To understand where the hyperscale cloud industry is today and where it’s headed, it’s helpful to dig into how the industry came about. The term cloud refers to a system or application that is being used for a business purpose where the infrastructure for that system is centralized, typically in a location referred to as a data center. Data centers are warehouses specifically built for housing advanced computing hardware, networking equipment, data, and applications.

Data centers are composed of racks and racks of servers, a business term to refer to a computer, along with networking equipment, storage arrays, and cooling and power equipment, among other components. Servers themselves are typically composed of a core processing unit (CPU), random access memory (RAM), and disk, which is typically either a hard drive or flash drive to store data. The CPU is typically used for computational tasks such as solving a math problem while RAM is used to store data temporarily, typically because data is being used by an application and being transformed in some way. Disk and flash drives are used to store data for a longer period, with disk drives being a cheaper, mechanical storage device and flash drives being more expensive given that data is stored in a semiconductor chip. Servers are used to host applications that are typically either internally facing, helping employees more efficiently and effectively do their job, or externally facing, providing services to customers and partners.

When discussing data centers, it’s helpful to define the different types. We’ll start by understanding the traditional approach: on-premises infrastructure. On-premises is a term that’s used to refer to an organization that hosts its technology infrastructure onsite at offices or other business facilities. For example, if you are a legal firm, your systems would be on-premises if they were hosted at the same location as your office. There would be a server room or several rooms at the facility where all of the systems and data are hosted for the employees to complete their work. This location would host the systems that support worker productivity and internal workflows, while also facilitating business operations.

This approach had benefits such as making it relatively easy to secure systems and applications. If all of the systems and data are hosted within your organization’s physical locations, and they are not accessible from the internet, you can establish a strong security posture through physical controls such as allowing only employees to access your facilities and not allowing them to take their workstations home with them. At a small scale, this is also a very manageable approach to infrastructure given that you could operate it with a small team and troubleshoot issues by reaching out to your local IT administrators.

However, as organizations and systems began to become more complex, scale globally, and support new patterns of work, new approaches began to surface. If the legal firm, for example, were to grow to 10 offices around the globe, it would be very difficult to continue to work via distributed, on-premises systems. Each office would need its own technology, infrastructure, and IT personnel and there would need to be a way for workers across offices to work together. They would need to share data, even if it were sensitive; if perhaps the New York and London offices were working together on a case for a multinational company operating in both the US and the UK. These pressures led to the centralization of infrastructure, which is where the term cloud comes from.

Let’s explore the two core variations of cloud hosting: private cloud and public cloud. An organization leverages the private cloud when a company is running environments where there is only one tenant – themselves. This may mean that it owns and operates all of the data center infrastructure itself. The company buys or leases land, manages the building, procures the servers, installs the operating systems, and manages the applications and data while also being responsible for both the physical and virtual security of the private cloud. In some circumstances, they may procure the space from a third-party vendor but they are ultimately responsible for the hardware, software, and networking infrastructure, with the space within the facility dedicated exclusively to them. Some drawbacks of the private cloud are the requirements for large capital expenditure on real estate, equipment, and operating costs, as well as the deep complexity that comes along with having to design, build, maintain, secure, and scale their infrastructure.

In contrast, when an organization leverages the public cloud, it offloads much of the physical responsibility of operating a data center to a third party. Google Cloud is a public cloud platform where developers and engineers can access infrastructure built on top of Google’s data centers and networks. This enables businesses to offload responsibilities such as building and managing the physical components of the data center to specialize in what will provide value to their customers. Customers of public cloud providers benefit by abstracting away much of the complexity of managing technology infrastructure by focusing on the virtualization layer and above. This means being responsible for the virtual machines, operating systems, applications, and data to operate their businesses.

A company that operates hybrid cloud environments blends both public and private cloud environments. They may have their own data centers hosting internal or sensitive applications while leveraging the public cloud for externally facing applications. This pattern is common in organizations that built up their own data centers and are building new applications in the cloud or are migrating systems to optimize for the most efficient hosting strategy. In some cases, they may build a data warehouse in the cloud to consolidate and organize data from disparate on-premises systems such as sales, marketing, logistics, and fulfillment data.

Multi-cloud is a cloud computing strategy where companies use multiple public cloud providers to host their applications. This allows them to run their workloads optimally across multiple environments and vendors, reducing the risk that arises related to vendor lock-in, where organizations become restricted in their ability to innovate and negotiate cost when they consolidate their infrastructure under a single vendor. Managing environments across multiple cloud providers can be complex given the variations between the platforms and the potential required integrations. Multi-cloud is becoming more common as engineers build skills across multiple providers and vendors begin to differentiate themselves through unique capabilities, partnerships, or contracting vehicles.

With the advent of cloud computing, we’ve also seen the rise of a new breed of technology company: cloud-native. Google Cloud states the following (https://cloud.google.com/learn/what-is-cloud-native):

“Cloud native means adapting to the many new possibilities – but a very different set of architectural constraints – offered by the cloud compared to traditional on-premises infrastructure. Unlike monolithic applications, which must be built, tested, and deployed as a single unit, cloud-native architectures decompose components into loosely coupled services to help manage complexity and improve the speed, agility, and scale of software delivery.”

Another concept that goes hand in hand with cloud-native is open source, as it relates to how software is developed and the accompanying standards with this shift. Historically, software has been closed source, meaning that the code base was owned and only viewable by the manufacturer. This led to a rise in enterprise software licensing where things such as vendor lock-in come into play, where you are at the mercy of the manufacturer from both a cost and capability perspective, locked into multi-year contracts, and unable to implement nor change the code base based on your needs.

In contrast, open source within the realm of software takes the opposite approach. Code bases are public, and anyone from around the world can view and contribute to the code base to ensure it meets their needs. Given this novel, distributed approach to software development, there were also requirements around policies that govern what would qualify as an open source project.

Some of the key principles to open source software development are as follows:

• Transparency, allowing public access to review and deploy the code
• Open, community-centric, and collaborative development
• Meritocratic approach to contribution, driven by experts
• Freely available without licensing or cost restrictions

Organizations that adopt the open source approach to software development can accelerate the pace of innovation for their teams given that they are not at the mercy of one company to improve the code base. Employees from the organization can make feature requests, contribute to the code base, and ensure that the code improves over time.

A great example of a successful open source project is Kubernetes. Kubernetes is an open source software project launched by Google as a way to help drive awareness of container-based deployment methods and architecture.

Containers were a new way of thinking about how to run applications as they relate to the underlying hardware and software. In the world of virtual machines, the application, operating system, and hardware are fundamentally coupled. This means that if the hardware fails, the application also fails. Containers allowed developers to scale applications more gracefully and build more fault tolerance into their architecture and systems. It also happened to be a more cost-effective way of hosting applications given that resources could be shared across several systems to ensure maximum utilization while minimizing cost.

This shift in designing and architecting systems translated very well to cloud-native organizations, given their flexibility and ability to rapidly innovate. More traditional organizations began to adopt similar practices as they began to comprehend the value that these approaches can deliver to their business, with start-ups rising quickly and disrupting industry after industry.

The shift from private to public cloud, by offloading the responsibilities of building and managing data centers, has enabled businesses to focus on driving change that has a meaningful impact on the bottom line. Engineers who had historically been tasked with monitoring onsite infrastructure or managing databases can be repurposed to increase developer productivity, improve the security posture, or engage in R&D projects.

As we explore the forces behind why businesses have been shifting to public cloud adoption, it’s helpful to start by defining digital transformation, including its importance and benefits.

Over the last few decades, we’ve seen a steady shift of businesses and systems from analog to digital. With this shift came a significant change in how companies build teams, design go-to-market strategies, and generate revenue. This shift was fundamentally a shift from paper-based processes to computing-based processes, where files and data went from being stored in filing cabinets to databases and filestores.

Imagine that you had to run a sales report to understand how much a department had done in sales over the last 10 years, growth rate year over year, and project out 5 additional years of sales. If the documents you required were on paper and scattered across three different sites, it may take weeks to collect them, analyze them, and provide the desired report. If, however, all of the data had been digitized and made available through an application, you would be able to run a report within seconds. Moving from weeks to seconds is a massive productivity boost and would enable business leaders to make faster, more accurate decisions. This is an example of the value digital transformation can provide.

According to the Google Cloud documentation (https://cloud.google.com/learn/what-is-digital-transformation), the official definition is as follows:

“It uses modern digital technologies – including all types of public, private, and hybrid cloud platforms – to create or modify business processes, culture, and customer experiences to meet changing business and market dynamics.”

The push to digitally transform is felt across organizations, as highlighted by the official definition, as it impacts not only the tools the technology team uses but also the organizational culture and the ability to deliver modern customer experiences. Engineers often have to learn new skills or completely new technologies, adapting how they’ve worked to address the needs of today.

There are many reasons why companies choose to go through this transformation:

• Infrastructure flexibility
• Ease of R&D
• Quantifiable innovation
• Global collaboration
• Customer value
• Agility

Let’s explore these in detail.

Infrastructure flexibility

In the world of physical data centers, capacity planning and availability can be a big blocker. Having a server procured, shipped, configured, and pushed online can take days, weeks, or even months, depending on the circumstances. One of the big advantages of working with a cloud provider is that machines of all shapes and sizes are available through the click of a button. Spinning up a server, whether it’s in the US, Europe, or Asia, is a trivial workflow that makes it very easy to spin up servers virtually, deploy them, and manage them. It’s all done through a secure internet connection and if you decide that you no longer need something, you can spin it down to effectively stop paying for it.

Ease of R&D

By leveraging a cloud provider such as Google, organizations can quickly and easily access, test and validate new technologies as they are developed and launched. They can spin up development projects within a secure environment, ensuring that corporate or customer data won’t be accidentally leaked and that they have access to the latest technology being launched by cloud providers and their independent software vendor (ISV) partners.

Measurable innovation

When experimenting with different services, tools, and technologies, it can often be challenging to define success criteria and costs and make the right decisions. By leveraging a data-centric approach to testing and validation, businesses can quickly iterate on their developments and make smart decisions based on the results.

Global collaboration

Working with cross-functional teams that are distributed across the globe can be an issue whenever you don’t have the right tools, systems, and processes in place to facilitate the collaboration without the appropriate security and compliance controls. Through digital transformation, you can make data more accessible to people who need it, when they need it, while still ensuring compliance with existing requirements.

Customer value

The demands that come from customers are ever-evolving concerning developments in the market and associated technologies. By analyzing how customers prefer to engage, how they grow through their life cycle, and what needs arise throughout that journey, businesses can provide tailored experiences that meet and exceed customer expectations. They can find patterns and reasons why people leave the platform for example, identify the root cause(s), and implement a way to overcome those challenges proactively, thereby increasing retention and reducing churn.

Agility

Organizations are having to compete on a global scale with companies large and small to win new customers and retain existing ones. Through digital transformation, development teams are enabled to accelerate the pace at which they innovate while also being able to significantly increase the scale of their launches. Rather than having to launch a service in a specific region or city due to process or technology constraints, businesses can now build once and launch anywhere through innovations such as global cloud providers and Infrastructure as Code (IaC).

There are many reasons for a business to transform from analog, paper-based processes to digital processes. Not only will employees be more productive, but they’ll be more innovative and make better decisions. Workflows that might’ve taken days, weeks, or months can be compressed into days, hours, or even seconds. A common anecdote for demonstrating the impact of failing to digitize is the story of Blockbuster. Blockbuster was a brick-and-mortar store where you would go to rent or buy movies and TV shows. The walls and floors were lined with shelves covered in empty VHS and DVD boxes highlighting which titles were available. Many customers had come to cherish the experience of walking through those aisles, exploring interesting titles and genres until they finally found the one – and hoped it was in stock! Blockbuster, by 2004, had 9,000 stores globally (as per https://www.businessinsider.com/blockbuster-is-closing-forever-2013-11) and earned $5.9 billion in revenue (as per https://www.sec.gov/Archives/edgar/data/1085734/000119312507239499/dex991.htm).

Fast forward to 2023 and you won’t find a Blockbuster anywhere as they were digitally disrupted by Netflix. They started by competing with Blockbuster through a video-mailing service, eliminating the need to go to a physical location and be at the mercy of what was in stock, but eventually moved onto cloud-based video streaming. Online video streaming created a new way to browse and consume content, where a customer had a massive library of titles at their fingertips. Customers began to expect to be able to watch the latest release from the comfort of their homes without having to worry about whether or not Blockbuster had that video in stock. Today, Netflix continues to be a successful company, having reached $8.1 billion in quarterly revenue for Q1 of 2023 (as per https://www.statista.com/statistics/273883/netflixs-quarterly-revenue/#:~:text=In%20the%20first%20quarter%20of,the%20corresponding%20quarter%20of%202022). They are now facing an innovation dilemma as they face intense competition from new services such as Disney+, Paramount+, and Max.

Now that we understand why organizations are transforming digitally, let’s explore the benefits of going through that transition.

There are many benefits to transforming a business so that it can leverage the latest advances in computing, software, and data technologies. Whether it’s launching new products or building new capabilities into an existing business, the technology space is ever evolving and the pace of innovation seems to be increasing. Companies that have implemented or were born digital as cloud-native companies have a significant advantage over those that haven’t.

Whether it’s going from a monolithic application architecture that struggles to serve global clients to containers, Kubernetes, and global service orchestration, or the adoption of a data warehouse to empower analytics use cases, organizations that embrace a new way of doing things can make the most of new technologies as they quickly learn, test, validate and adopt them.

According to the Google Cloud documentation, here are the main benefits of going through digital transformation:

• Modernize infrastructure
• Manage data
• Gain insight
• Break down team silos
• Solve business problems
• Realize cost savings

Let’s look at them in detail.

Modernize infrastructure

Companies that transform digitally and adopt cloud-native ways of architecting systems can meaningfully optimize their hardware and software usage. By migrating away from building and managing infrastructure themselves, they can quickly and easily build systems that have evolved from the traditional, server-based architecture to more modern, service-based architecture or even serverless systems. These systems allow their engineers to automate much of the day-to-day tasks of operating and managing infrastructure through features such as auto-scaling, which dynamically scales the infrastructure up and down based on load. They also allow for global traffic routing, ensuring that customers have the best experience based on their geography and minimizing the time and effort required to build systems that scale globally.

Manage data

Data is exploding and as companies try to gain more insight into the health of their go-to-market approach and how their customers think about them, being able to capture, organize, and integrate these datasets can be challenging. Digital transformation empowers you to go from paper processes to digital processes where new tools and capabilities can be applied to store, transform, analyze, and monetize data. Organizations can ingest vast amounts of data, going from terabyte to petabyte to hexabyte scale from a myriad of different systems, regardless of whether they’re internal or external.

Gain insight

Digital systems not only allow you to more easily and efficiently manage data but also facilitate the act of deriving value from the data. Companies can adopt new approaches to sharpen the focus of their business on their core value, applying things such as machine learning to provide more value to their customers and generate new revenue streams. Business leaders can also be empowered to make better decisions through higher fidelity real-time data, which gives them a better understanding of the current state of the business and what challenges it faces.

Break down team silos

The transition from paper to digital also facilitates productivity and collaboration for teams across geographies. Employees can easily find, access, share, and collaborate on files and projects at the speed of light rather than being at the mercy of paper-based processes. Customers also benefit from this as the teams that they work with can deliver more value faster relative to competitors who don’t adopt modern practices. A marketing team in India, for example, might need to update a campaign for the local market. With a digital cloud-based system, a team in the US can quickly and easily upload all of the raw marketing files to a shared drive where the India team can access it to make the appropriate updates, all with the click of a button.

Solve business problems

The adoption of technology also helps organizations approach their processes and applications with a new lens. Digital systems help business leaders quickly pinpoint challenges within the organization and its engagement with customers. By equipping them with the information they need to improve how they work and engage with customers, the business can dynamically solve problems as they arise and can continuously refine its approach.

Realize cost savings

The result of implementing digital systems and modern ways of doing business across people, processes, and technology also results in cost savings. Paper-based processes are often cumbersome and expensive, requiring significant human work and can be very slow. These challenges can be overcome by implementing technology to automate away process complexity and cost. For example, through paper processes, it may take weeks to generate, validate, issue, and execute a contract. You have to engage multiple teams to put the paperwork together, validate that what is generated will pass integrity checks, and have the appropriate provisions. From there, you may have to mail or fax a contract to someone and hope that someone is on the other end to pick it up and put it through the appropriate process. Through a digital system, however, you can automate the specific contractual requirements to have them generated with the click of a button and issued for signature – within hours rather than weeks.

There are many benefits to transforming digitally, ranging from realizing cost savings, solving business problems, and breaking down silos to more technical reasons such as modernizing infrastructure, managing data, and gaining insight from that data.

Hypothetical case study – Acme Inc.

Behind many of the major technological revolutions of the past couple of decades, there were often developments in key variables making them possible; computing, networking, and data. Whether we are discussing personal computers, smartphones, or cloud computing, they were all enabled thanks to advances in the density and scale of computing resources, the availability and quality of networking, and the accessibility of data.

Before we dive into the intricacies of Google Cloud, its services, and the impact it is having on businesses, it is important to establish foundational knowledge to ensure we start on the same page. Let’s frame the technological revolution by following along with a hypothetical company, Acme Inc.

Acme Inc. – its evolution from the 1980s to the 2020s

In the early days of Acme Inc., when it was first founded in the 1980s, they were selling desktop software for personal computers. They had three offices, each with their own server closet, where any required systems were installed and hosted. Most of their corporate processes were based on paper, with the vast majority of the work not being digital. Security was relatively easy to set up and manage; only the two IT folks on the team had access to the server rooms and all employees left their corporate computers at the office – they were locked down to their desks. In this world, the perimeter was well defined; everyone had to go to the office to access corporate systems and through physical security, you could generally ensure the infrastructure was secure. No one could take their computers home and IT must be onsite to troubleshoot but overall, it seemed to be working and life went on.

As time passed, Acme Inc. continued to grow and by the 1990s, they had 10 offices around the US. The IT team realized that they wouldn’t be able to physically manage and troubleshoot distributed systems across 10 offices and they needed to pivot their model. They had started digitizing their processes given the needs of the business and clients. Meanwhile, finance was starting to complain about the many hardware and software purchases required to maintain the technology ecosystem. Between all of the server and license requests, they decided to implement centralized infrastructure, empowering them to purchase equipment in bulk and making life easier for the IT team by consolidating all of the infrastructure that they needed to manage in one location.

Acme Inc. implemented a data center strategy and by the 2000s, they were running a couple of private cloud locations. They adopt VMware and virtualization to make the most of their hardware, allowing them to maximize hardware utilization by sharing the compute resources from their servers across multiple applications. They set up a backup and disaster recovery strategy by running a hot-cold setup where their backup data center would help them recover from any issues with the primary location. Managing all of the corporate infrastructure, however, started to become a burden given the heavy weight and cost of running a data center. Between keeping up with all of the security vulnerabilities, ensuring hardware procurement would support future capacity needs, and also managing finance’s complaints about large capital expenditures, the IT team became overwhelmed.

Thankfully, the advent of Software-as-a-Service (SaaS) solutions came onto the scene as organizations were looking to offload the responsibility of managing and securing infrastructure. IT can procure technology solutions that are hosted for them, empowering them to focus exclusively on permissions and data for the application while not having to worry about all of the additional layers of infrastructure that need to be addressed when you host things yourself.

Going into the 2010s, Acme Inc. adopted several SaaS solutions for their infrastructure, ranging from productivity tools such as email, HR, and finance systems. The core of what they offered, however, was still self-hosted as their desktop application was now being modernized to be offered as a service. This ensured that you would be able to generate predictable, recurring revenue (keeping finance happy) and help address the needs of your clients. Unfortunately, because their data center was still self-hosted, Acme Inc. discovered that a nation-state attacker was able to access a database that one of their admins forgot to patch. This caused much pain for IT and sales as Acme Inc. now had to navigate challenging conversations about how they manage infrastructure and had a hard time earning the trust of their customers. Fortunately for Acme Inc., there was a new computing revolution just on the horizon.

By 2020, Acme Inc. decided to migrate its infrastructure from on-premises to an Infrastructure-as-a-Service (IaaS) provider. This enabled the Acme Inc. team to focus less on managing and securing the lower layers of infrastructure while empowering them to focus on projects that would move the needle for their organization. Rather than managing a database, their data engineer started building out a data lake. They moved all of their servers from their on-premises data centers to the cloud, which enabled them to spin down those assets and sell them off.

With this capital burden being lifted, the Acme Inc. team invested in improving developer productivity and adopted a few new approaches to building code and managing teams: DevOps and microservices-based architecture. By adopting more modern approaches to launching applications, Acme Inc.’s application is now more scalable and easily improvable than ever before. They push code to production weekly and can compete with even the hottest, most well-funded start-ups.

In our case study about Acme Inc., we touched on many of the key elements driving the change we are seeing in technology from a data center perspective. The variables that are constantly in tension with building and managing technology infrastructure fundamentally are cost versus performance and distributed versus centralized. Many of the changes that Acme Inc. implemented, whether it was going from closet server rooms to mainframes to virtualization to containers, were meant to overcome challenges around finance and customer experiences. When designing cloud systems, we are constantly trading off how we can deliver an excellent experience while trying to minimize cost. We’ll see this as a common theme as we explore different use cases and prepare for the exam questions; often, you’ll have to think through what would be the best system for the job given specific technical, business, and financial restraints.

Now that we have a general sense of why organizations around the world and across industries are transforming themselves, it’s time to cover foundational cloud concepts. The focus for Chapter 2 will be on understanding why and how the cloud is adopted across different scenarios and business cases. We’ll explore the benefits of cloud infrastructure, along with how networking is the foundation upon which the cloud is built.