What aspect of cloud computing does the term 'scalability' refer to?

The term 'scalability' in cloud computing specifically refers to the ability to add or reduce resources based on demand. This characteristic is essential as it allows organizations to efficiently manage their resources in response to varying workloads. For example, during peak usage times, a cloud system can automatically allocate more resources such as processing power or storage to handle the increased demand. Conversely, when demand decreases, unnecessary resources can be decommissioned to save costs.

This flexibility allows businesses to effectively align their infrastructure with their actual needs, thus optimizing performance and cost-effectiveness. Scalability can be vertical, where resources are added to or enhanced within existing servers, or horizontal, where new instances or servers are added to distribute the load. Overall, scalability is a fundamental feature that makes cloud computing highly advantageous for organizations of all sizes.