Cloud computing: advantages and disadvantages for businesses
Estimated reading time: 22 minutes
Innovation and efficiency are key factors for business success today. Cloud computing offers significant advantages in this context: this technology is revolutionising the economy by providing resources such as storage space and computing power on demand and cost-effectively – exactly where and when they are needed.
Consider, for example, an online shop that increases its server capacity at short notice during the Christmas season due to higher demand, or a start-up that operates worldwide – and still keeps its infrastructure costs within reasonable limits.
This guide provides you with a comprehensive overview of the many advantages of the cloud and shows you how you can use them specifically for your company. Discover how the cloud can optimise your business processes, promote innovation and strengthen your competitiveness in the long term – regardless of the size or industry of your company.
Together, we will find the cloud solution that suits your needs!
Arrange a free initial consultation with our cloud experts.
What is cloud computing and why is it important?
Cloud computing is revolutionising the way organisations organise their IT infrastructure. Instead of investing in expensive hardware, resources can be used flexibly via the Internet. This technology not only offers cost advantages, but also greater efficiency and scalability.
Cloud computing enables IT resources such as storage space, computing power and software applications to be used via the Internet without having to be operated locally. The entire infrastructure is managed by a cloud provider. Companies usually only pay for the resources they actually use, which makes this model cost-efficient and scalable.
The steadily increasing relevance of cloud computing is particularly evident in:
- Cost optimisation: Using cloud services eliminates the need for proprietary hardware and physical infrastructure. This allows SMEs to migrate their IT to the cloud and save on acquisition and server maintenance costs.
- Global availability: Employees can access data securely and reliably from any location, which is particularly important in times of remote working. For example, an international software development team can collaborate seamlessly using cloud-based tools such as Google Workspace.
The multitude of advantages also depends on choosing the right cloud model. Depending on your specific requirements, the cloud offers different approaches. The possibilities of the cloud allow almost any business requirement to be addressed. Below, we take a look at the different models and their special features.
-
Public Cloud: Shared services for multiple users. This option is particularly cost-effective, but less customisable.
-
Private cloud: A dedicated infrastructure for a single company. An insurance company, for example, uses a private cloud to meet strict data protection requirements.
-
Hybrid Cloud: Combines public and private clouds to create an ideal balance between flexibility and security. For example, a retail company stores general customer data in the public cloud, while sensitive payment information is stored in the private cloud.
What are the advantages of cloud computing?
The advantages of cloud computing go far beyond mere cost optimisation. It improves collaboration, enables flexible adaptation to new requirements and increases productivity.
This allows businesses to respond more quickly to market changes and drive innovation with the help of the cloud. Both small start-ups and large corporations benefit from the versatility of this technology. The cloud is a central component of digital transformation.
Another key advantage is redundancy, which is often implemented as standard in cloud environments. Redundant data storage and processing ensure a high level of reliability, enabling businesses to continue operating even in the event of technical faults or unexpected incidents.
1. Improved collaboration
The cloud is revolutionising the way teams work together. Employees can work on projects simultaneously and access the same files regardless of their location. This not only saves time, but also boosts productivity.
- Real-time collaboration: Documents can be edited together in the cloud, so changes are visible immediately.
- Connected teams: Departments that used to work in isolation can now interact seamlessly with each other using cloud-based communication tools such as Slack or Microsoft Teams.
2. Scalability
Cloud computing offers companies the opportunity to flexibly adapt their IT resources to current needs without having to invest in new hardware.
- Dynamic adaptation: Companies can increase or reduce resources such as storage space or computing power as needed.
- Resource efficiency: Unused resources can be deactivated, reducing operating costs.
- Global expansion: Scalability helps companies expand into new markets more quickly.
3. Cost efficiency and flexibility
By using cloud services, companies can significantly reduce the costs of purchasing, maintaining and updating hardware and software. They only pay for the resources they actually use. This makes the IT infrastructure cost-efficient and flexible.
- Reduced investment: Companies save on hardware purchases and maintenance.
- Pay-as-you-go billing: Cloud service providers such as AWS and Azure offer models based on actual usage.
4. The highest security standards
Cloud providers rely on state-of-the-art security protocols to protect their customers' data.
- Encryption: Data is encrypted during transmission and storage in the cloud.
- Regular updates: Cloud providers deliver security updates without companies having to use their own IT resources.
- Disaster recovery: Many cloud service providers offer backup solutions that minimise data loss due to hardware failures, natural disasters or cyber attacks.
5. Flexibility and mobility
Cloud computing enables employees to access company resources from anywhere.
- Remote work: Employees can work independently of their location.
- Device independence: Data and applications are accessible from different devices.
6. Support for digital transformation
The cloud is a driver of innovation and competitive advantage. Decision-makers can respond more quickly to technological developments and implement solutions faster, which gives them a competitive edge.
- Automation: Cloud services offer automation features that make processes more efficient.
- Innovation through AI and big data: Many cloud providers integrate tools for artificial intelligence and data analysis.
Our comprehensive guide tells you everything you need to know about developing a successful cloud strategy.
What are the disadvantages of cloud computing?
Despite its numerous advantages, cloud computing also has potential disadvantages that you should carefully consider. From compliance concerns to technical dependency, there are various aspects that can complicate the implementation and use of the cloud.
A key issue is the dependence on a stable internet connection. Without reliable access to the internet, employees cannot use cloud-based services, which can lead to significant disruptions. In addition, unexpected outages on the part of the cloud provider can affect business operations, even if redundancy concepts are in place. In the following, we would like to introduce you to some of the other challenges:
Data protection and compliance
Handling sensitive data in the cloud is an important consideration. Organisations must ensure that they comply with strict data protection laws, particularly in areas such as the GDPR.
- External storage: Data is stored on third-party servers, which could potentially expose it to hackers.
- Access control: Without effective security measures, unauthorised individuals could gain access to confidential information.
Dependence on providers (vendor lock-in)
Depending on the cloud model, migration to the cloud can lead to dependence on a specific provider, which can limit your flexibility and negotiating position with the cloud service provider.
- High switching costs: Switching cloud providers can be expensive and time-consuming.
- Proprietary technologies: Some providers use proprietary standards that make integration with other systems difficult.
Cost risks due to uncontrolled use
Although cloud computing promises cost efficiency, unforeseen costs can arise if usage is not actively monitored.
- Scalable costs: Flexible resource usage can lead to uncontrolled spending if not managed.
- Additional fees: Extra costs for data transfer or special services can put a strain on the budget.
Dependence on technology and know-how
The introduction of cloud services requires technical expertise and ongoing training for employees.
- Management complexity: Managing multiple cloud services (multi-cloud environments) can be challenging.
- Technological change: Organisations must constantly adapt to new technologies and updates from cloud providers.
Legal and regulatory challenges
Storing data in the cloud often raises questions about compliance with national and international regulations.
- Location of data centres: Some industries require that data be stored only in certain countries.
- Unclear responsibilities: In some cases, it is not clear who is liable for data loss or security incidents.
Performance and latency times
The use of cloud services can lead to noticeable latency in data-intensive applications, especially when data is transferred over long distances.
- Geographical distances: The location of data centres can affect access speeds.
- High requirements: Real-time applications such as video streaming or AI-supported processes require optimal connections, which cannot always be guaranteed.
Cloud computing offers enormous opportunities, but also brings risks and challenges that managers must address proactively. With careful planning and clear strategies, these challenges can be overcome.
How does cloud computing contribute to cost optimisation and increased efficiency?
Traditional IT systems require significant investments in hardware, software and maintenance. With cloud computing, these costs are largely eliminated, as you only pay for the resources you actually use (pay-as-you-go model).
Managing your own IT infrastructure requires specialised knowledge and resources. Cloud providers take over most of these administrative tasks, reducing the workload for your IT team. Cloud computing also allows you to:
Minimise investment costs
There is no longer any need to purchase your own servers or storage systems; instead, companies can flexibly rent computing power, storage space and software. A start-up with a limited budget, for example, can use powerful IT resources right from the start without having to worry about expensive purchases. This leaves more capital available for the actual business.
Reduce maintenance costs
Cloud providers take care of all maintenance tasks, from regular updates to security measures and hardware maintenance. This saves a medium-sized software company not only money but also time, as it no longer needs internal IT teams for server maintenance. The resources freed up can be invested in product development.
Increase efficiency through demand-oriented use
Instead of paying high fixed costs for unused IT capacity, the cloud enables usage-based billing. Companies only pay for what they actually use. An e-commerce company, for example, avoids costs for oversized servers by only increasing storage space during peak loads, such as on Black Friday.
Cloud-Kosten unter Kontrolle
Quick Wins & strategische Hebel für IT-Führungskräfte
Optimise resources and flexibility
Cloud computing offers companies the opportunity to use resources efficiently and respond flexibly to changes. This not only reduces waste, but also improves overall productivity.
Efficient use of resources:
Cloud technologies enable you to make optimal use of your resources by automatically adapting them to actual demand. For example, a manufacturing company uses cloud-connected sensors to monitor and optimise its machines in real time. Outside of production shifts, these sensors and the required cloud infrastructure are switched off and do not collect any data. This reduces energy consumption and optimises utilisation times.
Flexible adaptation to business requirements:
Companies can increase or reduce capacity within minutes. For example, when a new film is released, a streaming service expands its bandwidth to cope with the sudden surge in user traffic and then scales it back down again later.
Greater agility in development processes:
Development and test environments can be quickly deployed and adapted in the cloud, accelerating product innovation. For example, an automotive manufacturer is testing various software solutions for autonomous driving in a cloud-based development environment, saving weeks of development time.
Save time through automation
-
Updates and backups: Cloud providers perform regular updates and data backups automatically, without any intervention from the company. For example, a financial services provider automatically backs up sensitive customer data in the cloud every day, reducing the effort and risk of human error.
-
Optimised workflows: Cloud-based tools integrate seamlessly into existing business processes and simplify workflows. A medium-sized machine manufacturer automates its customer billing via a cloud-based CRM system, saving several hours each week.
Enter the cloud with MaibornWolff!
Harness the potential of the cloud for your business. Arrange a free initial consultation with our cloud experts.
Sustainability through cloud computing
Using the cloud not only contributes to efficiency, but also to environmental protection.
-
Energy savings: Cloud service providers use optimised data centres that are more energy-efficient than traditional in-house solutions. For example, a pharmaceutical manufacturer that has completely switched to the cloud has reduced its carbon footprint by eliminating its own servers.
-
Resource-efficient scaling: Since companies only use resources when needed, unnecessary energy waste is avoided.
Cloud computing helps optimise costs, saves resources and increases efficiency on many levels. It allows you to focus on your core business while your IT infrastructure remains flexible and cost-efficient. Whether through reduced maintenance costs, automated processes or improved resource utilisation, the cloud not only creates financial benefits, but also a sustainable and future-proof IT environment.
How are security and compliance ensured in the cloud?
For many decision-makers, security and compliance are among the biggest concerns when it comes to using cloud computing. However, cloud providers have implemented comprehensive measures to protect sensitive company data and ensure compliance with legal requirements.
Security standards and precautions in cloud computing
The various cloud providers employ a wide range of security measures that often go far beyond the capabilities of individual companies. These precautions protect data from both cyber attacks and unauthorised access:
Multi-layer encryption
Data is encrypted during transmission and storage in the cloud. Processes such as TLS (Transport Layer Security) or AES (Advanced Encryption Standard) are used. For example, a financial service provider secures its sensitive transaction data using end-to-end encryption so that only authorized users have access.
Security certificates and audits
Certificates such as ISO 27001, SOC 2 or the Cloud Security Alliance (CSA) confirm that providers comply with the highest security standards. Regular external audits provide additional transparency. For example, a healthcare provider uses cloud services that comply with the strict HIPAA guidelines to store patient data in a legally compliant manner.
Access control and user management
Cloud providers provide detailed access policies and identity management solutions such as single sign-on (SSO) or multi-factor authentication (MFA) to ensure that only authorized persons are granted access. For example, a logistics company with distributed locations uses cloud-based user management to ensure that employees can only access the data relevant to them.
Detection and prevention of cyber attacks
Modern clouds use artificial intelligence (AI) and machine learning to detect and block suspicious activity in real time. For example, an e-commerce company secures its customer data against DDoS attacks by using adaptive security technologies.
Data backups and recovery plans
Cloud providers offer automated backup and disaster recovery services that protect companies from data loss. For example, a manufacturing company can restore business operations within minutes after a power outage because all data is backed up in the cloud.
How to ensure cloud compliance
Companies must comply with applicable data protection laws and industry-specific regulations, not least due to extensive compliance requirements. Cloud services support these requirements with integrated tools and solutions:
Data location and privacy policy
The physical location of the servers influences which data protection guidelines apply. European companies, for example, are subject to the GDPR and benefit from data centres within the EU. A German company, for example, stores customer data exclusively on servers in Frankfurt in order to comply with the requirements of the GDPR.
Industry-specific compliance solutions
Many cloud service providers offer solutions tailored to specific industries that meet industry-specific standards such as HIPAA (healthcare) or PCI DSS (payment card security).
Encryption and key management
Companies can use their own encryption keys to ensure that even the cloud provider cannot access the data. For example, a software company stores customer information in encrypted form and manages the keys independently.
Regular audits and reports
Many cloud providers support companies in creating compliance reports that are required for internal or external audits. In the financial sector, a company uses the cloud service provider to create reports that meet the requirements of regulatory authorities.
Security and compliance in the cloud are not obstacles, but rather strengths of modern IT infrastructures. Companies benefit from robust security measures and industry-specific compliance solutions that enable them not only to meet legal requirements, but also to strengthen the trust of their customers.
How flexible and scalable is cloud computing?
Flexibility and scalability are key advantages of cloud computing that offer you enormous benefits regardless of the size of your business. These features allow you to expand or reduce resources as needed without having to make expensive investments in additional hardware. These advantages are particularly crucial for companies in dynamic markets or growth phases in order to remain competitive.
Cloud computing for growing businesses
When your business is growing, you often need to respond quickly to changing requirements. Cloud computing offers the ability to immediately provide additional resources such as storage space, computing power or bandwidth.
-
Scaling as needed: Cloud service providers enable companies to dynamically scale resources according to current utilisation. This means they only pay for what they actually use and avoid unnecessary expenses. For example, a video streaming service can temporarily double its server capacity to handle high traffic during the premiere of a popular series and then reduce it again afterwards.
-
Global expansion: For organisations looking to expand internationally, the cloud offers the advantage of providing IT resources in geographically distributed data centres. This minimises latency and improves the user experience. For example, an e-commerce company is opening up new markets in Asia and using cloud services to provide servers in the region that ensure fast website loading times.
-
Relief for internal teams: By using cloud services, growing companies can relieve the burden on their internal IT teams. Routine tasks such as maintenance and updates are handled by the provider, allowing the IT department to focus on strategic projects. For example, a start-up outsources the operation and management of its databases to a cloud service and focuses entirely on product development.
Flexible adaptation to business requirements
Market requirements can change quickly, and you need to be able to respond quickly. Cloud computing supports greater agility through flexible and innovative solutions.
-
Rapid deployment of new services Cloud solutions enable new applications or services to be introduced within a very short time. For example, an education provider introduces a new e-learning platform and, thanks to cloud resources, can put it online within days instead of waiting months for physical servers to be deployed.
-
Automation of business processes Many cloud services offer tools for automating routine tasks such as data analysis, warehouse management and customer support. For example, an online retailer automates its inventory management using an AI-powered cloud service. This analyses sales figures and automatically triggers reorders.
-
Optimisation of development cycles Cloud-based development platforms enable companies to develop, test and deploy applications faster. Development and test environments can be created in a matter of minutes. For example, a software company uses a Platform-as-a-Service (PaaS) solution to test new features faster and bring them directly into production.
-
Respond to seasonal fluctuations Businesses with seasonal peaks, such as during the Christmas period, benefit from the ability to scale resources up or down at short notice. For example, a travel provider can increase its computing power during the booking season and then reduce it afterwards to save costs.
What strategic advantages and innovations does cloud computing enable?
Cloud computing offers you not only technical efficiency, but also strategic advantages that can promote innovation and strengthen your company's competitiveness. By integrating technologies such as artificial intelligence (AI), the Internet of Things (IoT) and big data, the cloud opens up new opportunities to transform business models and make data-driven decisions.
How can you identify suitable AI use cases for your company? What are the advantages of using AI, and what challenges can you expect? Our AI use cases provide answers to these questions.
-
Increase innovation and competitiveness The cloud is a platform for innovation. By providing scalable infrastructure and modern technologies, organisations can develop new products and services and bring them to market faster.
-
Integration of new technologies Cloud services make it easy to integrate AI, IoT and big data. These technologies promote automation, improve business processes and enable completely new business models. For example, a car manufacturer uses cloud-based AI models to analyse and optimise the behaviour of autonomous vehicles. This minimises safety risks and improves the customer experience.
-
Promoting agile innovation Managers can test new ideas with minimal resources and scale them quickly if they prove successful. For example, a FinTech start-up develops and tests innovative payment solutions in a cloud-based sandbox environment and launches the most successful products on the market.
-
Improved competitiveness The cloud enables companies to respond flexibly and quickly to market changes. This is a decisive advantage, especially in highly competitive industries. For example, a fashion company uses cloud-based analysis tools to identify trends early on and bring collections to market faster.
The strategic advantages of cloud computing go far beyond technical efficiency. They enable innovation, promote competitive advantages and make data-driven business models more accessible. Those who use the cloud can not only adapt, but also actively shape market trends and strengthen their position.
How do you select suitable cloud solutions?
Choosing the right cloud provider has a significant impact on the cost, security and user-friendliness of cloud services. Below, we outline some basic criteria to help you make your decision:
Costs and pricing model
Providers should offer flexible pricing models that allow you to pay only for the services you use. Usage-based billing is ideal, especially for companies with fluctuating demand. For example, a start-up with irregular usage peaks might opt for a provider that offers hourly billing. This keeps costs manageable, even during short, intensive periods of use.
Technical support
Round-the-clock technical support is a must, especially in industries where high availability is crucial. Ideally, support should be available in the local language and through various channels, such as telephone, email or live chat. A medium-sized machine manufacturer, for example, chooses a cloud provider with German-speaking support so that it can get help quickly in the event of production problems.
Safety standards and certifications
Providers should be able to demonstrate security certificates such as ISO 27001, SOC 2 or GDPR compliance. Those responsible must ensure that data is protected both at rest and during transmission. A financial services provider, for example, chooses a provider that uses special security measures such as end-to-end encryption and two-factor authentication.
Data location and data protection
The physical location of the servers plays an important role, especially when it comes to complying with local data protection laws. For example, a German car manufacturer prefers a provider with data centres within the EU in order to meet the requirements of the GDPR.
Scalability and adaptability
The service provider should be able to respond quickly to growing or changing requirements without compromising performance. For example, an e-commerce company might choose a cloud provider that is able to provide additional resources at short notice for promotional campaigns.
Adaptable technologies
Cloud providers should have a wide range of services and integrations in their portfolio that are tailored to individual requirements. For example, a marketing agency would choose a provider that offers APIs for integrating social media analysis tools.
Choosing the right cloud provider is an essential step in fully leveraging the benefits of cloud computing. Through careful provider selection, targeted pilot phases and continuous optimisation, you can ensure that your cloud strategy meets both your current and future requirements.
Who are the leading cloud providers?
Choosing the right cloud provider is a key step in implementing a successful cloud strategy. Depending on the use case and business requirements, different providers offer specific advantages and disadvantages. Below, we introduce some of the leading providers and briefly discuss their advantages and disadvantages:
Microsoft Azure
Microsoft Azure is known for its integration with existing Microsoft products such as Office 365 and Dynamics. It is particularly suitable for companies that already work in the Microsoft environment
- Advantages: Seamless integration, extensive AI and analytics tools, global reach
- Disadvantages: Complex pricing structure, steeper learning curve for new users
Amazon Web Services (AWS)
Amazon Web Services (AWS) is the market leader in cloud computing and offers a wide range of services, from computing and databases to machine learning.
- Advantages: Extensive range, high scalability, large community and support
- Disadvantages: Costs can rise quickly with intensive use, administration can be complex in some cases
Google Cloud Platform (GCP)
Google Cloud Platform (GCP) is particularly strong in the areas of big data and machine learning. It is aimed at companies that operate data-intensive applications.
- Advantages: Powerful data analysis tools, competitive prices, focus on sustainability
- Disadvantages: Smaller market presence, fewer third-party integrations compared to Azure or AWS.
STACKIT
STACKIT is a European provider that stands out for its strong focus on data protection and data security.
- Advantages: GDPR compliance, focus on security and compliance
- Disadvantages: Less global reach, limited selection of services
IONOS
IONOS is primarily aimed at medium-sized companies and scores highly with its high level of data protection and user-friendliness.
- Advantages: Transparent pricing, easy to use, strong customer service
- Disadvantages: Limited range of highly specialised tools compared to large providers
Oracle
Oracle Cloud Infrastructure is particularly suitable for companies that use Oracle databases and applications. The provider offers powerful services for data management and enterprise applications.
- Advantages: Strong support for Oracle products, competitive pricing for certain workloads
- Disadvantages: Less flexibility for non-Oracle applications, limited global reach compared to AWS or Azure
IBM Cloud
IBM Cloud offers a mix of traditional IT solutions and modern cloud computing. IBM is a leader in the fields of AI and blockchain in particular.
- Advantages: Specialisation in hybrid cloud solutions, powerful AI and blockchain tools
- Disadvantages: Higher costs, limited market presence compared to the largest providers
Alibaba Cloud
Alibaba Cloud, the market leader in Asia, offers a wide range of cloud services and is particularly aimed at companies with an interest in the Asian market.
- Advantages: Strong growth, competitive prices, comprehensive services specifically for the Asian market
- Disadvantages: Limited support outside Asia, data protection concerns in certain regions
Each of these providers has its strengths and weaknesses, and choosing the right service provider depends on your individual requirements. Comparing the offerings and conducting a thorough evaluation process are therefore crucial to finding the right solution for you.
We develop tailor-made cloud strategies based on a thorough gap analysis that takes existing structures and cloud-specific requirements into account. Arrange a free initial consultation here.
Conclusion: Why cloud computing is the future
Cloud computing is much more than a technical innovation; it has become the forward-looking foundation for digital transformation. In light of developments such as multi-cloud strategies, edge computing and artificial intelligence (AI), the importance of the cloud will continue to grow. Those who embrace this technology early on will secure decisive competitive advantages in the long term.
-
More and more companies are using a combination of different cloud providers to avoid dependencies and increase flexibility. This strategy makes it possible to use the best services from different providers and minimise the risk of downtime.
-
Cloud computing is increasingly being combined with edge computing to process data directly at the point of origin. This is particularly relevant for applications with low latency requirements, such as autonomous vehicles or IoT devices.
-
Cloud technologies provide the foundation for integrating AI applications that help companies with automation and data analysis. For example, a retail chain uses AI in the cloud to analyse customer preferences and offer personalised recommendations in real time.
Cloud computing has long been more than just a technological option – it is a necessity for companies that want to succeed in a dynamic and digitalised world. With its ability to optimise costs, streamline processes and promote innovation, the cloud is and will remain the backbone of modern business strategies in the future.
FAQ – Cloud computing advantages and disadvantages
Why is cloud computing important for companies?
Cloud computing enables flexible use of storage space and computing power exactly when they are needed. It offers cost savings by eliminating the need for investments in hardware and enables scalable use that can be perfectly adapted to current requirements.
Which applications can be migrated to the cloud?
Companies can migrate a variety of applications to the cloud, such as online stores that adjust their server capacities according to demand or global start-ups that operate worldwide. The cloud offers rapid scalability and global availability of IT resources.How do the various cloud providers differ?
The leading cloud providers include Microsoft Azure, AWS, Google Cloud Platform, STACKIT and IONOS. Each provider has different strengths, such as security, scalability, integration into existing infrastructures or specialised services for specific industries. The choice depends on your business requirements.
What challenges does cloud computing entail?
Compliance with regulations, cost risks due to uncontrolled use and technical dependence on a single provider (vendor lock-in) are among the key disadvantages of cloud computing. Careful planning and strategic decisions are necessary to minimise these risks.
How does cloud computing help to optimize costs and increase efficiency?
Cloud computing enables companies to use usage-based billing, where they only pay for the resources they actually use. This reduces investment and maintenance costs and increases efficiency through needs-based use and rapid scalability.
Maximilian Schaugg has been working on cloud projects at MaibornWolff since July 2018. He specialises in the design, implementation and operation of cloud and container solutions in existing and new IT infrastructures. An important part of his work is focusing on the needs of his customers and taking a holistic approach to successfully completing projects from start to finish. In recent years, he has focused particularly on cloud migration, cloud consulting and cloud platform development, where he has been able to apply and further deepen his in-depth knowledge, especially in the critical areas of security, cost efficiency and governance.