What you need to know about cloud computing

Two thirds of companies in Germany already use cloud computing services. On top of this, millions of private individuals use cloud platforms to store music and photos. But there is not “just one cloud”. Rather, there are many different storage methods with this technology – with various advantages and disadvantages. So here’s a guide through the “cloud jungle”.

Cloud computing – the name says it all. But few people actually know what this technical term means. Nonetheless, the cloud has long become established in our private and professional lives, even if it’s not obvious in all cases.

For example, if you use your smartphone to take photos or videos and upload them to the Internet, you will generally be using a cloud. This is because online storage, such as Dropbox or Microsoft’s OneDrive, where the photos and films end up, is usually located in cloud data centers. Music services such as Spotify and video streaming services like Netflix provide songs, TV series, and movies from cloud data centers.

What is Cloud Computing?

But what is cloud computing and how does it work? To put it simply, cloud services are like delivery services. Instead of cooking themselves, users order pizza, pasta, or sushi from a service provider. The oven at home stays cold or, at the most, the kitchen is used to make an espresso after dinner. The same principle applies to cloud computing. Only in this case it is not a pizza that is delivered, instead users can access IT services that are provided by a data center. This means that a company or a private individual does not need their own “kitchen", in other words, servers, storage systems, and the associated software to process or store data.

Applications such as Office products, databases, and IT security software can also be used in this way. For example, Microsoft offers a local version and a cloud version of Office 365. It has the same functions as the software package that users install on their computer from a DVD or by means of an installation file.

But how does the cloud get to the user? It’s easy for the pizza delivery service: It uses the road and an automobile or bicycle. If you want to use a cloud service, you also need a sort of road – a “data highway”. This is used to connect your computer, notebook, or smartphone with the cloud data center. At home or in the office, DSL connections (Digital Subscriber Line) are usually available for connecting to the cloud. Larger companies often use fiber optic cables to obtain bandwidths of 100 megabits per second or more. Of course, users can also use wireless connections to access cloud computing services.

An overview of the special features of cloud computing

An overview of the special features of cloud computing

The National Institute of Standards and Technology (NIST) in the United States has summarized the properties of cloud computing in five points. These also give an indication of when the cloud is an interesting model for commercial and private users:

On-demand self-service: Users order software, servers, or other services on their own, based on the self-service principle. This is done via an Internet portal.

Resource pooling: Users share the systems and services in a cloud data center. In other words, in addition to the other customers, every user gets a part of a server, a database, or a storage system. This is possible due to a technology called virtualization. Of course, the individual areas of the customers are strictly separated from each other.

Rapid elasticity: Cloud services automatically adjust to the users' needs. For example, they can order more servers or more powerful servers or book additional Office licenses. This on-demand model allows the IT environment to adapt to the actual needs without users having to install IT systems in their own home.

Pay only for what you use: Cloud computing services are known as measured services. The service provider can check in detail what services and capacities customers have used and bill them accordingly. This is why cloud service providers offer billing on an hourly or minute basis.

Broad network access: Cloud services are accessible via normal, open networks, preferably the Internet. In other words, users don’t need any special tools.

Areas Where Cloud Computing is Used

Is the cloud something just for high-tech industries and telecommunication companies? The cloud is there for everyone – and everyone can benefit from it.

Private users

Private individuals have also been using cloud services for some time now. According to Eurostat, the statistical office of the EU, in 2016, about a third of Internet users used cloud computing, and numbers are rising. Sweden is well ahead of the other countries. In this Scandinavian country, more than half of all users store data in clouds. As is to be expected, it is generally young users who are impressed by the benefits of the services, as shown in studies from the US: In 2017 more than 60 percent of 18 to 29-year-olds used clouds. As opposed to this, only about 15 percent of the over 60s use these services.

How do private individuals benefit from clouds? The majority of users are impressed by the convenience associated with the services: Access to images, documents, music, and movies is possible from everywhere, data can be shared and even edited together with family, friends, or colleagues – on any device. In many cases, cloud storage is also often very inexpensive: Many providers even give their users a certain storage capacity at no charge. However, with larger volumes of data, this free storage can quickly be used up by private individuals.


As well as private users of Dropbox, OneDrive, and others, many companies are customers of cloud service providers. The cloud is a good alternative to the do-it-yourself approach, especially for startups and new companies. Until recently, if you had a promising business idea, such as for an online service or a new app, you had to spend a lot of money: for servers, operating systems, storage systems and Office licenses. In addition to this were expenses for the staff who set up and administered these systems.

Initial costs such as these can be daunting and, as a result, some promising projects were nipped in the bud. But nowadays startups can obtain a complete IT environment from the cloud – at a reasonable, calculable cost. Cloud service providers, such as Amazon Web Services, Google, and Microsoft already provide special packages with important cloud computing services especially for startups. This allows young entrepreneurs to get started without any major preparations.

Especially complex requirements are also possible: For instance, analyzing big data is the key to success for an increasing number of companies. However, many small and medium-sized enterprises simply do not have enough storage or computing capacity. Various service models from cloud providers offer assistance without the need for enormous investments. As a result, cloud computing is a door opener for big data analyses.

The situation is similar when it comes to developing artificial intelligence (AI) systems. This is why a growing number of providers make cloud-based AI services available to their customers, such as machine learning along with all the necessary computing capacity.

Companies surveyed have become increasingly open-minded and interested in cloud computing in recent years.
“funk” fetches Office, phone, and storage from the cloud

“funk” fetches Office, phone, and storage from the cloud

funk, the online media offering for young people from German broadcasters ARD and ZDF, also changed from an internal infrastructure to a public cloud. funk had a problem: a rapidly increasing number of employees who used many different tools, such as different Office and chat tools. Besides, there were no fixed office hours at funk. In other words, employees also had to be able to work from home.

This is why funk threw out its old software and changed to Microsoft’s public cloud service Office 365. Today, video conferences and phone calls run via Skype for Business. To share information with co-workers quickly, the employees from funk use the Microsoft Team chat software. Data and documents are also stored in the cloud with OneDrive for Business. Classic Office applications, such as Word, Excel, and PowerPoint are also available.

One benefit of the cloud is that funk can integrate new employees into the working environment with little effort. It's sufficient to rent more Office 365 licenses. Employees can also access applications and data in the cloud from anywhere, such as from their home office or at an airport.

Industry 4.0

Industry 4.0 is one of the most important areas where cloud computing is used. This term describes the networking of the entire supply chain – of IT systems, machines, products, warehousing, and transportation systems. In addition, there are components such as sensors and measuring devices that are connected with each other through the Internet of Things (IoT). This enables machines to request help on their own if a component is very worn and could cause a breakdown. Transport containers with work material report when they are getting empty. As a result, processes are largely automated.

But the more things are networked, the more data is created, which has to be collected, prepared, and evaluated. This is where the cloud comes in, with its large computing and storage capacities. Companies can use cloud platforms of automation experts such as Siemens or Bosch to carry out evaluations. An IoT cloud such as this can also be installed in a company’s data center as a private cloud.

But it’s not only data from machines and containers that can be processed in the cloud. For example, Bosch plans to use an IoT cloud to update the software in automobiles. Control systems and communication devices obtain updates via the cellular network. This saves auto owners from making a trip to the repair shop. Manufacturers can also integrate new functions in vehicles in this way.

Public administration

Public facilities and authorities could also profit from the advantages of cloud computing, such as with flexible provision of computing and storage capacities and applications. “Could” because in reality the situation is quite different. According to Amazon Web Services, about 2,300 authorities and non-profit organizations in the US already use the company’s cloud services. In Europe, on the other hand, Amazon Web Services names only Nuremberg Airport and an offshoot of the European Space Authority (ESA) as customers from the public sector.

Benefits of Cloud Services

Cloud computing has several benefits for private users. For example, they can store documents, pictures, and videos in an online cloud storage facility. If the chosen cloud provider is demonstrably reputable and ensures strict data protection, information such as this is secure in the cloud – often more so than on your own computer or a flash drive. If a flash drive is lost or the hard disk breaks down irretrievably, the data is gone. Cloud service providers store the data of their customer in several, geographically separated data centers. Even if one data center breaks down, the information is still available. Users can also access their data from anywhere – no matter whether they are using a smartphone, tablet, or desktop computer – and can share it with other users such as friends or family.

One of the major advantages for companies is that cloud computing makes a large part of investments in hardware and software superfluous. For instance, if you get Word or Excel from the cloud, you don’t have to provide your own server, management software, databases, or Office package.

Cloud services can also be ordered just as you need them. For instance, if a medium-sized company needs two additional servers for six months due to high demand for its products, it can get them from the cloud – and hand them back again, in other words, terminate their use. However, if it buys or leases the systems it won’t be able to get rid of them so easily when they are no longer needed.

Cloud computing also offers further benefits, such as a high data security level – depending on the provider where the server is located. Reputable cloud service providers generally create regular backups of data. The security measures in a cloud data center are also often better than in a company’s data center.

Challenges and Security

What are the challenges associated with cloud computing?

Users should also be aware of the risks associated with cloud computing before deciding to use such a service. For example, reliance on one service provider can become a problem. If all you have is a private photo and music collection on Dropbox or OneDrive, this may not seem too dramatic. The data can be downloaded from an online storage facility and be uploaded on to the storage systems of a different provider. It’s annoying and time-consuming, but not business-critical.

But the situation is different for companies. Transferring databases and complete application environments to a different cloud service provider is certainly not trivial. There's one problem: Some providers use their own, non-standardized interfaces to import and export data. This makes it difficult to change providers. Also, when you change to the cloud, IT expertise in the company is lost. That also increases the dependency on one cloud provider.

Another risk: Users, but also companies, can lose access to their data for technical, organizational, or contractual reasons. After all, cloud providers can become bankrupt or contracts can expire or change. This is why it is important to design a fall-back concept beforehand. Companies in particular should consider at an early stage in the process how they can recover important data from the cloud in case of an emergency.

Also, many cloud services can be adapted to suit special requirements only to a limited extent. Companies that need a customized solution, not an off-the-shelf product, should take a very close look at the respective services. System houses such as Bechtle, Cancom Pironet, and QSC can provide assistance. They offer to carry out customizing work – for a fee.

The majority of companies, which do not use public cloud solutions, fear unauthorized access to sensitive company data.

So that companies can access data quickly and flexibly, it is also important to bring cloud computing together with another innovative technology in the long term: the future 5G mobile standard. 5G provides 100 times faster transfer speeds than the current LTE networks. Data can be uploaded and downloaded extremely quickly. This also extends the options for using clouds: Telecommunication provider Huawei plans to develop and improve live streaming products with 5G.

How secure is cloud computing?

For many users, security of data and applications in cloud computing environments is extremely important. According to a study from KPMG and Bitkom Research, almost 60 percent of German companies which do not use public clouds have concerns regarding unauthorized access to their data. More than half of the cloud skeptics regard the possible loss of data an impediment to using cloud services.

Without question, security is important when sensitive data ends up in the cloud. ISO certificates and cloud certificates from organizations like the EuroCloud association and the Cloud EcoSystem indicate just how serious cloud service providers take security. These certificates are awarded only to service providers that prove that they comply with strict security standards. A word of advice: If you want to book a cloud service, you should ask what security and quality certificates the cloud computing provider has and if it renews these regularly.

Because, in the past, when cyber criminals hacked the systems of cloud service providers, the effects were, in some instances, disastrous. A data leak at the online service Yahoo, which provides its products via a cloud platform, attracted a lot of attention. Hackers stole the data of three billion users – names, e-mail addresses, phone numbers, dates of birth, and passwords. The loss of this confidential data is not only serious in this individual case: The large number of passwords which cyber criminals obtained gave them further knowledge of the habits of users – in other words, what passwords or character strings they like to use. This could make future cyber attacks even easier.

Consequently, in serious cases, one single hacker attack is already one too many. However, it would be wrong to judge all cloud providers badly just because of the Yahoo example. A survey of US companies showed that for 22 percent of them, the higher level of security of cloud services is the most important benefit of cloud computing – even ahead of efficiency and better scalability of IT resources. With trusted providers, regular patch cycles and highly efficient cyber defense centers prevent attacks on data in the cloud.

41% of the companies surveyed stated that in the past 12 months data security incidents in company-internal IT systems occurred or at least were suspected. With a total of 32% the share is lower for public cloud solutions.

The greatest security risks of cloud computing

Individuals and companies that use cloud computing services benefit from the high data protection and security precautions taken by the service providers. But there are several risks that users of cloud services should keep in mind:

According to a study by the LinkedIn Information Security Community, more than 60 percent of IT security experts fear that hackers or disloyal employees of cloud service providers steal data. As a result, cloud users could lose important business data. The discussion about the activities of the NSA has also made it clear that even government facilities can view and gather sensitive data from companies and private users without their knowledge. In most cases, cloud users can help themselves by encrypting data in the cloud – provided they take other precautions. For instance, they must make sure that the data never appears as plain text during data transfers.

It is dangerous when hackers get hold of users’ access details, as this allows them to steal or manipulate data. The problem is that in many cases these attacks remain unnoticed for some time. It is therefore important to train employees regularly about the use of IT security solutions that report unusual activities of a supposed user.

Providers of cloud services must fulfill strict security and compliance standards. Since May 2018, these include the rules of the EU General Data Protection Regulation (EU GDPR). If a cloud provider breaches these regulations, data could be lost or be viewed by third parties. In cases such as this, it is not only the provider that faces high penalties and loss of reputation. Users of the services are also liable. They cannot pass on the responsibility for data protection to the providers.

Weak passwords, no multi-factor authentication or negligent handling of passwords and certificates make things easy for hackers. This is why providers and users of cloud computing services should use security software that offers effective protection against unauthorized access to data and applications. It is also a good idea to check the provider’s security functions beforehand.

APIs (Application Programming Interfaces) create the connection between a company's IT systems and the cloud. This is why they must have no security gaps. Especially because cloud services are accessed via public Internet connections.

Attacks by the employees of service providers (insiders) are especially dangerous. This applies especially to users with extended access rights, such as administrators. According to a study by KPMG, insiders were responsible for data theft from German companies in 20 percent of the cases. It is therefore important to review the activities of these user groups regularly.

If hackers flood a cloud service with requests from many hijacked computers, this can block the service. The provider must take precautions, such as monitoring network traffic and using protection systems.

The IT and network systems in a cloud can also have security gaps and weak points. Consequently, users of cloud services should ask whether the provider carries out regular weak point scans and installs software patches as quickly as possible.

Security tips when using the cloud

So that the use of a cloud does not cause problems, users should observe some basic security rules.

One of the most important things for cloud users to know is where their data is stored. This is for the following reason: Cloud services store information in different data centers, also abroad. With personal data and business-critical information, it is possible that data protection laws could be breached. Therefore, with many cloud service providers, customers can specify the data centers in which their data is to be stored, for example in centers in Germany.

It is also important to encrypt data. Werner Vogels, Chief Technology Officer of Amazon Web Services, recommends this measure: “Encrypt, encrypt, and encrypt again,” he warns. Companies with especially high security requirements can use encryption hardware for this (hardware security modules, HSM). When it comes to encrypting data in public clouds, German companies in particular have some catching-up to do: According to a survey by the anti-virus experts Bitdefender, only every ninth company encrypts this type of information.

Private users should also not place sensitive data in Dropbox, OneDrive, or Google Drive without first encrypting it. They can use tools such as Boxcryptor from the German provider Secomba.

Backup experts also recommend that important data should not be stored exclusively in a cloud computing environment. Admittedly, cloud providers generally make backups so that data is lost only in extremely rare cases. Nevertheless, it is advisable to make your own backups regularly and at least keep a copy at home or in your own data center.

Employee authentication is another important security measure. Only authorized persons should be able to access data and resources in a cloud. Multi-factor authentication provides even more security. This means that users not only enter their user name and password but must also confirm access to the cloud with another check. This can be a PIN that is sent to their smartphone.

Models and Applications

Different types and products of cloud computing

Nothing is impossible in the cloud. Admittedly, this sounds a little exaggerated. But in actual fact, the app stores and market places of cloud providers contain thousands of products. For example, in the Marketplace of Amazon Web Services, the largest provider of cloud services, more than 5,000 services in 35 categories were available in 2017, from software for every conceivable purpose, to storage systems and servers, to storage capacities that would do credit to a supercomputer.

Even prototypes and simulators of quantum computers, the high performance computers of the future, are available in the cloud. IBM, for example, offers scientists access to a computer such as this via its own cloud computing environment. The experts can carry out experiments with the system and develop software for it.

However, according to a study by the market researchers of KPMG and Bitkom Research, most companies in Germany use cloud services for conventional purposes. In particular, they obtain office and security applications from the cloud. E-mail services, group calendars and collaboration applications are also very popular. According to Techconsult, a market research institute based in Kassel, Germany, many German companies have discovered infrastructure as a service (IaaS) – in other words, servers and storage systems. Sales revenue with these products is predicted to double by 2019.

Cloud products can be split into several categories. The two most important are:

Service models: They give an indication of the types of services users buy from a cloud, such as server capacities or cloud storage.

Deployment models: They define where the data of a cloud service comes from, in other words, where it is stored. If several users share the cloud data center of an external service provider, this is called a public cloud. If the data is stored in a company’s own data center, this is a private cloud.

Service models in cloud computing

Users have a choice of several types of “as-a-service” products. The service models are a distinguishing criterion.

With infrastructure as a service, a cloud service provider provides classic IT systems. These include servers, storage systems, and network components. De facto the customers rents computing capacity (server) and space to store data. Network services (connectivity) is another area.

Users can run operating systems and applications of their choice on a server in the cloud. For example, different versions of Windows and Linux are available. The least expensive IaaS products are those where several users share a physical system, such as a server. Each user receives a virtual server that runs on the same hardware as the virtual servers of other users. If that is not secure enough, users can also book a server system exclusively for themselves at an additional cost.

However, if you use IaaS products, you have to set up and administer the systems in the cloud yourself. This is done by the company’s own IT department or the user has it done by an external service provider.

Users of PaaS products are saved the effort of setting up an infrastructure on their own. You could say that they enter one floor higher: The cloud computing provider provides the complete infrastructure and offers standardized interfaces on this platform. Users can then “dock” their own applications on this. The benefit is that users can focus on providing and administering their applications. The provider handles tedious tasks such as booking hardware, planning capacities, maintaining system software, and installing security patches.

It is important that the service provider offers standardized interfaces and tools with which users can connect their own software to a cloud platform. This ensures that they are not tied to a specific platform.

The SaaS category includes applications that users purchase via a cloud. There are almost no limits to the variety that is available: e-mail services, software for customer relationship management (CRM), accounting software, chat programs, and solutions to protect networks and devices. You could transfer almost your whole company to the cloud. Some cloud providers, like Microsoft, Zoho, and Salesforce, provide coordinated services.

These days, it is not only applications that are available via the cloud, but entire workplaces. The advantage of this is that employees can access their familiar digital work environment – everything from the office software to the CRM tool – from anywhere.

One advantage of SaaS products is that the number of software licenses can be adjusted exactly to users’ requirements. If you need 50 times Office 365, you book 50 licenses – no more, no less. If business is good and more employees join the company, you order more licenses.

Companies most often get Office and security applications from the cloud as "software as a service".

Deployment models in cloud computing

In addition to the IaaS, SaaS, and PaaS service models, there is another feature that distinguishes cloud computing services: the way in which the services are provided, in other words, which provision processes are used.

If you use services from Amazon Web Services, Microsoft Azure, or the Telekom Cloud, you are in a public cloud. With this model, several users or companies share the IT resources that the service provider provides. User data is stored and processed in this external cloud data center. One benefit of the public cloud is that more server or software licenses can be booked without great expense. The service provider provides these resources according to the customer's needs.

However, this flexibility has a snag: Public clouds are not designed for special requirements. Rather, one “off-the-peg” product is available for all users. But it is cheaper than a tailored product. Users must also consider another point: protection of the data that they transfer to a public cloud. But now many public clouds provide the option of storing sensitive information solely in one data center in Germany.

Is the private cloud actually a real cloud? That’s not an easy question to answer, since, to a certain extent, this type of cloud is like a private function: it is set up in the company’s own data center. Only employees and partners of the company have access to these cloud services.

It's not really surprising that critics say that private clouds are actually classic data center services, just with a different label. These doubters are not completely wrong. After all, a private cloud offers only limited options to order applications or infrastructure services as they are needed. They are limited by the capacities of the server and storage systems in the data center.

Nevertheless, according to KPMG and Bitkom Research, almost half of German companies currently use a private cloud. One reason is the fear of losing control of their own data. Private clouds are often regarded as more secure than public cloud products.

For forward-looking as well as careful users, there is a third variant – the hybrid cloud. The name says it all: Some of the data and applications remain in the company’s own data center, in other words, in a private cloud. Other data is consigned to a public cloud. Cloud providers such as Microsoft and VMware in collaboration with Amazon Web Services make it easy to develop hybrid clouds. They provide pre-configured systems, which companies can use to set up a private cloud environment. Interfaces are also available via which the private cloud can be connected with the public cloud from Microsoft or Amazon Web Services.

A hybrid cloud environment can offer the same cloud services as a public or private cloud, in other words, software-as-a-service, platform services, as well as computing and storage capacity (IaaS). According to the market experts from Crisp Research, at present about 44 percent of German companies prefer hybrid clouds. At 47 percent, the hybrid cloud will also be the favorite deployment and usage model in 2020.


Why cloud computing is the way of the future

One thing is clear: These days, the issue is no longer whether cloud computing will be used, but how. After all, the core task of a mechanical engineering company or a retailer is not to maintain a data center. Such companies want to build reliable equipment or offer their customers appealing products. Also with regard to the increasing importance of big data analyses, it is practical to purchase at least part of the company's IT environment “as a service”.

But this doesn’t mean that the IT experts in companies have to fear for their jobs. In the cloud era there is more than enough work for them, for example, connecting the cloud services with the company’s IT systems. Ideas for new digital products also have to be developed and companies have to be made fit for the digital age. These tasks can be carried out easier and quicker if the cloud is part of the equation. Last but not least, the future high speed cellular network 5G will ensure even more stable, much faster connections – also to the cloud.

The most important questions and answers at a glance

Cloud computing means the provision of IT services via the Internet – in other words, the provision of servers, storage, computing capacity, databases, and software. Users decide exactly what services they need and can use these immediately. They pay only for what they use. As a result, they do not have to invest in hardware or software. This makes cloud computing a popular solution for companies – but also for private users who want to back up photos or music in a cloud.

Cloud computing is no longer a tool for large high-tech companies. Private users and small companies can also benefit. In particular, startups have completely new options as a result of highly flexible IT solutions and the much lower costs. Extended computing and storage capacities are also needed in industry: Because of the trend to network machines, systems, and means of transportation, an increasing volume of data has to be collected and evaluated. These days, in countries such as the US, public authorities are also cloud users.

Cloud computing offers many benefits: The extent of the services that are ordered can be adapted exactly to your needs, which means a high degree of flexibility. The costs are also easy to calculate, as users pay only for services that they use. In many data centers, data protection is even better than in the company’s own data center. For private users, their documents, photos, and videos are usually also more secure in a cloud, since cloud providers make regular backups. As opposed to a flash drive, data in the cloud cannot get lost just like that.

In spite of all the benefits, there are some concerns with cloud computing. Companies in particular need tailored IT solutions – which usually means higher costs. For many people, the security issue is an impediment: Because, in the past, when cyber criminals hacked the systems of cloud service providers, the effects were, in some instances, disastrous. A few security tips should definitely be observed. Does the chosen provider have the relevant certificates? In which country is the data stored? Data protection laws can differ considerably. It is also important to encrypt the data and to handle passwords and access rights with caution.

Cloud services differ with regard to their service models. You can choose between “infrastructure as a service” (IaaS), “platform as a service” (PaaS), and “software as a service” (SaaS). Various methods of provision are also available. With a private cloud, the services are provided via the company's own data center, while with a public cloud they come from an external provider. The hybrid cloud unites both options by connecting them via interfaces.

In the future, cloud computing will allow many companies to focus on their core activities by outsourcing at least some of their IT services. Experts will still have plenty to do, since the cloud services have to be connected with the company’s own systems, for example. But if people want to prepare their company to handle the enormous volumes of data in the digital age, they won’t get around cloud services. In other words, use of cloud computing will increase in the future.

Last update: June 2018

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