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Updated Oct 23, 2023

Virtualization vs. Cloud Computing: What’s the Difference?

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Andreas Rivera, Business Strategy Insider and Senior Writer

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Virtualization and cloud computing are often discussed interchangeably, but while they’re closely associated, these tech terms have crucial differences. Virtualization and cloud computing are similar technologies, but their differences are significant enough to affect your business decisions. This guide will help demystify the tech behind the jargon and help businesses determine which technology is right for them.

What is cloud computing?

Cloud computing comprises software, hardware and high-level network resources that individuals and companies can access via the internet. A cloud computing service provider will make available several types of services that support a business’s needs. 

For example, a cloud service provider may use a software-as-a-service (SaaS) model to deliver software applications to client businesses. While the software isn’t installed on users’ desktops, they can access these applications in a web browser. 

Some corporate business clients may need more advanced services delivered over cloud computing. These platform-as-a-service (PaaS) offerings may include databases and virtual servers. Even more high-level cloud services are called infrastructure as a service (IaaS); these solutions support the components that make platforms and services function, such as physical servers, device storage and other networking components.

Did You Know?Did you know

Cloud hosting, which stores your website remotely and uses the hosting service’s resources, can be an IaaS or PaaS solution.

What is virtualization?

Virtualization software separates computer environments from physical infrastructures so that you can run multiple operating systems and applications simultaneously on the same machine. For example, in a workspace virtualization model, if you do most of your work on a Mac but use select applications exclusive to PCs, you can run Windows on a virtual machine to access those applications without switching computers.

“Virtualization software … enables businesses to reduce IT costs while increasing the efficiency, utilization and flexibility of their existing computer hardware,” said Mike Adams, vice president of product and technical marketing at Ivanti.

Virtualization has many practical applications, with two main ones.

  • Application testing: Virtualization allows software developers to test their applications in various environments without setting up several different computers. If the application crashes on the virtual machine, they can close and restart the virtual machine to a previous state without damaging the computer.
  • Server consolidation: One of the most significant benefits of virtualization is server consolidation. Instead of maintaining multiple servers with unique functions, server virtualization allows you to split a single server’s resources for multiple purposes. Often, server resources are underutilized, resulting in businesses spending too much on server upkeep for a little output.

How is virtualization different from cloud computing?

Virtualization is the fundamental technology that powers cloud computing. Virtualization is software that manipulates hardware, while cloud computing refers to a service that results from that manipulation. You can’t have cloud computing without virtualization. 

“Virtualization is a foundational element of cloud computing and helps deliver on the value of cloud computing,” Adams said. “Cloud computing is the delivery of shared computing resources, software or data – as a service and on demand through the internet.”

Most of the confusion about these terms occurs because virtualization and cloud computing work together to provide various services. The cloud can – and most often does – include virtualization products to deliver the computer service, said Rick Phillips, a consultant at the IT firm Weidenhammer.

According to Phillips, the difference is that a true cloud provides self-service capability, elasticity, automated management, scalability and pay-as-you-go service, which are not inherent in virtualization.

What are the advantages of a virtualized environment over the cloud?

To best understand the advantages of virtualization, consider the difference between a private cloud in a virtualized environment and a public cloud.

A private cloud, in its own virtualized environment, gives users the best of both worlds. It can give users more control and the flexibility of managing their systems while providing the consumption benefits of cloud computing, said John Livesay, vice president and chief sales officer of InfraNet Technologies Group.

“Private cloud computing means the client owns or leases the hardware and software that provide the consumption model,” Livesay said. “You pay for resources as you go, as you consume them, from a [vendor] that is providing such resources to multiple clients, often in a co-tenant scenario.”

On the other hand, a public cloud is an environment open to many users, built to serve multi-tenanted requirements, Phillips said. “There are some risks associated here,” he added, such as having bad neighbors and potential latency in performance.  

With virtualization, companies can maintain and secure their own “castle,” Phillips said. This provides several benefits.

  • Maximized resources: With virtualization, you can maximize your resources by reducing the number of physical systems you need to acquire.
  • Enhanced value: Virtualization allows you to get the most value from your servers since you can use multiple systems and applications on the same hardware.
  • Integrated costs: When you use virtualization, you can integrate costs associated with management, administration and all the attendant requirements of managing your own infrastructure into your IT budget. 

Virtualization isn’t right for every business. Consider the pros and cons of virtualization before incorporating the technology into your company.

How do you know if your business needs a virtualization solution?

Determining if virtualization is the best solution for a business requires an in-depth analysis of the organization’s specific needs and requirements. Livesay said you should also consider the following:

  • Costs
  • How much management the business can and wants to do
  • Scalability requirements
  • Security needs
  • How much feature development can be expected

If you run a smaller operation and are looking to reduce costs on computing resources and upkeep, conduct an audit of your physical, on-location hardware. Are your server’s resources being utilized to their full potential? Could they take on the workload of another server that’s equally being underutilized? This could cut down on power consumption and upkeep costs.

“Businesses that work more on an OPEX [operational expenditures] model that have less IT staff and fewer security concerns are more cloud-oriented,” Livesay said. “Businesses that need greater control for integration and security or who work more on a CAPEX [capital expenditures] model would lean towards virtualization.”

How do you know if your business should use a cloud solution?

While virtualization is the best solution for some organizations, a cloud solution offers several benefits more suitable for other businesses. Phillips said cloud solutions are best for businesses with the following needs.

  • Outsourced IT: With cloud solutions, the day-to-day administration, care and feeding of supporting systems moves from you to the IT managed service provider. This could free up internal IT resources for higher-value business support and allow you to put IT budget dollars toward efforts that advance your business.
  • Quick setup: Getting started with cloud solutions is relatively straightforward. Plus, servers, appliances and software perpetual licenses go away when you use such a service.
  • Pay-as-you-go model: SaaS applications let you offload basic IT requirements to cloud service providers. You pay for what you need and use. You don’t have to continue to invest in many of the products used to support the network and systems, such as antivirus, data archiving, encryption, email and offsite storage solutions.
  • Scalability: With the cloud, you can temporarily scale your IT capacity by offloading high-demand compute requirements to an outside provider. As a result, you pay for only what you need and use, only when you need it.

What should businesses look for in a virtualization provider?

According to Adams, business owners considering virtualization should consider the following questions:

  • Is the virtualization provider offering a tried and tested solution? Research the vendor’s track record of product innovation, success and customer adoption.
  • Is there a vision and public road map for the virtualization solution? You should understand how the solution will advance and how it will help your business in the long run.
  • What type of ecosystem support exists for the virtualization solution? It’s imperative that the vendor works with key business and industry-specific independent software vendors, as well as a wide range of resellers, service providers and system integrators.
  • Does the virtualization solution support openness and choice? As your business grows, you want the flexibility to evolve your products and processes and the ability to incorporate other technologies over time.
Did You Know?Did you know

A virtual phone number can keep your personal number private while making you accessible by phone anywhere, anytime.

What’s next for virtualization and cloud computing?

Virtualization and cloud services are not end-all, be-all solutions. Like any other technology or service a business adopts, things can always change.

“While cloud computing and virtualization each have their own benefits, they are not competing approaches,” Adams said. “We view cloud computing as an evolution of virtualization. Customers who virtualize their hardware servers may adopt cloud computing over time for increased self-service, scale, service delivery levels and agility.”

The conversation over virtualization and cloud computing nowadays often leads to talk of “serverless computing,” which aims to eliminate user-end concerns about server upkeep, constraints and scalability. This is a full-managed service that often bills you for the resources you consume and the amount of time your code runs. 

This “pay for what you use” model may be expensive for smaller businesses right now, but it is becoming more affordable as the technology is developed.

Sandra Mardenfeld and Sara Angeles contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.

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Andreas Rivera, Business Strategy Insider and Senior Writer
Andreas Rivera is a multimedia wiz who has spent years testing and analyzing the latest B2B software solutions and services. He engages with top programs and tools to determine the best products for businesses across a range of sectors. He also recommends the best practices and strategies for specific business areas. Rivera has a firm understanding of what small business owners need thanks to the time he's spent interviewing countless entrepreneurs and industry experts. He also has hands-on experience in customer acquisition, marketing, PR and thought leadership. He earned a bachelor's in communication and journalism from the University of Utah.
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