What every entrepreneur needs to know about cloud computing services

Everywhere and nowhere at once

Cloud computing services and the cloud are no longer new terms. We encounter these terms and related terminologies like data centers and virtualization even in the daily news, business periodicals, and news websites. After all, the companies that offer these services — Amazon, Google, Microsoft, IBM, SAP, Oracle, Salesforce, Alibaba, and others — top the Fortune 100 list.

Since it’s an abstract concept, few understand what cloud computing services have to offer.

The biggest advantage to cloud computing is the considerable cost savings to those who use it.

 

Plus, there’s the fact that, with cloud computing, someone else is managing your IT infrastructure – freeing you to focus on your core business and customers.

Should every business consider cloud computing services, or are they only for large businesses? Read on to learn the answer.

What is cloud computing?

So, what exactly is cloud computing? The industry standard NIST definition of Cloud Computing is (definition has been paraphrased):

Cloud computing is a model for enabling on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services). These resources can be rapidly availed with little service provider interaction.

This cloud model is composed of five essential characteristics, three service models, and four deployment models (scroll to the bottom of this post for a definition of the last two on this list).

Let’s break this up and try to understand each part of the definition.
Diagram over a picture of computing servers]
Cloud computing resources — servers, networking, storage, applications — are provided by a Cloud Service Provider (CSP). These resources are owned by the CSP, housed in massive data centers around the world, and shared between multiple organizations. The organizations, known as “tenants,” rent these resources, paying for them on a usage basis.

A common analogy here is electricity. You do not have to own a power station to have electricity in your home or office.

You just pay for it on a consumption basis — usage is metered, and you get a bill for it every month, based on units consumed. The more you consume, the more you pay.

Cloud computing services are like that; you define how much storage and networking you think you’ll need and then pay for what you use as per the rate card.

Can anyone use cloud computing services?

This is a question that most small business owners ask. The perception is that cloud computing is only for large enterprises. Well, there are two parts to the answer:

Publicly available cloud services

If you use a smartphone and email, it is likely that you already use cloud computing services. Gmail, Yahoo! Mail, and Microsoft Office 365 all run from the cloud. Even the apps on your smartphone run from the cloud. You already use cloud computing services for personal use and are perhaps oblivious to that!

Your business infrastructure on cloud

What about your business — to what extent should you host your business on the cloud? That would depend on the:

  • Nature of your business operations
  • Size of your operations
  • Global markets in which you operate, if any
  • Size of your customer base and partner network

For businesses that operate regionally

If your business has a regional focus, and your customers are within your city, state or country, you can opt for co-location services instead of the cloud.

With co-location, you provide your own server and storage, and the service provider keeps it in their data center.

If your business is small and will grow gradually, co-location is suitable.

 

If you want greater control of your infrastructure, opt for co-location or IaaS (Infrastructure-as-a-Service). The downside is you will need to manage security updates and application maintenance yourself. That will require having skilled professionals on your payroll.

Related: Recruiting employees who help your business grow

Full cloud computing services

On the other hand, if you opt for full cloud computing services, you rent the infrastructure, paying as you use it. The infrastructure is entirely managed by professionals responsible for security updates, applications, and infrastructure maintenance.

Row of three men working at computers
Full cloud computing requires you to have IT staff working for you.

The biggest advantage here is the cost savings — you do not have to pay for computing and networking equipment, power, cooling, or real estate/rental.

Only the large businesses can afford to have an in-house data center — a hall to accommodate all the IT infrastructure and the associated environment (power, cooling, etc.).

You do not have to make all those up-front investments with cloud computing because you just rent it from a cloud service provider.

The trade-off is that the infrastructure is shared, so your applications and data could be located on servers shared by other organizations. That raises concerns about data security and privacy.

These concerns should be addressed by having proper contracts or Service Level Agreements (SLAs) with your cloud service provider. Be sure to consult with a legal professional before you sign or accept any agreement.

For very small businesses

If you own a micro or very small business, the Google Suite of applications (G-Suite) or Microsoft Office 365 should suffice, with other services for marketing, CRM, ERP, accounts, finance, taxation, HR, etc. There are individual cloud services available for each of these functions, and these fall under the SaaS (Software-as-a-Service) model.

The drawback here is that these are all separate services, so making them work together can be a challenge. In other words, your business data will be in silos. So, opt for a suite of applications from one SaaS provider.

How to decide how much cloud computing you need

‘How much’ will be defined by:

  • The size of your business
  • Whether it has a global reach
  • Number of customers you have
  • Types of services

You can start small and then top up by helping yourself to additional cloud computing resources as your business grows.

It’s like a buffet meal — you serve yourself and then go back for a second helping. Except in the computing world, you pay an additional amount for the second, third, and fourth helping!

In technical terms, this is called ‘scaling up’ your infrastructure. Cloud computing services are ‘elastic,’ which means you can scale up (add) or scale down (subtract) the resources as needed.

Scale up during your peak season and scale down when business contracts to everyday levels.

When you scale down, you de-provision, or return, the extra resources you no longer require and stop paying for them.

A seasonal example

For instance, if you sell clothes, gifting items, or sweets, the demand for these items will grow during the holiday season as more orders come in. If demand spikes suddenly, your eCommerce website could be unable to keep up and might “crash” or fail, leaving customers unable to access your website.

That would result in the loss of sales and customers. To prevent this, you need to request extra compute, storage, networking and other resources.

Read the NIST definition of cloud computing services again, and it will begin to make sense now! Let’s move further and explain how to choose a cloud service provider.

Tips for choosing a cloud service provider

Do your research when looking for a Cloud Service Provider (CSP). You want to look for a reliable partner who is financially sound, as the partnership will likely be a long-term one.

You will be highly dependent on the CSP — if their infrastructure fails, your business operations will be hurt.

Man weaving a rug by hand
If your business relies on computers and the internet, you need them to keep operating smoothly.
Photo: Annie Spratt on Unsplash

That means your customers will be unhappy with the quality of service, since your services will not be available for however long the outage lasts. Your customers might look for alternatives in your competition.

Also, it is not easy to migrate your IT infrastructure and applications from one CSP to another, so you want to get this right the first time. When you do choose a provider, ensure that you are not locked in with them and that they make it easy for you to migrate to another CSP if you are unhappy with their services.

Here are some things to consider before choosing a CSP:

1. The cloud service provider’s financial health

Who are the promoters of the company? How long have they been in business? What is their track record? Do they have sufficient funds to sustain their business in the long-term?

2. Compliance and policies

Do the CSP comply with government and industry regulations? Which industry standards do they follow? Do they go in for external audits? How often?

3. Knowledge and experience

How knowledgeable are they about cloud computing, cloud security, and related areas? What kind of experience does their leadership and staff have?

4. Reputation

What is their reputation in the market? What are their existing and past customers saying about them?

5. Market valuation

What is the share price of the company today? What has been the performance of its stock in the market?

6. Transparency

Are there any hidden costs that are not declared upfront? Look closely at their pricing structure.

7. Service-level agreements

Make sure that there are penalties for poor performance or delivery on the part of the CSP.

8. Availability

How often do they experience outages during the year? The availability of their infrastructure should be as close as possible to five 9s: 99.999% of the time.

9. Reporting

What kind of performance reports do they provide, and how often?

10. Security

What level of physical and data security do they provide? What security standards do they follow? How often do they do penetration testing and security audits?

11. Billing and accounting

How do they do their billing for metered usage?

12. Monitoring

How are they monitoring your infrastructure hosted in their data centers?

13. Tech support

How many levels of support do they provide? What is their response time?

14. Resilience

How resilient is their infrastructure? Do they have a disaster recovery site and a business continuity plan in place?

Summary

Cloud computing services offer IT resources for your business on-demand through a self-help model. It provides flexibility to use more when business activity peaks and less when the business contracts to normal levels.

A major advantage is the cost savings because you just pay for resources as you use them.

 

The decision to opt for cloud computing services depends on the size and future growth of your business, the type of services offered, and your customers’ location.

Think about the benefits of integrating all the services and getting all your business data in one place. You need to run analytics on this data to gain insights — to drive business decisions. And the cloud is good for this.

However, if you are an entrepreneur with a micro-business, few employees (less than 10 or 15), and a tiny customer base, you can get by with cloud services like Google’s G-suite or Microsoft 365 and a few cloud services like DropBox.

But do not underestimate the power of the cloud; it should be a consideration in the long term.

~Definitions~

If you are confused about some of the terminologies used in the article above, you can find the definitions here.

The three service models

IaaS

In the Infrastructure-as-a-Service model, you can rent physical computing resources such as servers or compute, storage, and networking. These are all managed by the CSP. You deploy your business applications on this infrastructure, which are hosted in the CSP’s data center.

PaaS

Platform-as-a-Service is meant for software developers. They get access to hardware, software, and other tools to develop and test applications.

SaaS

Software-as-a-Service is a software licensing model in which business software and applications are centrally hosted on the CSP’s infrastructure. These are licensed on a subscription basis. So, you do not have to purchase individual licenses and deploy the software on services within your premises, although that option is also available. Examples are Microsoft 365, SAP ERP, Salesforce CRM, and Oracle HCM.

The four deployment models

Public Cloud

In this model, users access servers, storage, network, security, and applications, all owned by the Cloud Service Provider. All these resources are offered as services that can be accessed through the Internet on a pay-as-you-consume basis. A key characteristic is that these resources are shared, and the public cloud is multi-tenant. That raises concerns about security and data privacy. That’s why organizations prefer the private cloud or more dedicated hosting like co-location services (explained later) for storing sensitive customer data and intellectual property on the cloud.

Private Cloud

In this model, the CSP’s resources are for the exclusive use of an organization and are not shared with other organizations. This also gives the organization more control over resources with the assurance of better security and compliance. However, all this comes at a higher cost since the resources are exclusive to the organization.

Hybrid Cloud

It is common for organizations to use both the public and private cloud. Non-core applications (like e-mail) are hosted on the public cloud, while sensitive data and applications (like customer data and core banking) that need better security are hosted on the private cloud. A hybrid cloud connects both clouds so that they work seamlessly as a unified, flexible infrastructure for running an enterprise’s applications and workloads. A consumer will not be able to tell if the service is running on a private or public cloud as there is no latency in accessing the service.

Community Cloud

This model is like a Public Cloud because there are multiple tenants sharing resources. The Community Cloud brings together organizations that have similar business interests or similar applications. This cloud will need to be configured to comply with standards specific to an industry. An example could be co-operative banks sharing a community cloud, which is configured for security and compliance in that industry segment. Another example could be a group of developers creating a certain application with similar requirements regarding the tools and infrastructure.

The five essential characteristics

On-demand self-service

Need more resources when your business grows? Just help yourself to more compute, storage, network, and other resources. The cloud has a self-service architecture that spares you the long winding route to requisition, purchase, and deployment, which took weeks or months in the pre-cloud days. With cloud services, you can deploy in a few minutes or hours.

Broad network access

CSPs offer bandwidth options from multiple telecom providers. With proper planning, you will avoid bandwidth restrictions on your network.

Resource pooling

Since the infrastructure is shared among multiple organizations, the costs of consumption comes down.

Rapid elasticity

Scale the infrastructure up when business increases and scale it down when business contracts to normal levels.

Measured service

CSPs provide metering tools and define all the costs upfront. So, you pay only for what you consume.

Brian Pereira has been writing on consumer and business technology for 25 years. He is the former editor of InformationWeek and CHIP magazines in India. He has written thousands of articles and blogs and has travelled around the world to report on technology events. Brian is currently a content specialist at a startup in India, developing content for Fortune 500 companies. He is also an aviation enthusiast and likes all things from the 1980s. He continues his journalism work on his own platform Digital Creed.