What is Cloud Hosting? A Comprehensive Guide to Hosting Services in the Cloud

Embracing cloud computing has gone from a trend to a critical necessity for modern businesses striving for agility, cost-efficiency, and competitiveness. With an increasing number of organizations acknowledging the advantages of cloud technology, cloud migration has accelerated. The cloud migration market is projected to grow substantially, estimated at USD 232.51 billion in 2024 and expected to reach USD 806.41 billion by 2029, with a compound annual growth rate (CAGR) of 28.24%.

Businesses increasingly turn to cloud hosting to streamline operations and IT infrastructure, departing from slower, less adaptable systems. This article explores cloud hosting, its benefits, and various deployment and service models. Plus, we discuss considerations for selecting a suitable cloud hosting platform, helping you make the best decision for your business.

💡 DigitalOcean offers unmanaged cloud hosting through our Droplet virtual machines and managed cloud hosting through Cloudways by DigitalOcean, giving customers the choice of hosting that best suits their needs!

What is cloud hosting?

Cloud hosting is a type of internet hosting where computing resources are provided on-demand, scaled dynamically, and distributed across multiple virtual servers in a network of remote data centers, rather than being limited to a single physical server. This approach leverages multiple servers to distribute resources efficiently and ensure high availability, improving performance and reducing the risk of downtime.

Web vs. cloud hosting

Web hosting includes providing resources and server space by a third party to businesses for various purposes like website hosting, data storage, or application deployment. Cloud hosting, a specialized subset of web hosting, leverages cloud technology, virtualization, and remote servers to cater to business needs.

While cloud hosting falls under the umbrella of web hosting, the latter can employ different technologies such as virtual private servers (VPS), dedicated hosting, or shared hosting instead of relying on cloud infrastructure.

VPS hosting vs. cloud hosting

VPS hosting involves virtualizing a single physical server to accommodate multiple clients, each with access to allocated resources. However, depending on the provider, cloud scalability may be limited.

In contrast, cloud hosting uses multiple interconnected cloud servers, collectively offering a pool of resources. This setup allows for dynamic scaling, where additional resources can be drawn from the pool as needed. As a result, cloud hosting provides greater flexibility compared to VPS hosting, although a hybrid option, known as VPS cloud hosting, combines the benefits of VPS with the scalability of the cloud.

Dedicated hosting vs. cloud hosting

Dedicated hosting exclusively uses a single physical server housed in a data center. Purchasing a dedicated server grants sole access to its resources without virtualization, ensuring heightened server security and performance. However, this setup incurs significant costs compared to cloud hosting.

Cloud hosting typically offers a flexible pay-as-you-go model, eliminating the need for upfront hardware investments. Users can configure their desired setup without owning the underlying server hardware.

Shared hosting vs. cloud hosting

In shared hosting, multiple entities share a single server and its resources, resulting in slower performance than dedicated or cloud hosting. However, it remains a cost-effective option for those seeking affordable hosting solutions, particularly for non-critical workloads.

On the other hand, cloud hosting uses virtualization to allocate dedicated space to users, ensuring enhanced performance without resource sharing.

Benefits of cloud hosting

According to DigitalOcean Currents report, 85% percent of companies believe that investing in technology will help them prepare their businesses for the future, including investments in automation/self-service (53%), cloud computing (41%), and managed services (32%). The respondents reported that these technology investments increase efficiency (67%) and cost savings (47%). Let’s take a look at the benefits of cloud hosting:

1. Flexible scalability

Cloud hosting services allow businesses to easily scale their resources up or down based on demand. This flexibility means that additional resources can be allocated quickly during peak traffic periods and reduced in slower periods, ensuring optimal performance without overspending.

2. Cost efficiency

With cloud hosting, you only pay for the resources you use. This pay-as-you-go model eliminates the need for significant upfront investments in hardware and reduces ongoing maintenance costs, making it a cost-effective solution for many businesses.

3. High reliability

Cloud hosting plans provide high reliability by distributing data across multiple servers. This redundancy ensures that if one server fails, another can take over without causing downtime. It minimizes the risk of service interruptions and ensures consistent availability.

4. Boosted performance

A cloud hosting provider uses multiple servers to distribute the load, improving performance and speeding up content delivery. This setup enhances user experience by efficiently reducing page load times and handling higher traffic volumes.

5. Robust security

Cloud hosting providers implement strong security measures, including data encryption, regular security audits, and robust access controls. These measures help protect sensitive data and reduce the risk of cyber threats.

6. Easy accessibility

With cloud hosting, your data and applications are accessible from anywhere with an internet connection. This accessibility supports remote work and collaboration, allowing teams to work together seamlessly from different locations.

7. Automatic updates

Cloud hosting providers manage and deploy automatic updates for both hardware and software. This ensures that your systems are always running the latest versions, which include the latest security patches and performance improvements, without manual intervention.

8. Environmentally sustainable

By optimizing resource use and consolidating cloud server needs, cloud hosting reduces the environmental impact compared to traditional hosting. Some data centers also use energy-efficient technologies and practices, contributing to lower carbon footprints.

9. Comprehensive support and maintenance

Cloud hosting providers offer extensive support and maintenance services, including 24/7 monitoring, troubleshooting, and customer support. This professional assistance ensures that any issues are promptly addressed, minimizing disruptions to your services.

10. Competitive advantage

Using cloud hosting can provide a competitive edge by enabling faster deployment of new services, improved scalability, and boosted performance. Businesses can respond more quickly to market changes and customer demands, positioning themselves ahead of competitors.

How does cloud hosting work?

Cloud hosting environments consist of two key components: virtual servers that host applications and websites and physical hosts that manage these virtual servers. Virtualization is fundamental to cloud hosting solutions, enabling flexibility and scalability beyond traditional hosting methods.

Virtual servers

A common form of cloud hosting today is the VPS. A VPS operates like a standalone computer with its operating system despite sharing physical resources allocated by the host. Each VPS is isolated, ensuring that activities on one VPS do not impact others.

Virtual servers are deployed and managed by a hypervisor on a physical host. The hypervisor installs an operating system on each virtual server, making it functionally equivalent to a dedicated physical server. However, the virtual server shares the host’s physical hardware resources with other virtual servers.


Physical servers, or hosts, allocate resources to virtual servers under their control. These hosts have substantial computational power, including processors (CPUs), memory (RAM), storage, and networking capabilities, which they partition and assign to multiple VMs. The primary function of hosts is to provide a stable and robust physical environment where hypervisors can manage the virtual resources efficiently.


A hypervisor software layer on the host deploys, manages, and assigns resources to virtual servers. The hypervisor oversees the allocation of memory, CPU cores, and network connections to each virtual server upon its launch. It also schedules processes between virtual and physical CPU cores, as multiple virtual servers may use the same physical cores. Different hypervisors have varying methods of process scheduling and resource sharing.

Types of cloud computing services

Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS) are all considered types of cloud computing services. They represent different levels of abstraction and service models within cloud computing. Here’s a brief overview; Understanding these services empowers you to select your business’s best cloud hosting services.

1. Infrastructure as a Service (IaaS)

IaaS offers the most fundamental building blocks of cloud computing—the infrastructure itself. This includes virtual servers, storage, networking components, and firewalls. IaaS provides a virtualized data center where you have complete control over the operating system, applications, and data security.

IaaS is ideal for organizations with high technical expertise requiring granular control over their infrastructure. It also suits businesses with fluctuating resource demands, allowing for on-demand resource scaling. Besides hyperscalers, DigitalOcean is a popular IaaS provider offering on-demand virtual servers, storage, and networking.

2. Platform as a Service (PaaS)

PaaS provides a development and deployment environment on top of the virtualized infrastructure. This includes operating systems, programming languages, databases, and development tools. With PaaS, you focus on building and deploying your applications without worrying about managing the underlying infrastructure.

PaaS is a compelling choice for developers who want to accelerate the application development lifecycle. It simplifies the process by eliminating the need to set up and maintain the underlying infrastructure. DigitalOcean App Platform is a PaaS offering that allows developers to focus on application logic without managing servers.

3. Software as a Service (SaaS)

SaaS is the most user-friendly cloud service model. It delivers software applications over the Internet, eliminating the need for local installation or infrastructure management. With SaaS, you simply access the application through a web browser or mobile app and pay a subscription fee.

SaaS is perfect for businesses that require readily available applications without the burden of managing infrastructure or software updates. It’s also a cost-effective option for companies with limited IT resources. Salesforce is a well-known example of a SaaS provider offering customer relationship management software.

Types of cloud hosting models

Cloud deployment models define how the cloud infrastructure itself is delivered and accessed. Understanding these models empowers you to select the best cloud hosting environment that aligns with your needs.

1. Public cloud

Public cloud environments offer readily available, shared resources accessible over the internet. These resources, including servers, storage, and networking, cater to multiple users, fostering a cost-effective and highly scalable solution. Public cloud providers like DigitalOcean, Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) provide various services to meet diverse requirements.

Key features:

  • Shared resources: Economical due to economies of scale and shared infrastructure.

  • On-demand scalability: Resources can be easily adjusted to meet fluctuating workloads.

  • ​​Limited control: Organizations have less control over the underlying infrastructure than private cloud deployments.

2. Private cloud

Private cloud environments offer dedicated resources for a single organization. These resources can be located on-premises within your data center or hosted by a service provider with a segregated infrastructure. Prioritizing security and control, private clouds are ideal for organizations handling sensitive data. Unlike public clouds like hyperscalers, private clouds like DigitalOcean specifically cater to developers, startups, and ISVs.

Key features:

  • Dedicated infrastructure: Minimizes security risks by offering resources exclusive to your organization.

  • Granular control: Provides complete control over the underlying infrastructure and configuration.

  • Customization: Can be tailored to meet specific organizational needs and compliance requirements.

3. Multi-cloud

The multi-cloud deployment model leverages a combination of two or more different cloud services, potentially including both public, private, or hybrid cloud. This approach allows organizations to leverage several benefits such as creating a customized environment, optimizing cost, security, and performance for specific workloads.

Key features:

  • Hybrid flexibility: Enables leveraging the strengths of different cloud providers for cost-effective and secure solutions.

  • Risk mitigation: Distributes workloads across clouds, reducing reliance on a single vendor and potential outages.

  • Optimized performance: Positions specific workloads in the most suitable cloud environment for optimal performance.

Factors to consider when choosing a cloud hosting platform

According to the 2023 DigitalOcean Currents report, cost continues to be a significant factor in selecting a cloud infrastructure provider, especially for small businesses trying to control costs during an economic downturn. Security and time to maintain infrastructure are other challenges companies face regarding their cloud provider. Selecting the right cloud hosting platform involves evaluating several critical factors to ensure it meets your specific needs. Here are key considerations to guide your decision:

1. Performance and reliability

Assess the platform’s performance metrics, including uptime guarantees and response times. Reliable platforms should offer high availability and minimal downtime, supported by robust infrastructure and redundant systems to ensure continuous service delivery. Additionally, consider if they offer advanced features like dedicated IP addresses or managed cloud hosting for your growing business needs.

2. Scalability

Determine how easily the platform can scale resources up or down based on your business requirements. The ability to dynamically adjust computing power, storage, and bandwidth is essential for handling varying workloads and future growth.

3. Security

Evaluate the security measures, including data encryption, firewalls, intrusion detection systems, and compliance with industry standards (e.g., GDPR, HIPAA). Ensure the platform provides robust access controls and regular security audits to protect sensitive data.

4. Cost structure

Analyze the pricing model to understand the total cost of ownership and cloud ROI. Compare pay-as-you-go plans, subscription models, and additional cloud hosting costs for extra services or features. Choose a platform that offers transparent pricing and aligns with your budget. Additionally, be mindful of potential hidden costs and factor in the value of introductory promotions like free domain registration or free SSL certificates.

5. Support and Service Level Agreements (SLAs)

Review the support options available, such as 24/7 customer service, technical support, and response times. A comprehensive SLA should outline the platform’s commitments to service quality, including uptime guarantees and support response times.

6. Integration and compatibility

Ensure the platform is compatible with your existing tools and systems. Check for integration capabilities with popular software, cloud computing tools, APIs, and development frameworks. Compatibility with your current technology stack can streamline operations and enhance productivity.

7. Data management and backup

Consider the platform’s data management and backup solutions. Reliable backup and recovery options protect data against loss or corruption. Look for automated backup features and disaster recovery plans.

8. Compliance and regulatory requirements

Verify that the platform adheres to relevant regulatory requirements and industry standards. Cloud compliance with regulations like GDPR, HIPAA, and PCI-DSS is crucial for businesses handling sensitive or regulated data.

9. User experience and interface

Evaluate the platform’s user interface and overall user experience. Ensure the cloud hosting platform supports the operating systems your applications require. A diverse range of supported operating systems (OS), such as various Linux distributions (e.g., Ubuntu, CentOS) and Windows Server versions, is essential. This flexibility allows you to run different applications and services without compatibility issues. Plus, it will enable you to choose the best operating system for your specific needs, whether for development, testing, or production environments. An intuitive and user-friendly interface can simplify management tasks and reduce the learning curve for your team.

10. Data center locations

Check the geographic distribution of the platform’s data centers. Having data centers in multiple regions can reduce latency, improve load balancing, and ensure better service availability for users worldwide. Data residency requirements must also be considered, and data centers that comply with local regulations must be selected.

Simplify cloud hosting with DigitalOcean and Cloudways

For an in-depth comparison of DigitalOcean and Cloudways hosting providers, explore these platforms based on your business needs.

DigitalOcean presents a user-friendly interface facilitating the deployment and management of cloud infrastructure, featuring a diverse array of products, including Droplets, Managed Kubernetes, and App Platform. Its competitive pricing and emphasis on simplicity render DigitalOcean an attractive option for developers and businesses of all scales.

Sign up for DigitalOcean today.

Cloudways offers a managed cloud hosting platform that simplifies application deployment and scalability across leading providers. With functionalities like 1-click app installations, server cloning, and managed security and backups, Cloudways optimizes cloud infrastructure administration.

Sign up for Cloudways today.


Try DigitalOcean for free

Click below to sign up and get $200 of credit to try our products over 60 days!Sign up

Related Resources

What is Containerization?
8 Microsoft Azure App Service Alternatives
What is Cloud Object Storage? Scalable and Cost-effective Data Storage in the Cloud

Get started for free

Sign up and get $200 in credit for your first 60 days with DigitalOcean.*

*This promotional offer applies to new accounts only.