When you stream a show, back up your photos or use a work app, you’re almost certainly using the cloud. Here’s what cloud computing actually is, who controls it, and why it has become so important.
“The cloud” sounds abstract, but it’s very physical. It’s made up of millions of computers in huge data centres around the world, owned by a small number of companies and rented out over the internet.
Cloud computing lets businesses, governments and individuals use those computers to store data and run software, instead of buying and maintaining their own.
How it works
Before the cloud, companies typically bought their own servers and kept them in a server room or rented data centre. They had to predict how much computing power they’d need, and pay for it upfront.
With cloud computing, they rent what they need, when they need it, and pay as they go. A retailer can rent extra computing power for Black Friday sales, then scale back the next week.
Cloud services come in layers. Some rent out raw computing power and storage. Others provide ready-made platforms for building apps. And software-as-a-service products, such as Gmail, Microsoft 365, Xero, Netflix and Dropbox, run entirely in the cloud, accessed through a web browser or app.
Who controls it
The market is dominated by three U.S. companies. Amazon Web Services, which pioneered the industry in 2006, is the largest, followed by Microsoft Azure and Google Cloud. China’s Alibaba Cloud is a major player in Asia.
Cloud computing is among the most profitable businesses in technology. Amazon Web Services, for example, makes most of Amazon’s operating profit.
The boom in artificial intelligence has supercharged demand, because training and running AI models requires enormous computing power that most companies can’t afford to build themselves.
Why businesses moved to the cloud
The cloud lets businesses start up quickly, scale easily, and avoid the cost of buying and managing their own equipment. Big providers also invest heavily in security and back-up systems.
Many Australian companies and government agencies now run their core systems in the cloud, and the major providers have built data centres in Australia, partly so sensitive data can be stored onshore.
The risks
Because so much of the internet relies on a handful of providers, problems at one of them can have huge effects. In October 2025, an outage at Amazon Web Services knocked out thousands of websites and apps around the world for hours, including banking apps, games and smart home devices.
Other concerns include cost, which can climb quickly as businesses use more, the difficulty of switching providers, and questions about who can access data stored by U.S. companies.
Some businesses have moved part of their computing back in-house or use several cloud providers to reduce their reliance on one.
