Episode 21: What is cloud computing?
- Embedded IT
- Jan 14, 2025
- 3 min read
Updated: Jan 16
This article is part of our Cloud Computing series, exploring the technology, commercial models, and risks organisations need to understand when adopting cloud services.
Cloud computing is one of the most overused terms in the IT world, and it has been for nearly two decades. Let's explain what cloud computing actually is, why it became so widespread, and how procurement professionals can make sense of the different layers of cloud services.
This builds on our introduction to cloud computing, which sets the foundation for this topic.
Understanding what cloud computing really is
Cloud computing began as an idea similar to buying electricity: pay only for what you use. At its simplest, cloud computing is a consumption-based way of purchasing technology. Instead of owning hardware outright, organisations access computing power through a pay-as-you-go model.
The confusion often arises because some services marketed as cloud are essentially leases, not true consumption models. The real value of cloud computing appears when organisations only pay for what they use and minimise long-term commitments. This works best when workloads are highly variable and can be switched on and off as needed.
At its core, cloud combines hardware, software, and services into a single on-demand model. Providers such as Microsoft and Amazon design huge, scalable platforms that multiple clients share, reducing infrastructure and resource costs.
The three layers of cloud services
Cloud platforms are often explained as a stack with three distinct layers:
Infrastructure as a service (IaaS)
IaaS is the foundation layer. It involves buying core compute capacity such as CPUs, memory, and disk as a service. It is the most commoditised and highest-revenue part of the cloud market, offering similar capabilities across providers with only minor differences.
Platform as a service (PaaS)
PaaS adds shared components such as databases or security tools on top of IaaS. It is more complex to buy because these components behave differently depending on requirements. While not as common as IaaS or SaaS, it plays an important role when organisations need shared, reusable tools without managing the underlying infrastructure.
Software as a service (SaaS)
SaaS is the most widely used cloud layer and includes examples most people interact with daily. Social platforms like Facebook and streaming services like Netflix are SaaS platforms. Business tools such as Office 365 are also SaaS products, delivered entirely from the cloud.
Understanding IaaS, PaaS, and SaaS helps procurement teams communicate confidently and make informed decisions.
When cloud computing makes sense
Cloud services are particularly useful when organisations need to scale quickly. Online retailers, for example, can increase capacity during peak periods like Christmas or Black Friday, then scale down afterward. Instead of buying large amounts of hardware to cover occasional demand, they only pay for what they use.
A simple analogy compares buying a car with using Uber. A car is a fixed asset with predictable costs, while Uber charges per mile based on demand. Cloud computing works the same way: variable pricing based on usage.
When cloud computing becomes risky
The biggest risk in cloud procurement is cost. If workloads are stable and run continuously, the pay-as-you-go model can become more expensive than owning hardware and depreciating it over several years.
Other risks include dependence on a provider, data centre locations, data storage concerns, and reliance on the internet. But cost remains the issue most procurement teams focus on.
The cloud in summary
Cloud computing offers a flexible, consumption-based model for buying IT, split into three main layers: IaaS, PaaS, and SaaS. It delivers clear benefits for variable workloads but also introduces financial and operational risks that procurement teams must understand before committing.
For organisations exploring whether cloud services are the right fit for their technology strategy, get in touch.
