Cloud providers play a central role in today’s cloud environments, offering everything from data storage and computing power to advanced machine learning and AI tools. These services support better data management and allow businesses to scale quickly in increasingly competitive markets.
A cloud provider is a third–party company that offers services over the Internet, including storage, computing power, servers, and applications. Instead of relying solely on your device or your company’s on-premise servers, your files, apps, and services can be hosted in offsite data centers operated by the provider. These "cloud" data centers, placed across the globe, use redundant power and network systems to minimize downtime. Big cloud computing services include Amazon Web Services (AWS), Google Cloud Platform, Alibaba Cloud, and Microsoft Azure.
One of the main reasons companies sign up with a third-party cloud provider is because it can be faster, more flexible, and cheaper than setting up and maintaining their own infrastructure. Rather than investing in expensive servers and hiring tech teams, they pay only for what they use, and scale up or down as needed.
In fact, Accenture reports that moving to the public cloud can cut costs by up to 40%. Most companies aren't sticking with just one provider, however: Virtana states that "82% of organizations are currently leveraging a multi-cloud strategy to handle their various needs. With so many options available, choosing the best cloud service provider depends on a company's goals, budget, and long-term scalability needs.
Cloud computing is the preferred way for many companies to conduct business. To understand why, let's examine how cloud computing works and how it’s different from traditional on-premise systems.
Table of contents How cloud computing works On-premises vs. cloud computing: A detailed comparison The three core types of cloud services Cloud deployment models: Public, private, and hybrid How to choose the right cloud provider Conclusion: Why businesses are moving to the cloud
How cloud computing works
Prior to the early 2000s, you had to download media files to listen to music or watch a movie on your computer. If your computer lacked storage space or couldn't accommodate the bandwidth to play the file, you were out of luck. Today, thanks to cloud computing, you can watch movies and listen to music using streaming services like Netflix and Spotify—they give you access to enormous music and media libraries without downloading a thing. Instead, the streaming services store these files in data centers so you can enjoy your entertainment without worrying about storing them on your device.
On-premises vs. cloud computing: A detailed comparison
As you explore on-premise or cloud-based systems, it’s important to compare the pros and cons of each, including things like scalability, cost, data security, and maintenance needs. Let’s take a closer look.
Scalability
On-premise systems
When a business installs an onsite system, one of the most important considerations is scalability. If an organization recognizes its potential to outgrow their software or hardware soon after it’s installed, they should carefully consider cloud options alongside on-premise solutions.
For example, a start-up retail company with its own internal IT team might decide to set up their own onsite infrastructure. But if they experience quick growth, the servers could quickly become overwhelmed. Simultaneously, the software may bog down due to increased traffic, negatively impacting the customer experience. Additionally, if the spike is only temporary, or only occurs at certain times of the year, the business is paying for hardware that is no longer being fully utilized.
Cloud computing services
Cloud computing solutions can eliminate the complexity of scaling up or down. For example, many retailers get busier during the holiday rush in December than at any other time of the year. Before cloud computing, they most likely had to invest in enough infrastructure to handle their busiest times of the year, which left them with more than they needed during other times of the year. With cloud computing, they ask the provider for extra bandwidth or other enhancements during peak times and then scale back down after the rush.
Key takeaway
Cloud computing is flexible, cost-efficient, and can scale up or down as business needs dictate.
Cost
On-premise systems
Technology isn’t cheap. If you install an onsite system, you’ll have to pay for IT professionals, hardware, software, and a server room with a cooling system. Once installed, the system must be monitored, requiring constant attention from hardware and software experts. If the hardware breaks or the software experiences a bug, it may take hours or days to fix, which could eat into your profits.
Cloud computing services
Cloud services provide full-service packages that include expert guidance, hardware, software, and servers for a set price. If there is a hardware malfunction or a software bug, the cloud provider is responsible for fixing those issues, often without any additional cost to you. Using a cloud service is similar to renting a home versus owning a home. As a renter, when the plumbing backs up, you call the landlord to fix it and they pay for the repair. As a cloud service customer, you contact their service desk and they troubleshoot your problem for you.
Key takeaway
Off-site cloud systems operate on a pay-as-you-go model, eliminating upfront investments and ongoing maintenance costs.
Data security
On-premise systems
Financial institutions and healthcare organizations manage large amounts of personally identifiable information (PII), which must meet regulatory guidelines, such as those contained in the General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA). Because of this, they may choose to use an on-premise system so they have complete control of their data. Sometimes, they may use a hybrid system, with the on-premise tools handling sensitive data and a cloud-based system managing non-sensitive data.
Cloud computing services
Security is a top priority for cloud providers. They use tools like encryption, firewalls, and multi-factor authentication to protect data, often surpassing what most companies can do independently. Moving to the cloud means you need to put your trust in your provider that they can keep your data safe. For example, Microsoft Azure can encrypt data, control access to verifiable users, and monitor systems around the clock for suspicious activity, giving business owners peace of mind.
Key takeaway
For some companies, cloud systems may not be the best choice, depending on their security needs. For others, the cloud offers a secure solution with less effort.
Data loss and recovery
On-premise systems
Storing and managing 100% of your data in one location might seem like the easier path, but the truth is it increases your risk exposure. If there’s an unexpected event, like a fire or power outage, you could lose access to your data. Setting up an offsite backup helps, but managing that can be costly.
Cloud computing services
Conversely, a cloud provider does not rely on one server. Instead, they store data in multiple locations so if a disaster strikes one data center, a redundant service takes over.
Key takeaway
Backup and redundancy plans are expensive to implement in on-premise systems but are often standard in cloud computing service packages.
Maintenance and staffing
On-premise systems
When you run an in-house system, you need IT specialists that are ready and trained to handle everything from routine updates to last-minute emergencies. This often means hiring or contracting an around-the-clock technical team. This is a significant upfront investment; it may also take some time to find people with the right skill set.
Cloud computing services
With a cloud solution, experts are employed by your provider. While they may have additional costs for advanced technical assistance, many offer a pay-as-you-go model that is cheaper and easier than maintaining your own team. If you already have an IT team, having a cloud provider can free up their time to focus on other projects.
Key takeaway
Cloud services can take the day-to-day tech work off your IT team’s plate, which can save time and money.
The three core types of cloud services
Cloud computing services fall into three main models, each catering to different business needs: software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS).
SaaS
Software as a service is one of the most common types of cloud service. In this model, everything needed to access and use a software package, including data storage, servers, operating systems, security, and the software package itself, is provided and managed by the service provider. Instead of logging into an internal company platform, users can access the software online and use it immediately. This software could be an email program, a file storage service, or a customer relationship management tool. It may also be more complex software, such as accounting platforms that manage client accounts. Clients can upload paystubs, receipts, W2s, and other documents, allowing accountants to complete much of their work without reentering data.
Regardless of the software type, users simply log in, with no installation, maintenance, or updates required.
What you manage: How you use the software
What the provider manages: Everything else
Available SaaS systems: Google Workspace, Dropbox, Salesforce, Zoom
SaaS use case
A small writing agency needed a tool they could use to send company emails, share files, and conduct video conferences with clients, but none had technical expertise. They heard that Google Workspace was available right from their browser and offered everything they needed, such as email, document storage, calendars, and video calling. They decided to try it and were up and running in less than an hour, sharing documents, sending emails, and setting up video conferences with clients.
PaaS
Platform as a service lets developers focus on writing code and building applications instead of setting up and maintaining databases, message queues, and caching systems. When the developer is ready for the platform, they can integrate these services into their application, saving development time and speeding time-to-market. PaaS-managed services are also highly available and designed to scale, which means developers can depend on them to be ready when needed.
What you manage: Your applications and data
What the provider manages: Everything else (infrastructure, OS, runtime, etc.)
Available PaaS systems: MongoDB Atlas, Amazon Web Services, Red Hat OpenShift, Heroku, Microsoft Azure, Google Cloud Platform
PaaS use case
A startup building a mobile app might not have the time or resources to manage the platform infrastructure, database, and other services needed to host and deploy their application. When they use a PaaS solution, they can offload the back end to the provider and focus on developing their app. If the app ends up being a hit, the PaaS can scale automatically to handle the spike in demand.
IaaS
Infrastructure as a service provides you with foundational infrastructure tools, like virtual machines, storage, and networking, so you don't have to own or manage hardware. Your team will still be responsible for setting up and running your software, but the cloud provider handles the behind-the-scenes equipment. It's useful for companies that want control over their software without the added cost and hassle of owning servers.
What you manage: Applications, data, runtime, middleware, and operating systems
What the provider manages: Servers, storage, networking, virtualization
Available IaaS systems: AWS, Google Cloud Platform, IBM Cloud
IaaS use case
A media company needing to render high-quality video content can use a cloud provider for computing power. They can scale up resources during production and scale down afterward.
Cloud deployment models: Public, private, and hybrid
Once a company decides which kind of cloud service they need––whether it's the software they use (SaaS), a platform to build on (PaaS), or the basic infrastructure (IaaS)––the next big decision is how they want to set it up. There are three main ways to proceed: public, private, and hybrid cloud models.
Public cloud
A public cloud is a shared infrastructure that is managed by a third-party cloud provider. Multiple users tap into the same resources that the provider owns. It offers a wide selection of online technology you can choose from, paying only for what you use without the hassle of owning and managing the underlying equipment yourself. This capability makes it an attractive option for new businesses and smaller companies watching their budgets.
Available public systems: AWS, Google Cloud, Azure, Alibaba
Public cloud example
Some small businesses need an easy way to store their files without getting involved in server management or other complex technology. A shared, public cloud solution is often the answer. Companies like Dropbox offer businesses a place to store and share documents online with colleagues and customers so everyone can collaborate easily.
Private cloud
A private cloud is a good choice for businesses that need a secure space. It can be more expensive, but the peace of mind and control it offers make it a worthwhile investment for companies that can't take chances with cloud security or compliance. A private cloud is built for one organization. Whether hosted by on-premise servers or managed by a third party, businesses can customize their setup to meet specific needs—like tighter data security or unique workflows—without sharing resources.
Available private cloud systems: IBM Cloud, VMware
Private cloud example
Businesses commonly use private clouds in highly regulated industries like healthcare and finance. For instance, a financial institution might rely on a private cloud to store and manage sensitive customer data to help comply with regulations such as GDPR or HIPAA.
Hybrid cloud
Many companies successfully combine on-site and cloud systems, keeping sensitive data in-house where they have more control, while moving things like customer apps to the cloud where they can easily scale up when needed. This approach helps them follow regulations while simplifying their technology in other areas. More IT teams are seeing this as the way to go rather than moving everything at once.
Available systems: Microsoft Azure Hybrid, AWS Outposts
Hybrid cloud example
A hybrid cloud lets businesses combine the benefits of public and private cloud platforms. For example, a bank may use a private cloud for account information and customer data, but use a public cloud for customer service chatbots. This hybrid approach allows for strict control over sensitive customer data with a private cloud and handles general customer-facing information using a public cloud.
How to choose the right cloud provider
Picking the right cloud partner is an important decision. Below are some key factors to consider.
Service and product offerings
Make sure the provider offers the services you need, whether it’s SaaS for software, PaaS for app development, or IaaS for infrastructure. Some providers, like AWS and Google Cloud, offer all three, while others focus on specific areas. It’s worth evaluating cloud service providers and checking how easily their services can scale as your business grows.
Pricing
Look for explicit pricing models that match your budget and usage needs. If your business has seasonal spikes, look for a provider that offers flexible plans without hidden fees. Pay-as-you-go or tiered plans are good options for most companies.
Support and documentation
Providers that offer knowledgeable support specialists and detailed documentation can save you time and limit frustration. Tutorials, FAQs, and guides can be as important as live support when problems arise.
Data center locations
The region of your provider’s data centers in relation to your location can affect performance and even compliance. Certain industries and regions require sensitive data to be stored within specific geographic areas, so make sure your provider meets your security and regulatory needs.
Reputation and certifications
A provider’s track record matters. Look for industry-recognized standards like ISO 27001, SOC 2, or HIPAA (if applicable), and review customer feedback or case studies to assess long-term performance and trustworthiness.
Conclusion: Why businesses are moving to the cloud
More and more businesses are turning to the cloud because it just makes sense. Instead of sinking money into expensive hardware, companies only pay for what they use, making IT costs easier to predict. In fact, according to Gartner in a press release issued in November 2024, “worldwide end-user spending on public cloud services is forecast to total $723.4 billion in 2025, up from $595.7 billion in 2024.” These numbers highlight how pivotal the cloud has become in recent years. For most businesses, cloud computing is no longer optional—it’s a critical foundation for staying competitive and driving growth.
Learn more on how to use MongoDB with the major cloud platforms AWS, Microsoft, and Google Cloud.