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How Cloud Computing Works: TheArchitecture Behind the Services

  • Arushi
  • Mar 19
  • 5 min read

Updated: Mar 28

Cloud Computing, Demystified: What It Is, How It Works, and Why It Matters

Cloud computing is everywhere. It powers your Netflix binges, your banking app, your food deliveries, and the tools you use at work. Despite being deeply woven into our daily lives, it’s often misunderstood—and casually brushed off with phrases like, “The cloud is just someone else’s computer.”

That’s not entirely wrong. But it doesn’t tell the whole story.

To truly understand the cloud, it helps to think in architectural terms: how it's built, how its services are layered, and how different platforms fit into the picture. That understanding not only clarifies the tech—it sheds light on the business models and decisions that shape it.

Whether you're simply curious about how modern tech works, or you want to understand the systems behind the apps you use every day, this post offers a clear, big-picture guide to cloud computing. Along the way, we’ll use real-world examples like AWS EC2, Lambda, and Azure Functions to make it concrete.

So, What Is Cloud Computing?

At its core, cloud computing is the on-demand delivery of computing resources—like storage, processing power, and software—over the internet.

Instead of owning and maintaining physical servers, you "rent" what you need from cloud providers such as Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform (GCP).

This model gives organizations:

  • Flexibility – scale up or down as needed

  • Speed – deploy services quickly, often in minutes

  • Cost efficiency – pay only for what you use

  • Focus – spend less time managing infrastructure, more time building value

But cloud services aren’t all the same. They’re offered at different levels of abstraction—commonly described as IaaS, PaaS, and SaaS.

The Cloud Stack: IaaS, PaaS, and SaaS Explained

Let’s break down each layer with practical examples.

1. IaaS – Infrastructure as a Service

What it is:The foundation layer. IaaS lets you rent raw computing resources—like virtual machines, storage, and networking. It’s like leasing server space, but far more flexible.

You manage:Everything above the OS—your applications, runtime, security, updates.

The provider manages:The hardware, virtualization layer, and sometimes the operating system.

Examples:

  • AWS EC2 (Elastic Compute Cloud)

  • Microsoft Azure Virtual Machines

  • Google Compute Engine

Use case:A startup wants to launch its backend systems without buying servers. With EC2, it can deploy virtual machines in multiple regions, scale them on demand, and shut them down when idle.

2. PaaS – Platform as a Service

What it is:A step up in abstraction. PaaS provides a complete platform to develop, deploy, and manage apps—without dealing with infrastructure.

You manage:Just your application code and configuration.

The provider manages:Servers, OS, runtime environments, scaling, and updates.

Examples:

  • AWS Elastic Beanstalk

  • Google App Engine

  • Azure App Service

Use case:A development team building a web app uses a PaaS to focus solely on writing and shipping code. The platform handles hosting, load balancing, and scaling automatically.

3. SaaS – Software as a Service

What it is:The most abstract layer. SaaS delivers fully-built software over the web—no setup, no infrastructure, just log in and go.

You manage:Nothing. You simply use the application.

The provider manages:Everything—servers, databases, software, updates, security.

Examples:

  • Google Workspace (Docs, Gmail, Drive)

  • Microsoft 365

  • Salesforce

  • Dropbox, Zoom, Canva

Use case:An HR team uses Workday to manage payroll and employee records—without touching a server or writing a line of code.

Where Do EC2, Lambda, and Azure Functions Fit?

Cloud providers offer hundreds of services, but many can be mapped to these cloud layers.

AWS EC2 – IaaS

  • Category: IaaS

  • What it offers: Virtual servers with full configuration control

  • Who it’s for: Developers or IT teams needing granular control

  • Analogy: Renting an unfurnished apartment—you set it up however you like

AWS Lambda / Azure Functions – Serverless (PaaS)

  • Category: Serverless (a modern form of PaaS)

  • What it offers: Run small bits of code in response to events—no servers to manage

  • Who it’s for: Teams building lightweight, event-driven logic (e.g., send an email after form submission)

  • Analogy: Like calling an Uber—use it when needed, and it disappears when you're done

These services represent a shift toward event-driven computing: you write what the app should do, and the platform handles how it runs.

SaaS Tools like Zoom or Salesforce

  • Category: SaaS

  • What it offers: Fully managed apps for end users

  • Who it’s for: Anyone needing ready-to-use tools

  • Analogy: Eating at a restaurant—just show up and enjoy the experience

Why These Layers Matter

Each layer solves a different set of problems. Choosing the right one depends on how much control you want and what your team needs to focus on.

  • IaaS gives you full flexibility, but with more responsibility

  • PaaS simplifies development by managing infrastructure for you

  • SaaS removes technical complexity altogether so teams can focus on outcomes

In practice, most companies use a combination of all three:

  • IaaS for core systems needing customization

  • PaaS for quickly building internal tools or web apps

  • SaaS for common needs like email, CRM, or collaboration

How These Layers Work Together

These aren’t isolated silos—they often build on each other.

  • A SaaS product like Zoom may run on virtual machines (IaaS) and use serverless compute (PaaS) behind the scenes.

  • A PaaS like Azure App Service itself runs on an IaaS foundation managed by Microsoft.

Cloud services are modular. You mix and match building blocks depending on your goals.

From a Business Perspective: Why It All Matters

Understanding cloud architecture helps you make smarter decisions—not just technical ones, but strategic ones:

  • Should we build or buy this feature?

  • Do we want full control, or do we need to move fast?

  • How do we optimize for cost, speed, and resilience?

Example:

  • A fintech startup might use EC2 (IaaS) to ensure compliance and control for sensitive workloads.

  • The same team could use Lambda (PaaS) to automate internal processes.

  • Meanwhile, sales and HR use SaaS tools like Salesforce or Workday to manage customer and employee data.

When business leaders understand these layers, it bridges the gap with technical teams—and leads to better, more aligned choices.

Key Takeaways

  • Cloud computing isn’t just “someone else’s computer”—it’s a layered architecture designed to offload complexity at different levels.

  • IaaS, PaaS, and SaaS each serve different purposes, offering trade-offs between control and convenience.

  • Services like EC2, Lambda, and Azure Functions are examples across this spectrum, helping organizations scale intelligently and work efficiently.

  • Understanding the cloud stack empowers better technical and business decisions—and helps everyone speak the same language.

Final Thoughts

Cloud computing has quietly transformed how modern businesses operate. It’s not just for developers—it’s reshaping industries across finance, healthcare, retail, media, and more.

Whether you're building software, choosing a vendor, or planning your digital strategy, understanding the cloud's structure gives you a critical edge. Because while it may not be magic, once you see how the parts fit together, it’s pretty close.

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