on-premise private clouds. Another downside to AWS is the scale of its offering. While having the options is attractive, it can be challenging to navigate the number of features offered. Some see AWS as a complex vendor to manage, while others who compete against Amazon avoid using their services altogether.
Microsoft Azure – Distribution Advantage
Microsoft utilizes its distinct distribution advantage—a solid footing within most organizations helps the company leverage its sales reach. It offers existing customers significant discounts and sells Azure alongside other Microsoft products, using bundle pricing. They can easily play a role in helping companies transition to the cloud as Azure naturally links well with Microsoft on-premise systems such as Windows Server, System Center, and Active Directory.
Microsoft Azure is perceived as a safe global bet among customers. It is a popular choice for those who know that Microsoft can meet most of their enterprise computing needs—from productivity and enterprise software to the 100+ services that Azure offers.
Enterprises committed to Microsoft technology generally choose Azure for IaaS+PaaS solutions and hybrid deployments with its well-established Azure Stack. It provides customers with the hardware and software required to deploy Azure public cloud services from a local data center.
The main areas in which Microsoft falls short is the maintenance and high expertise needed to use Azure. Users frequently run into issues with the quality of Microsoft technical support and the increasing cost of support.
Google Cloud – An Artificial Intelligence Angle
GCP started its offerings in containers—packages of software that contain all of the necessary elements to run in any environment. Google also led the development of Kubernetes, an open-source system for managing containerized applications across multiple hosts, which is quickly becoming industry-standard technology.
As such, Google also often stands out for its expertise around open source technologies, cloud-native operations, and high compute offerings, such as artificial intelligence, analytics, and machine learning.
The firm’s culture of innovation and unique opportunities for customers to engage Google engineers, particularly for co-development, has caused many to gravitate towards the Google Cloud Platform.
Google’s overall coverage is behind its competitors, with only 60+ services. Enterprises often lament Google’s inability to craft appropriate solutions for their requirements when engaging with solution architects.
Furthermore, it does not have a traditional relationship with many organizational customers, falling behind in contract negotiation, discounting, independent software vendor licensing, integration with enterprise systems, and support.
Availability zones are physically separate locations with one or more data centers from which public cloud services originate and operate, with redundant power, networking, and connectivity. A greater number of availability zones makes the service provider more tolerant of failures and can reduce latency for the customer.
- AWS has 84 availability zones in 26 regions
- Azure has approximately 113 availability zones shared in 59 regions.
- Google Cloud Platform offers 88 total zones in 29 regions.
In general terms, prices have continued a downward trend, and services are roughly comparable as there is fierce competition between the three companies.
While organizations find AWS the most suitable service provider, many find it hard to understand the cost structure and manage costs effectively while running high-volume workloads.
AWS’s various services operate differently, making it challenging to gain visibility of all active workloads, and bill calculations involve combining information from different sources. Mishaps can happen to even the most experienced of engineers—in March 2021, AWS chief evangelist Jeff Barr made a Twitter post of a surprise bill he’d received after setting up a database on the wrong AWS account. Thus, users must know what they are deploying on AWS and how to switch it off.
All three cloud service providers have their share of high-profile customers. AWS has taken on large deals with the US and UK governments and well-known companies, such as Netflix, Airbnb, Unilever, BMW, and Samsung. It was successful in convincing more traditional businesses to move to the cloud.
Azure also succeeded in gaining its share of high-profile customers, with over 95% of Fortune 500 companies using its services, such as Verizon and Adobe.
Many major companies have faith in Google Cloud for their artificial intelligence and machine learning expertise. A prime example is UPS, where Google designed routing software that tells the driver the single best, most efficient, and cost-effective route. The software saves the company up to $400 million a year and reduces fuel consumption by 10 million gallons per year. Some other significant partnerships are with P&G, Paypal, and Twitter.
AWS continues to be the clear market leader, but the gap is closing fast. Microsoft has started to bridge that gap with its ongoing investment in Azure to build out the cloud platform and strengthen ties with its on-premise software. Google could prove to be a serious competitor under its new leadership. It made progress with many customers with its Kubernetes and machine learning expertise.
- Establishment: With a head start of 5 years, the advantage is clear for AWS.
- Growth and Market Share: Google Cloud is the fastest-growing, while AWS the largest in market share.
- Services: When it comes to the number of services, the winner is AWS. However, the winner is Azure for integration with open-source and on-premise systems that most organizations already use.
- Availability zones: With the most well-established network and the greatest number of availability zones, the winner is AWS.
- Distribution and Pricing: With many large enterprises using a suite of Microsoft products, they have distribution advantages to sell additional services (including Azure), while providing discounts.
- Customers: As major customers use all three cloud platforms, it’s currently a tie.