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

Andreas Rivera
Andreas Rivera

Virtualization and cloud computing are two terms that often seem interchangeable if you're not familiar with how either work. Although the two technologies are similar, they are not the same thing, and the difference is significant enough to affect your business decisions. Here is a guide to help demystify the tech behind the jargon.

What is virtualization?

Virtualization is the fundamental technology that powers cloud computing. This software separates compute environments from physical infrastructures, so you can run multiple operating systems and applications simultaneously on the same machine. For example, if you do most of your work on a Mac but use select applications that are exclusive to PCs, you can run Windows on a virtual machine to get access to those applications without having to switch computers.

"Virtualization software … enables businesses to reduce IT costs while increasing the efficiency, utilization and flexibility of their existing computer hardware," said Mike Adams, senior director of cloud platform product marketing at VMware.

Virtualization has many practical applications. For software developers, virtualization allows them to test out their applications on different environments without having to set up several different computers. If the application crashes on the virtual machine, they can simply close and restart the virtual machine to a previous state without causing damage to their computer.

One of the biggest benefits of virtualization is sever consolidation. Instead of maintaining multiple servers that each have a different function, server virtualization allows you to split the resources of a single server for multiple purposes. Often server resources are underutilized, resulting in businesses spending too much on server upkeep for a little output.

[Read Related: The Pros and Cons of Virtualization.]

How is virtualization different from 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. [Read related article: Cloud Computing: A Small Business Guide]

"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 occurs because virtualization and cloud computing work together to provide different types of services. The cloud can, and most often does, include virtualization products to deliver the compute service, said Rick Philips, vice president of compute solutions at IT firm Weidenhammer.

"The difference is that a true cloud provides self-service capability, elasticity, automated management, scalability and pay-as-you-go service that is not inherent in virtualization," he said.

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

To best understand the advantages of virtualization, consider the difference between virtualization and public clouds.

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 own systems, while providing the consumption benefits of cloud computing, said John Livesay, vice president and chief sales officer of InfraNet.

"Private cloud computing means the client owns or leases the hardware and software that provides 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, Philips 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," Philips said. This provides several benefits. First, you can maximize your resources by reducing the number of physical systems you need to acquire. It also allows you to get the most value out of your servers, since you can use multiple systems and applications on the same hardware. Finally, when you use virtualization, you can integrate costs like management, administration and all the attendant requirements of managing your own infrastructure into your IT budget. 

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. You should also consider costs; how much management the business can and wants to do; scalability requirements; security needs; and how much feature development can be expected, Livesay said.

For a smaller operation looking to cut back 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 businesses know if they should use a true cloud solution?

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

  • Outsourced IT — The day-to-day administration, care and feeding of supporting systems move away from you to the 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 — Cloud startup is relatively quick and easy. Plus, servers, appliances and software perpetual licenses go away when you use such a service.
  • Pay-as-you-go — An example could be found in Software-as-a-Service (SaaS) applications available today that allow the off-loading of basic IT requirements to cloud service providers. You pay for what you need and use. But you do not have to continue to invest in many of the products used to support the network and systems, such as spam/anti-virus, encryption, data archiving, email services and off-site storage.
  • Scalability — By using the cloud, you can also temporarily scale your IT capacity by off-loading high-demand compute requirements to an outside provider. As a result, you pay for only what you need and use, only at the time when you need it.

What should businesses look for in a virtualization provider?

Businesses considering virtualization should think about the following questions, Adams said:

  • Is it a tried and tested solution? Research the vendor's track record of product innovation, success and customer adoption.
  • Is there a vision and public roadmap for the solution? You want to 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 solution? It's imperative that the vendor work with key business and industry-specific independent software vendors (ISVs), as well as a wide range of resellers, service providers and system integrators.
  • Does the 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.

[Related Content: What is a Virtual Phone Number?]

What's next?

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 is consistently becoming more affordable as the technology is developed.

Additional reporting by Sara Angeles. Some source interviews were conducted for a previous version of this article.

Image Credit: Stokkete/Shutterstock
Andreas Rivera
Andreas Rivera
Business News Daily Staff
Andreas Rivera graduated from the University of Utah with a B.A. in Mass Communication and is now a staff writer for and Business News Daily. His background in journalism brings a critical eye to his reviews and features, helping business leaders make the best decisions for their companies.