CHAPTER 1: BASIC CLOUD CONCEPTS IN MICROSOFT 365

CHAPTER 1: BASIC CLOUD CONCEPTS IN MICROSOFT 365

Welcome to Basic Cloud Concepts! In this chapter, we're going to cover several topics. We're going to start off with the principles of cloud computing, and then we'll dive into funding models and compute costs. We’ll then discuss the different cloud computing models and cloud service types. We’ll round things out by looking at the benefits of cloud computing.

Cloud Computing Principles

Cloud computing refers to the delivery and use of various compute resources over the internet. By leveraging cloud computing services, organizations can “rent” instead of “own” their resources. This eliminates the headache of maintaining servers, storage, and other hardware that you would normally have to deal with to support on-prem solutions.

By renting resources from a cloud provider like Microsoft, organizations can shift many of their support and maintenance responsibilities to the cloud provider. This allows the organization to focus on its actual business, rather than on the underlying infrastructure. The underlying maintenance and support can be left to the cloud provider.

Microsoft offers a wide range of services. The most common of these are compute services, communications services, productivity services, search services, and storage services.

Compute services are useful when you need to run your own virtual machines, web apps, and other types of computing solutions in the cloud - instead of on physical hardware that resides in an on-prem datacenter. Microsoft Azure Virtual Machines are probably the most common type of cloud-based compute services available to Microsoft customers.

Communications services are used to establish communications between users. Popular communication services offered my Microsoft include Microsoft Exchange Online and Microsoft Teams.

Exchange Online is a cloud-based version of the on-prem Microsoft Exchange offering. This offering provides services such as email, calendar, and contact sharing. Teams, which has replaced Skype, provides instant messaging services for end users, along with computer-to-computer audio and video calls. It also facilitates document sharing and collaboration among team members.

Productivity services like Microsoft Office 365 facilitate collaboration among team members.

Search services offer search functionality (no surprise). This search functionality can be integrated into custom applications. The Azure Search service, quite obviously, would be a prime example of search services that are offered.

Storage services, not surprisingly, provide a platform that organizations can use to store data. Storing data in Azure makes it more easily accessible by users from all kinds of devices. Microsoft Azure Storage and Microsoft OneDrive for Business are two good examples of storage services that Microsoft makes available.

Funding Models and Compute Costs

Because cloud computing changes how and where an organization uses computing resources, it also changes the funding model. The funding model governs the costs associated with computing and it changes when an organization moves to cloud computing because the costs become operating expenditures, rather than capital expenditures.

Capital expenditures, which are referred to as CapEx, are costs that are incurred when an organization purchases or upgrades physical hardware, such as servers and networking equipment. CapEx also includes things like datacenters and office buildings. When a CapEx purchase is made, the equipment or real estate purchased is typically amortized over several years, instead of being deducted in full in the first year.

Operating expenditures, which are referred to as OpEx, are costs that are incurred by an organization while performing its normal day-to-day operations. OpEx costs typically include things like electricity, cost of employees, office space, and other ongoing business expenses. An organization’s management team is ultimately responsible for keeping OpEx costs to a minimum without negatively affecting the organization’s operations.

OpEx costs, unlike CapEx costs, are typically expensed each year, rather than being amortized over time. Let’s see how each of these funding models relates to cloud computing and to traditional on-premises costs.

On-Prem Compute Costs

An organization that runs a traditional, on-prem datacenter will usually have to pay for server costs, storage costs, network costs, datacenter infrastructure costs, costs associated with backups and disaster recovery , and personnel costs. That’s a lot of money!

Server costs generally include server hardware components as well as the costs of supporting that hardware. Whenever a server or other hardware component needs to be replaced or added to a datacenter, you use the CapEx bucket to pay for it. Since this is an up-front cost, it affects the organization’s cash flow. However, as mentioned previously, the hardware cost can be amortized over several years.

Storage costs usually include all storage-related hardware components as well as the cost of supporting that hardware. In larger organizations, these costs can become quite large – and as was the case with server costs, storage costs also fall into the CapEx bucket.

Network costs include networking hardware such as cabling, switches, routers, and the like. WAN connections and internet connections also fall under network costs. These network hardware expenses fall into the CapEx bucket, just like storage hardware and server hardware costs.

Backup and archive costs are generally split between CapEx and OpEx. While the hardware costs associated with a backup and archive infrastructure fall under CapEx, consumables like tapes and backup maintenance support typically full under OpEx.

Business continuity and disaster recovery costs are usually considered mostly CapEx, because they typically include redundant hardware, backup generators, and even redundant datacenters. However, the infrastructure and personnel costs are typically considered OpEx.

Datacenter infrastructure costs, like electricity, floor space, and cooling, are generally considered OpEx expenses.

Technical personnel, or IT staff, is considered an OpEx cost.

Cloud Compute Costs

So, what about cloud computing costs? Which buckets do these costs fall into?

Instead of physical hardware and datacenter costs, cloud comput­ing incurs different costs, which for accounting purposes, are all OpEx. These costs include things like VM leases, software leases, and charges incurred as a result of scaling out.

VM leases are considered OpEx because the cost is usually based on the pay-per-use model. The same thing goes for software leases.

Scaling charges that are based on demand instead of fixed hardware or capacity are usually billed as you go as well. That being the case, these charges also fall under OpEx.

So, as you can see, the lion’s share of computing costs is suddenly switched to OpEx when an organization moves to the cloud.

Cloud Computing Models

There are three primary cloud computing models. They include the public cloud model, the private cloud model, and the hybrid cloud model. Let’s review the properties of each, as well as the benefits of each.

Public Cloud

The public cloud model is the most common cloud deployment model. In a public cloud model, the organization has no local hardware to manage or maintain. All resources and services run on the cloud provider’s hardware. The IT infrastructure, including hardware, servers, and software, resides somewhere other than the on-prem datacenter – and it’s managed by the cloud provider.

There are two different types of a public cloud. They include the shared public cloud and the dedicated public cloud.

A shared public cloud allows all customers of a cloud service provider to share common resources within the provider’s environment. However, each customer can only see its own tenant. The cloud provider is the only one that can see all of the different tenants – and it is this cloud provider who manages the multi-tenant environment. The shared public cloud model is often a good choice for smaller businesses because, by sharing resources with other customers, it helps them save additional costs.

A dedicated public cloud is typically reserved for larger enterprise organizations. This model features a dedicated physical infrastructure that’s reserved for the organization only. Although the costs associated with a dedicated public cloud are often higher than those of a shared public cloud, a dedicated public cloud will often offer better security, performance, and customization.

Some key advantages of the public cloud model include lower costs and no maintenance requirements. Public cloud costs are lower because there is no need to purchase hardware or software. The ability to pay-as-you go also contributes to the reduced costs. Public clouds also offer near-unlimited scalability, meaning you can automatically provisionon-demand resources as they are needed. And last, but not least, public clouds offer high reliability because they rely on a vast network of underlying hardware.

Private Cloud

A private cloud is a cloud environment that you deploy into your own datacenter. You manage the cloud hardware and you provide self-service access to your compute resources to the users in your organization. A private cloud is essentially a simulation of a public cloud as far as your users are concerned. However, your organization is 100% responsible for the purchase and maintenance of the underlying hardware and the services that you provide.

Although they are more expensive than public clouds, private clouds offer more flexibility over their public counterparts because they can be customized to meet specific business needs – and because the resources within a private cloud are not shared with other organizations, they offer improved security as well. Private clouds also offer similar scalability and efficiency to that of a public cloud.

Hybrid cloud

A hybrid cloud is essentially a combination of a public and a private cloud. Hybrid clouds allow organizations to run their applications in whichever location is most appropriate. A typical use case for a hybrid cloud would be a situation where an organization wants to host a public-facing website in the public cloud that connects back to a secure database that’s hosted in the private cloud, or even in an on-prem datacenter.

Organizations will often deploy hybrid clouds when they need to protect sensitive data or when they wish to extend the capabilities of their on-prem systems. For example, an organization that needs to run an application that will only run on an older OS or on older hardware, might opt to keep the old system running locally, but connect it to the public cloud for authorization or storage.

Hybrid clouds can also be used to reduce data protection costs. For example, if your organization needs to deploy a PKI and Information Rights management infrastructure to protect its data, the cost of doing so locally might be quite high. However, enabling these features from the cloud will allow you to protect both your cloud and on-prem data and documents.

Some key advantages of the hybrid cloud model include increased control, the ability to leverage resources in the public cloud when they are needed, and a cost-effective way to scale out to the cloud when needed. A hybrid cloud also eases the transition of your workloads to the cloud.

However, there are a couple caveats to consider when thinking about deploying a hybrid cloud. Not only is a hybrid cloud more complicated to setup and manage, but it’s often more expensive than choosing just one model – be it public or private.

Cloud Service Types

When deploying a cloud solution, you have a choice of three main cloud service types. They include infrastructure-as-a-service, platform-as-a-service, and software-as-a-service.

Infrastructure-as-a-Service (IaaS)

Infrastructure-as-a-Service, or IaaS as it is known, is the most flexible cloud service type available, because it provides you with complete control over the underlying hardware that runs your application. Instead of purchasing physical hardware like servers, switches, routers, and such to host your app, infrastructure-as-a-service allows you to you rent it.

While infrastructure-as-a-service offers more control, due to the associated hardware costs, it is not a good solution for organizations that are interested in minimizing their infrastructure and application maintenance costs.

Platform-as-a-Service (PaaS)

Platform-as-a-Service, or PaaS, provides organizations with a platform they can use to build, test, and deploy software solutions on. That being the case, platform-as-a-service is not usually a good fit for organizations that require a service like Exchange Online, which is already fully developed.

The purpose of platform-as-a-service is to allow organizations to create appli­cations quickly, without having to deal with the deployment or management of any underlying infrastructure. For example, an organization that deploys a web application using platform-as-a-service can do so without having to install an operating system or even the web server software itself. The organization won’t even have to worry about system updates.

Software-as-a-Service (SaaS)

Software-as-a-Service refers to software that is centrally hosted and managed for the customer. This service type typically provides the same version of the software or application to all customers. The software or application usually runs on-demand in either a web browser or via Remote Desktop Services. It’s usually licensed via a monthly or annual subscription, and because it’s accessed remotely over the internet, it usually doesn’t require deployment or any ongoing maintenance.

Services like Microsoft 365 and Exchange Online are typical examples of software-as-a-service offerings because they deliver software products over the internet, on a subscription basis.

Cloud Computing Benefits

There are many benefits to moving to the cloud. Let’s take a look at some of the key benefits of cloud computing.

Cost-Effective

Cloud computing works on a pay-as-you-go model. This means that organizations can rent hardware and pay only for the resources that they use, instead of paying upfront for hardware.

Scalability

The ability to scale is critical to organizations who have to keep up with application demands. Leveraging cloud computing allows such organizations to leverage both vertical and horizontal scaling.

Vertical scaling, which is also known as scaling up/down, refers to the ability to add resources to an existing server to increase its power. For example, you might scale a virtual machine vertically by adding additional processors or more memory to it.

Horizontal scaling, which is known as scaling in/out, refers to the addition of more servers that function as one unit. An example of horizontal scaling would be a scenario where you add a second web server to handle the load of a web front end, instead of adding hardware to the first server. VM Scale Sets, in Azure, operate on the principle of horizontal scaling.

Generally speaking, scaling in/out is usually the preferred scaling solution.

Elasticity

While scalability is critical to organizations because it allows them to keep up with growing demand for applications, elasticity is also just as critical because it allows a chosen computing solution to automatically add resources as demand increases and to remove resources as demand drops.

An example of elasticity would be a website that’s promoting the launch of a new product. Leading up to the product launch, there is lots of press around the upcoming product. Before the launch occurs, there is a consistent number of people visiting the website to read about it. However, once the product launches, there is a crush of traffic hitting the website. Because the cloud is elastic, additional compute resources are automatically allocated for the website to handle the increased traffic. In the days following the launch, as traffic subsides a bit, the cloud will notice that there are too many resources allocated for the website. As a result, it will begin to remove those resources automatically. This saves the organization money.

Up to Date

A company like the Blue Widget Corporation makes widgets. Instead of dealing with system upgrades, configuration, and other kinds of IT management tasks, the Blue Widget Corporation can focus on its core business while allowing the cloud service provider to handle all of these tasks. Because the cloud service provider maintains the underlying hardware that runs the systems that support the Blue Widget Corporation, it is the cloud provider that will ensure the hardware is always the latest and greatest.

Reliability

Organizations obviously require reliable IT solutions. If the IT infrastructure of an organization is not solid, this will often negatively affect the organization’s earnings. By leveraging cloud computing, organizations can be sure that their data is always available and that their applications are always running.

By leveraging cloud computing, organizations can focus on their core businesses, instead of dealing with IT management tasks - and they can do so while reducing their IT costs. This is what makes cloud computing so attractive.

What You’ve Learned

Congratulations! You’ve reached the end of Basic Cloud Concepts! Let’s review what you’ve learned.

In this chapter, we covered several basic cloud computing topics. We started off with the principles of cloud computing, and then we dove into funding models and compute costs. Next, we discussed the different cloud computing models and cloud service types. We rounded things out by looking at the benefits of cloud computing.