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Cloud vs. Hosted Services, what’s the difference?

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Owen Swart, Technology analyst at Don't Fear the Tech (Image: File photo)

All too often of late I see press releases from tech providers who are re-branding their old hosted services as “cloud” services. This strikes me as somewhat disingenuous. There are some important differences between hosted services and a true cloud offering.

What’s a Hosted Service?

Hosted services are technology services offered to you or your company by a provider that hosts the physical servers running that service somewhere else. Access to the service is usually provided through a direct network connection that may or may not run via the Internet.

This isn’t a new idea. Hosted services date back to the early years of commercial computing, when companies would purchase processing time from mainframes hosted by other companies. These days hosted services generally take the form of more generic business applications including website hosting, email servers, off-site backups, data warehousing and that sort of thing.

Odds are, if you’re operating in the corporate space, you’re using at least one hosted service right now.

What’s a Cloud Service?

As the name “cloud” suggests, this is a somewhat nebulous concept. Strictly speaking, a cloud service is a hosted service that’s accessible over the Internet – a subset of hosted services. But is that really all there is to it?

I don’t believe that it is. I submit that a hosted service, even one accessible via the Internet, can’t be considered a real cloud solution unless it’s been built to capitalise on the new range of collaboration and interconnectivity that is inherent in the cloud.

Let’s look at an example: email.

We’re all familiar with the old standards of corporate email solutions like Microsoft Exchange and IBM Lotus. Although larger corporates will most often run their own instances of these locally in their internal datacentres, mid-size companies will usually outsource email provision on these tools to hosted service providers. The difference between hosted and local is literally just where the physical server sits – essentially there’s no distinction in functionality between the two.

Describing a hosted email solution such as these as a “cloud” service is probably a bit misleading. While it certainly satisfies the literal definition of a cloud service, Exchange and Lotus are essentially designed to run as internal services. Their access via the Internet is clumsy at best (try accessing Microsoft Outlook Webmail through Mozilla Firefox and you’ll see what I mean), and is clearly a tacked-on afterthought added to the tools in response to growing need.

Contrast this with a cloud-based email service like Google’s Gmail – an email solution born in the cloud and built to be accessed via the Internet. Gmail is equally at home on any computer and in any browser. It even supports outdated standards like POP3, allowing users to access their accounts from computers and applications that may be obsolete or less powerful (less-popular smartphone platforms, for example).

In addition to this, Gmail’s default interface is studded with extra connectivity tools like Gtalk (instant messaging) and Buzz (social networking) that are able to effortlessly connect to non-Google services through the use of open standards and APIs. More experienced users can connect their Gmail account up to Google’s other offerings like Docs and Calendar for an integrated cloud experience, allowing for a level of collaboration simply not achievable through old-fashioned hosted services.

And that’s the key-word: collaboration. The most popular cloud-based services are popular because they provide collaboration other tools don’t allow: an extra layer of interconnectivity between users and other systems that’s easy to use and inexpensive (or free) to buy.

These cloud-based tools: Gmail, Google Docs, DropBox, Twitter, Facebook, Google Maps, YouTube and so on, are streaking ahead of their local and hosted predecessors – not only in corporate implementation, but also in adoption by private users – because they are built for the web and designed from the very beginning to work with the user and with each other. These are the tools that make the cloud what it is.

Connecting an internal solution to the web and calling it “cloud” is a bit like waterproofing a truck and calling it a submarine: It might technically fit the description, but it’s clearly not meant for that.

By Owen Swart, Technology analyst at Don’t Fear the Tech


  1. The term “cloud” in reference to computer services has been banded around quite a bit recently with no clear directive on what the term actually means. I’d say another element to consider in the argument between hosted services vs cloud hosted services is the scalability and flexibility cloud hosting (and cloud based services) can have. Simply put you can expand the virtualized attributes of a cloud based machine almost instantly whereas with physical machines you obviously have to go out of your way to purchase additional physical resources.

  2. As a proud employee of a company that owns a cloud (8 interconnected data centers) and offers cloud computing services, I’m afraid I don’t completely agree… Cloud computing is an idea. The idea is, move your computing into the cloud, and that way minimize resource waste. If you take hosted MS Exchange as an example, it is one instance where you are (in my opinion..) completely wrong, as it is a perfect cloud solution. This has nothing to do with the client app, outlook in most cases, which can or cant be web-based. Its about the server side app, the exchange. If Exchange is run in a data center, on a server that is offering it to more than one company, you are offering a cloud service. Moreover, the additional services you mentioned in Google mail are available as part as UCS by Microsoft, another cloud service that isn’t Google…

  3. In many cases, Email can be a pretty bad example of a way to differentiate between cloud & hosted services because most Internet users, over time, have had to access their email account (whether corporate or personal) via the Internet at some point (consider this Cloud 0.5, or pre-Cloud). However, with our definition of the cloud today, a traditionally hosted Exchange server for example, cannot be considered a true cloud service; and this is because it cannot be truly elastic or economical. Admittedly so, the cloud is certainly not a technology, but it is an operations model that is powered by cutting edge technologies today which makes it possible for providers reduce (some) operations cost, as well have the flexibility to react to the market due to an IT infrastructure that can economically leverage its resources on-demand and yet be aware of the new complexities such an environment introduces while meeting SLAs of your clients.
    The traditionally hosted environment was simply not designed to scale at will or to easily enable new offerings; the cloud makes this a possibility

  4. IMHO its just semantics, Cloud is type of hosted service. Cloud is we-centric hosting. Its hosting in steroid if you will, or the next level of hosting. Its like its a type of plane— it can fly but can also land and take off on water –a has all the properties of a plane —and more! :-).

    Regarding elastichost comment:
    “can expand the virtualized attributes of a cloud based machine almost instantly whereas with physical machines you obviously have to go out of your way to purchase additional physical resources.” I beg to disagreem of this statement, Cloud or hosting, ofcourse have physical resources
    “–somewhere. If you’re refering to the flexibility of expanding because of virtualization, I pressume you havent worked on a mainframe environment which has been around for decades,they’re just calling it now virtualization–like I said–its new in Wintel machines , but definitely the technology has been around for at least 40 years. Like I saidm its all just semantics.

  5. My interest and comment is from the non-technical user perspective. I wouldn’t want or even know to purchase/lease a hosted solution but if there is an application of any size and complexity that I wanted to utilize, purchasing the use of that application for 1 person feels more cloud provided than hosted. Take Electronic Medical Record solutions as an example. Thoughts?

  6. Simply if you are talking about Hosted so it means storing your data on server, but if you are describe it such as Web Hosting Or Cloud hosting so it is a type of Hosting services.
    Different technology have different method to provide service and it own advantages.
    You are defining it good but not best.
    Thanks for sharing your thought and knowledge.

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