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Cloud Vs. Hosted: What Is the Difference?

This article was updated on November 5, 2023

What is the difference between hosted vs. cloud services? It depends on who you ask. Many software providers claim their solutions are cloud-based, but you may find they're just hosting traditional solutions and running a bit of virtualization. Hosted vs. cloud services have fundamental differences, each with advantages and disadvantages. It's important to know what they are and not buy into marketing spin.

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What Are Cloud Services?

Cloud services are third-party computing services that providers host online and deliver to customers via the internet and on-demand. There are three main categories: 

  • Software as a service (SaaS): single applications built for a specific purpose, such as customer relationship management (CRM), accounting, or file sharing

  • Platform as a service (PaaS): cloud-based solutions that combine a collection of applications into one platform — for example, communications platform as a service (CPaaS) combines SMS, chat, video calls, and other real-time communication applications

  • Infrastructure as a service (IaaS): Cloud-based solutions that provide a development framework (including hosting, storage, and virtualization) that companies can use to build and support custom-built apps and networks

What Is Multitenancy?

Tenancy is one of the key differences between hosted vs. cloud services. Cloud-based solutions rely on multitenancy — the sharing of resources and costs across a wide pool of users or businesses. All tenants use the same software, platform, or infrastructure solution hosted by the same public cloud, but your company's data is isolated and inaccessible by anyone outside your business. 

What Are the Benefits of Using Cloud-Based Services?

Using cloud services offers your business numerous advantages, many of which you don't get with hosted solutions: 

  • Simplify IT: Cloud providers build and maintain all the necessary hardware, so your IT department doesn't have to manage servers or install and update software on everyone's computer. The provider is also responsible for security and troubleshooting.

  • Reduce costs: With cloud services, you pay for what you use. You don't have to invest in hardware or buy software licenses that your team may never use. Migrating to an SaaS solution saves companies an average of 30% to 40% over five years, according to ZK Research.

  • Integrate business systems and data: You can integrate different third-party cloud solutions — and the data hosted by them — to streamline workflows and boost team collaboration and productivity. For example, if you integrate your cloud communications platform with a CRM, your employees can see customer information before they answer incoming calls and then automatically log all calls into the CRM.

  • Increase agility and scale quickly: Cloud services let you make changes in just a few clicks, whether you need to shift workflows, add new features and functionality, or change the number of users.

  • Leverage artificial intelligence, predictive analytics, and the internet of things: With your data in the cloud, you can easily apply these advanced technologies to improve efficiency, gain new insights, and future-proof your business.

  • Support remote workforces: Your team can access cloud services anytime, from anywhere, using any device. All they need is a login and internet connection.
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How Reliable Are Cloud-Based Services?

Reliability will depend on your vendors' public cloud infrastructure, but most leading cloud-based solutions providers, such as those catering to cloud call centers, leverage multiple redundant server sites to ensure reliability (even during peak traffic), business continuity, and disaster recovery.

Cloud services are typically resilient and reliable because they're upgraded constantly and dispersed geographically, which shields them from local disasters that could interfere with service availability. Data is protected by teams of engineers whose sole job is to monitor data privacy and ensure security protocols are effective and always up-to-date.

What Are Hosted Solutions?

Like cloud-based solutions, hosted services are managed by a third-party provider and accessed via the internet. They also include SaaS, PaaS, and IaaS. 

Instead of a public cloud, hosted solutions rely on physical servers that the provider owns and maintains privately somewhere off the customer's premises. The service is virtualized to be available online — without the need for hardware or software installations — and it's typically accessed via a virtual private network or remote desktop.

What Is Single Tenancy?

Single tenancy is a single application or platform, with a single supporting infrastructure and database, used by a single customer. Unlike multitenancy solutions, resources are not shared, so they tend to be limited in scope and more expensive than true cloud services. 

What Are the Benefits of Hosted Solutions?

Hosted services offer some of the same advantages as cloud solutions, including remote access and the ability to integrate with certain other cloud solutions. Because the software and hardware are maintained by the provider, there's also less for IT to manage than with traditional computing solutions (but typically more than with cloud solutions).

Depending on the setup and service agreement, hosted services may be more customizable than cloud services. You also have more control over security protocols, which can be important for companies in certain highly regulated industries. (That said, it's important to note that most leading cloud providers have built security infrastructures that comply with industry-specific security and privacy regulations.)

How Reliable Are Hosted Services?

This depends on your provider. Hosted does mean you're not sharing resources like security expertise or bandwidth with other users. But with these services, you might not be able to rely on the multiple redundant sites that help ensure disaster recovery, business continuity, and uptime.

Hosted vs. Cloud: How to Know Which Is Best for You

Without multitenancy, you can't get the cost efficiency of true cloud computing. Hosted means more control, but it also means more work for IT. Cloud services by comparison are easier to set up, manage, and maintain. Hosted services also often come with a heftier price tag, especially if you seek the effective elasticity and reliability that you get with cloud-based, multitenant solutions. 

Whichever solution you choose, don't be fooled by hosted services providers claiming to be cloud providers. They aren't the same. And "virtualized" also doesn't mean cloud. The simple rule is that if a solution isn't multitenant, it isn't cloud, and you won't get all the benefits that true cloud services providers can deliver.

Ready to migrate your business communications to the cloud? Contact a Vonage representative to learn more.


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