The cloud enables access to data from anywhere with an internet connection. It is scalable as the cloud can accommodate growing data volumes without requiring users to manage their own physical storage infrastructure so it is also cost-effective. Data is replicated across multiple servers and data centres and has automated backup and disaster recovery ensuring data remains safe and recoverable in the event of a system failure. 

Some software providers describe their solution as ‘cloud hosted’ while others are ‘cloud native’. This opens the door to questions – what is the difference, and why does it matter?  Lenders should be aware of the differences when signing up to cloud technology providers. 

One of the similarities is that the cost of both cloud hosted and cloud native are part of a firm’s capital expenditure and operational expenses. In both cases, computing services are obtained from a cloud vendor and are charged based on periodic usage. 

Cloud hosted  

Cloud hosted refers to the practice of running applications or storing data on servers provided by a cloud vendor. Instead of investing in and maintaining their own physical servers, firms rely on the infrastructure and resources offered by the cloud provider. With this approach, costs are incurred based on the amount of resources used, such as storage space, processing power, and data transfer. 

Cloud native 

Cloud native goes further than cloud hosted as it builds and deploys applications specifically designed for the cloud environment. Cloud-native applications are developed using cloud technologies and services, such as containers and serverless computing.  

By leveraging these cloud-native tools, organisations can take advantage of the scalability and flexibility offered by the cloud. Similar to cloud hosted, costs in the cloud-native approach are based on usage, with organisations paying for the resources and services consumed. 

The key point is that both cloud-hosted and cloud-native approaches allow organisations to shift their expenses from the upfront capital investment of buying and maintaining physical infrastructure to ongoing operational expenses based on their actual usage of cloud services. This provides organisations with more flexibility and cost efficiency, as they only pay for the resources they need and can scale up or down as required. 

Downside of cloud hosted 

However, the cloud-hosted solution requires limited investment by the solution provider compared to the necessary changes to applications and infrastructure when using cloud-native solutions.   

Cloud-hosted applications are those which have traditionally been installed on-premise within the company’s IT infrastructure, which are then lifted and migrated onto cloud-based servers. This means that any pre-existing issues and limitations still remain.   

All the solution provider is doing is using cloud services to deliver the computing capability which would typically be provided within a datacentre. Just because a legacy system has been migrated to the cloud, that doesn’t mean it has adapted to more modern approaches and has not taken advantage of the benefits of a cloud-native approach. 

As the cloud-hosted solution is not ‘shared’ cloud-hosted solutions need ongoing investment in infrastructure, maintenance, and resources. Cloud-hosted applications are typically tightly integrated ‘monolithic’ solutions and may require significant effort to manage upgrades of the applications of associated technology stack. Given the need to manually configure server setup, software installation, and customisation, implementation times are usually longer. 

Cloud-hosted solutions have been described by some technology experts as trying to fit a square peg into round hole, they are not a perfect fit. If the square peg is smaller than the round hole, it will fit in but won’t do the job properly as there are too many gaps. When compared to first-rate cloud-native solutions, the potential of cloud optimisation becomes clear. 

Dynamics of cloud native 

Providers of cloud native solutions have developed applications, infrastructure and automation which takes advantage of solutions and capabilities provided by the cloud provider.  While individual client environments and data are isolated, the overall compute, storage, and network architecture, is shared, enabling true economies of scale, and instant elasticity and lowered costs.  

Cloud native does so much more than cloud hosted and is being used by more companies every day for greater flexibility, scalability and capability. 

Neil Dyke is chief technology officer at Phoebus