What is Cloud Computing?

Before I get into my own cloud-related thoughts in subsequent posts, let’s make sure we’re all on the same page re: what cloud computing actually refers to! Here’s a quick primer from Andrew McAfee, who is a principal research scientist at MIT’s Center for Digital Business and the coauthor, with Erik Brynjolfsson, of the e-book, Race Against the Machine (Harvard Business Review Press, 2011).

The cloud computing industry is growing and evolving rapidly–and also generating lots of jargon. As a result, it can be difficult to understand exactly what the cloud is and how its offerings differ. To oversimplify just a bit, those offerings can be divided into three categories: raw computing capacity, computers that are ready for software, and software itself.

The first of these, called INFRASTRUCTURE-AS-A-SERVICE (IaaS), is the most basic; it’s a server or servers out there in the cloud, or a bunch of storage capacity or bandwidth. IaaS customers, which often are tech companies, typically have a lot of IT expertise; they want access to computing power but don’t want to be responsible for installing or maintaining it.

The second tier is called PLATFORM-AS-A-SERVICE (PaaS). This is a cloud-based platform that companies can use to develop their custom applications or write software that integrates with existing applications. PaaS environments come equipped with software development technologies like Java, .NET, Python, and Ruby on Rails and allows customers to start writing code quickly. Once the code is ready, the vendor hosts it and makes it widely available. PaaS currently is the smallest segment of the cloud computing market and is often used by established companies looking to outsource a piece of their infrastructure.

SOFTWARE-AS-A-SERVICE (SaaS), the third category, is the largest and most mature part of the cloud. It’s an application, or suite of applications, that resides in the cloud instead of on a user’s hard drive or in a data center. One of the earliest SaaS successes was Salesforce.com’s customer relationship management software, which provided an alternative to on-premise CRM systems when it was launched in 2000. More recently, productivity and collaboration software—spread sheets, word processing programs, and so on—has moved into the cloud with Google Apps, Microsoft Office 365, and other similar offerings.

Customer offerings share a few similarities across these three categories. First, customers rent them instead of buying them, shifting IT from a capital expense to an operating expense. Second, vendors are responsible for everything “beneath the hood”—all the maintenance, administration, capacity planning, trouble-shooting and backups. And finally, it’s usually fast and easy to get more from the cloud—more storage from an IaaS vendor, the ability to handle more PaaS projects, or more seats for users of a SaaS application. (Source for all of the above: Harvard Business Review, pgs 128-129, Nov. 2011).

Next post: What are the benefits of cloud computing?