Virtualization in cloud computing: Definition and types

Virtualization enables businesses to make the most of their computer hardware using specialized software.

Business owners can use their existing hardware to create multiple virtual computers. Each virtual computer runs independently, so one physical machine completes several tasks simultaneously.

This technology allows for more efficient use of hardware, reduces costs, enhances flexibility, and improves scalability.

In this article, we’ll go beyond the basic definition of virtualization, providing detailed insight into how it works, its benefits, and the various types of virtualization.

Table of contents

• What is virtualization?
• Virtualization in cloud computing
• Types of virtualization
• The benefits of virtualization
• Simplify virtualization for your business with Liquid Web

What is virtualization?

Virtualization is a technology that allows you to create virtual versions of physical components, such as servers, storage devices, networks, and operating systems. It’s a software-based solution for processes that typically require a physical platform.

Virtualization software, known as a hypervisor, builds multiple virtual machines on a single physical machine. So, the same host computer or server can run many guest operating systems. As of December 2024, VMware was the top virtualization technology, holding around 44.8 percent of the market share.

When businesses virtualize their systems, they can run dynamic workloads without the added complexity of managing the hardware. Let’s consider an example scenario.

A medium-sized enterprise has multiple physical servers for different business operations. Instead of running ten physical servers at 15 percent capacity each, the company can use virtualization to integrate those workloads onto two to three virtual servers running at 70–80 percent capacity.

As a result, the company has lower hardware costs, better server utilization, and can add new servers in minutes to improve scalability.

Virtualization in cloud computing

Virtualization forms the backbone of cloud computing. It abstracts physical resources using hypervisors, containers, software-defined networking (SDN), and storage virtualization.

This abstraction creates flexible, scalable, and efficient virtual environments that cloud providers use to deliver on-demand services.

Cloud computing includes a few key mechanisms of virtualization.

• Resource abstraction and pooling: Virtualization abstracts physical hardware resources (CPU, memory, storage, and network) into virtual resources that can be pooled and dynamically allocated to different virtual machines or containers.
• solation and multi-tenancy: Virtualization provides isolation between different virtual instances (VMs or containers) running on the same physical hardware so each of them can operate independently. This isolation allows multiple customers with the same physical infrastructure to perform tasks without interfering with each other’s operations.
• Scalability and elasticity: Virtual resources can be rapidly added, deployed, and removed so that cloud providers can meet fluctuating user demands.
• Efficient resource management: Hypervisors monitor resource usage and dynamically adjust allocations to optimize performance.
• Disaster recovery and high availability: You can easily create backups and snapshots of your virtual servers to support efficient disaster recovery. For high availability, you can also migrate VMs between physical servers without downtime.

Amazon S3 and Google Cloud Storage are real-world examples of using virtualization in cloud services.

Virtualization and on-demand self-service

Virtualization transforms how organizations interact with computing resources through cloud delivery models that prioritize flexibility and efficiency.

The National Institute of Standards and Technology (NIST) defines on-demand self-service as a core characteristic of cloud computing, moving away from traditional IT provisioning processes toward automated resource allocation.

Cloud platforms deliver virtualized resources through three key operational features:

On-demand self-service empowers users to provision resources automatically through management portals without IT staff intervention. This reduces deployment times from weeks to minutes and enables rapid response to business needs.

Broad network access makes virtualized resources available from any location using standard protocols. This supports remote work, distributed teams, and multi-location businesses through secure, consistent access regardless of device.

Measured service provides detailed resource usage tracking and reporting. This transparency allows for precise cost allocation, encourages efficient utilization, and supports usage-based billing models that align expenses with actual consumption.

These capabilities collectively shift virtualization from being merely a technical solution to a comprehensive approach for delivering IT services that better support business agility.

Types of virtualization

There are seven types of virtualization, including server virtualization, desktop virtualization, storage virtualization, network virtualization, application virtualization, cloud virtualization, and data virtualization.

1. Server virtualization

Server virtualization, or hardware virtualization, is the foundation of modern data centers. It involves creating virtual machines that act like physical computers, each with its own operating system and applications.

The critical component in server virtualization is the Type 1 hypervisor or bare metal hypervisor, a software layer that runs directly on the physical server. By virtualizing their hardware, businesses can host their database, mail, and web servers on one powerful machine.

Server virtualization can also be in the form of virtual private server (VPS) hosting or a private cloud. In VPS hosting, a hosting provider creates independent VMs for separate clients on a single server.

Businesses can use a private cloud to create VMs that only they have access to, streamlining operations and improving security. For example, VMware private cloud hosting at Liquid Web provides fully managed setup and maintenance.

2. Desktop virtualization

Desktop virtualization provides virtual desktops for users. It separates the desktop environment from the physical device so users can access their desktops and applications from any device.

This is achieved with a Type 2 hypervisor or a hosted hypervisor. It runs on top of a host operating system rather than directly on the physical hardware. A single physical machine usually runs one or more virtual computers.

Virtual desktop infrastructure is a standard implementation of desktop virtualization, where virtual desktops are hosted on centralized servers and delivered to end-users over the network.

3. Storage virtualization

Storage virtualization pools physical storage resources from multiple devices into a unified virtual storage unit managed from a central console. This virtualized data center simplifies storage management, improves utilization, and enhances scalability.

By decoupling storage from hardware, organizations can achieve greater flexibility in managing and scaling their data infrastructure.

4. Network virtualization

Network virtualization creates virtual networks that are decoupled from physical hardware. Many physical network devices can be virtualized to lower costs and simplify network resource management.

• Load balancers
• Firewalls
• Intrusion detection systems
• Wide area network accelerators

Network functions virtualization (NFV) and SDN are the two main types of network virtualization.

SDN virtualizes the network control plane, enabling centralized management and dynamic network configuration. NFV virtualizes one or more hardware appliances that provide a specific network function (like a load balancer or a firewall), allowing for rapid service deployment and scaling.

Combining network, server, and storage virtualization leads to robust infrastructure solutions like the VMware private cloud.

5. Application virtualization

Application virtualization allows software to run on machines without installing them on the user’s device. Developers can use this to deploy applications in virtual isolated environments that match their application’s exact needs.

This type of virtualization centralizes application management, simplifies deployment, prevents conflicts, reduces the need for local installation, improves security, and optimizes resource usage.

6. Cloud virtualization

Virtualization technologies provide the foundation for the three main service models in cloud computing.

• Infrastructure-as-a-service (IaaS): IaaS offers virtualized computing resources. Users can rent virtual machines, storage, and networks. Amazon Web Services (AWS) EC2 and Microsoft Azure Virtual Machines are examples.
• Platform-as-a-service (PaaS): PaaS provides a platform for customers to develop and manage applications without managing the underlying infrastructure. Virtualization isolates applications and ensures they run smoothly on shared hardware. Google App Engine is a well-known example of a PaaS. 
• Software-as-a-service (SaaS): SaaS delivers software over the internet on a subscription basis. Virtualization ensures the software can be updated and maintained centrally, providing a good user experience. Common examples include Google Workspace and Microsoft 365.

7. Data virtualization

Data virtualization abstracts data from multiple sources (databases, data warehouses, cloud storage, etc.) into a virtual data layer. This layer provides a unified view of data from various sources, presenting it in a consistent format to users and applications. It allows applications to retrieve and manipulate data without requiring technical details about the data.

Implementing data virtualization is better than directly storing data on individual hard drives for the following reasons.

• Simplicity: Presents data to clients as if it were stored on a single drive, simplifying access.
• Accessibility: Allows multiple clients to access the same data without having to manage the technical details of how that data is stored.
• Safety: Administrators can quickly implement safety measures such as RAID mirroring and parity checks to minimize the chance of data loss during a drive failure.

The benefits of virtualization

Virtualization can help businesses improve IT infrastructure, optimize resource use, and enhance flexibility. Here are the main benefits of virtualization.

1. Lower operating costs

Businesses can use server, storage, network, application, and desktop virtualization to enable data center virtualization. This virtual data center is hosted on the cloud and significantly reduces expenses.

For example, a physical data center requires additional payments for the building, servers, Internet, IT team, and cooling systems. Moving your data to a virtual data center hosted by a dedicated web hosting company helps you reduce infrastructure, hardware, and maintenance costs.

There is a growing market for virtual data centers, with the data center virtualization market recording over 11 billion U.S. dollars in revenue in 2022.

2. Simplified management

Virtualization tools allow users to manage all VMs and virtual resources from one console, streamlining administrative tasks.

IT admins can quickly execute tasks, like server creation and adding server resources, with minimal or no server downtime. You can also automate routine tasks like backups and updates to minimize manual effort and errors.

3. Enhanced flexibility and scalability

Unlike a physical environment, businesses can quickly respond to changing workloads by creating new virtual machines or containers in minutes.

Administrators can also choose their preferred operating system for each VM. Most reputable hosting companies will have preconfigured templates for quick setup. They can also make recommendations based on the server’s intended use case.

4. Easier data and server migration

Since virtual machines are independent of the underlying hardware, you can migrate your data center and servers using techniques like live migration and snapshots.

Live migration lets you transfer virtual machines from one physical host to another without downtime.

Snapshots record the state of a virtual machine (VM) or a system at a specific time. They can be used to clone VMs, creating identical copies that can be deployed on different hosts for backup.

These techniques enable businesses to perform hardware maintenance, load balancing, and upgrades with minimal service disruptions.

5. Dedicated support

Managed virtualization with a hosting company goes beyond server leasing. When you use a top hosting service, like Liquid Web, you also get instant expert technical support when you have an issue or query related to hosting a virtualized environment.

6. Access enterprise hardware

Top hosting companies, like Liquid Web, provide virtualized environments using enterprise-grade hardware.

Businesses of all sizes can access top-grade hardware at affordable prices using a VPS or another managed hosting option. This enterprise-level hardware has the processing power to keep your server online at all times and prevent downtime due to hardware failure.

7. Strong security

Virtualization platforms have advanced security measures such as encryption, secure boot, and role-based access control. Each VM also operates in an isolated environment, preventing interference and reducing security risks.

Fully-managed virtual or cloud servers are safe places to store your data because they have robust security measures.

• Site-to-site VPN solution from external networks.
• Advanced network-level distributed denial-of-service protection.
• Regular backups and disaster recovery services.
• 24/7/365 support via chat or support ticket.

8. Improved disaster recovery

In a virtualized environment, snapshots and backups facilitate quick disaster recovery and business continuity in case of server or hardware failure. If your data gets damaged or lost, you can instantly restore it and continue operations.

9. ​​Licensing

Virtualization can transform how organizations approach software licensing, potentially offering significant cost benefits. Different vendors have varying approaches to licensing in virtual environments, which can impact the total cost of ownership.

Some vendors offer licensing models specifically designed for virtualized environments, such as per-processor, per-core, or per-VM licensing. By carefully evaluating these options, businesses can select the most cost-effective approach for their specific workloads and usage patterns.

Virtualization also enables license mobility, allowing organizations to move licenses between physical servers without additional costs. This flexibility helps businesses optimize their licensing expenses while maintaining compliance with vendor agreements.

Additionally, consolidating servers through virtualization can reduce the total number of licenses required, particularly for operating systems and applications that charge on a per-server basis rather than by usage metrics.To find out more about the benefits of virtualisation, read our full guide.

Simplify virtualization for your business with Liquid Web

Virtualization can help you maximize your resources and drive innovation. To effectively virtualize your infrastructure, leverage Liquid Web’s expertise and tailored solutions.

We offer a range of virtualization options, including dedicated cloud servers and private cloud. These services can help businesses transform a traditional IT infrastructure into a more efficient, scalable, and cost-effective environment.