By Nicholas Larsen, International Banker
Few technologies have proven more transformative to business-growth potential than cloud computing in shaping the digital-transformation journeys on which businesses have embarked worldwide. By enabling the delivery of crucial services over the internet, the cloud has become the preferred online home for important software, servers, platforms and infrastructures, which are now delivering seamless services to customers, enabling hefty cost savings for businesses and helping to support significant business scalability.
By securing data in the cloud, users can access applications over the internet rather than hosting them locally through their own hardware. The virtual nature of cloud computing thus helps to organise data and applications in a more streamlined fashion. The cloud itself can be private, whereby the network is confined within a company’s infrastructure, or it can be public, using the internet to store data and issue access to applications. Companies can also adopt a multi-cloud system that facilitates multiple public cloud services.
Anyone with an internet connection can run these applications from anywhere in the world—whether to check e-mail through Gmail, listen to favourite songs via Spotify or watch cherished movies courtesy of Netflix. These forms of data can be accessed seamlessly via cloud-based servers. By hosting such services across multiple servers in the cloud rather than relying on single servers through individual applications or websites, the service can remain uninterrupted over additional servers should one go down.
Among the biggest beneficiaries of cloud computing has been the “anything as a service” (or “everything as a service”) (XaaS) revolution, which allows products, innovations and tools to be delivered to users over the internet. Among this delivery model’s most popular types are:
- Software as a service (SaaS): Software is distributed via a cloud provider used to host applications and furnish them to users over the internet. Examples include Google Apps and Microsoft 365.
- Platform as a service (PaaS): Software and hardware resources for developers to build and run applications are provided in the cloud, such as Amazon Web Services (AWS) and Salesforce’s Heroku.
- Infrastructure as a service (IaaS): The cloud provider offers crucial IT (information technology) infrastructure, such as storage and networking resources. AWS’ Elastic Compute Cloud (EC2), for example, provides scalable computing capacity in the AWS cloud.
Many of these services are proving hugely popular among users because they can be offered on a pay-as-you-go subscription model, so customers can select the cloud-computing services that most closely align with their needs on demand.
On the supply side, meanwhile, the highly flexible cloud-computing infrastructure—typically through pay-as-you-go cloud-storage and virtual servers—makes scaling up or down much easier in response to consumer demand, supporting various application loads. This flexibility often proves a massive cost-saving advantage for companies, as they can scale without purchasing additional physical hardware, instead spending money and resources on the more important value-generating aspects of their businesses. Indeed, much of the physical IT infrastructure on which companies typically rely can be discarded when migrating to cloud computing, while businesses can also save substantially on cost and space by not having to run large-scale servers and storage systems in on-site data centres.
Organisations can also remotely access necessary resources through the cloud. This can be an enormous advantage for multinational businesses seeking greater collaboration across their global locations; with every file and application available on demand, cloud computing does much to support decentralised work environments. It also greatly supports the popular post-pandemic remote-work trend, as employees can now access business resources from anywhere with any device at any time. Such employees are afforded more flexibility in their work schedules, which, in turn, drives higher productivity and creates happier workforces with higher staff retention.
With little need to purchase additional hardware or software upfront to enable cloud computing, in addition to potentially sizeable savings in overheads such as space, cooling and lower IT-staff capital outlays (much of which can be transferred to the cloud provider), operational and maintenance costs can be greatly reduced. According to the “KPMG global tech report 2023”, over the past 24 months, 64 percent of the 2,100 business executives from 16 countries surveyed confirmed that the public cloud and XaaS technologies had positively impacted their profitability and/or performance.
But businesses nonetheless face important challenges when deploying cloud services. In July, the French IT firm Thales published its “2023 Cloud Security Study”, providing its annual assessment of the latest cloud-security threats, trends and emerging risks based on a survey of nearly 3,000 IT and security professionals across 18 countries. The study found that 39 percent of businesses experienced a data breach in their cloud environment last year—an increase from the 35 percent reported in 2022—with human error cited as the leading cause of cloud data breaches by more than half (55 percent) of those surveyed. And 38 percent ranked SaaS applications as the leading target for hackers, closely followed by cloud-based storage at 36 percent.
This demonstrates that cloud services remain far from ideal. With storage and maintenance handed off to third parties, businesses will invariably be concerned that their data is not being sufficiently safeguarded—and Thales’s statistics show they have every reason to remain distrustful. Human error, hacking attacks and insufficient encryption are just a few factors that keep businesses sceptical about cloud providers’ ability to secure their sensitive data effectively. These trends are also being exposed at a time when businesses are reporting dramatic increases in the level of sensitive data stored in the cloud, with Thales recording a whopping 75 percent of businesses confirming that more than 40 percent of their data stored in the cloud is classified as sensitive, significantly more than the 49 percent of businesses reporting the same in last year’s study.
Cloud providers are implementing solutions to these issues, however, as they strive to improve their security credentials, particularly regarding identity and access management (IAM), to mitigate data breaches. Indeed, the Thales study found that robust multi-factor authentication (MFA) adoption had risen to 65 percent among those surveyed. But only 41 percent of organisations had implemented zero-trust controls in their cloud infrastructure, while just 38 percent used such controls within their cloud networks.
Vendor lock-in remains another distinct problem for businesses using public cloud services, typically arising when the costs of switching from one vendor to another are so steep that the business remains stuck with the original vendor, even if the service quality is far from market-leading. This is reportedly experienced often by those using cloud services, with the costs for businesses of safely migrating their databases from one cloud vendor to another proving hugely expensive. The issue becomes even more glaring over the longer term, especially given that prices for cloud computing had been markedly declining until recently, such that businesses locked into contracts with mediocre cloud providers at uncompetitive prices continue to lose out.
According to PwC (PricewaterhouseCoopers), implementing a multi-cloud solution so businesses can diversify their cloud-computing exposures across various providers is the best solution to avoid vendor lock-in. “By spreading systems across several cloud platforms, moving between service providers will be more feasible if better opportunities are presented,” the UK consulting firm noted in 2021. “Setting up the cloud architecture to maximise portability and interoperability is crucial to enabling this.”
Nonetheless, the pros of cloud computing largely outweigh the cons for businesses, as the trend towards cloud deployment in 2023 continues in earnest—and is expected to do so over the coming years. According to market researcher Fortune Business Insights, for example, the global cloud-computing market was valued at $569.31 billion in 2022 and is projected to grow from $677.95 billion in 2023 to $2,432.87 billion by 2030 at a compound annual growth rate (CAGR) of 20 percent during the forecast period.
The May 2023 study from the market-research firm cited the healthcare industry as the fastest-growing sector due to its increased deployment of cloud-based software, mobile applications, wearable healthcare devices and smart healthcare equipment, among others. “Other industries, such as retail and consumer goods, BFSI [banking, financial services and insurance], government, manufacturing, and others, are expected to grow at a significant rate, owing to increased government and cloud provider initiatives and investment plans to support cloud adoption among start-ups,” the report also noted.