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"How does cloud storage work?"
Cloud storage keeps files/objects in a central place (i.e. the cloud). Users can either access the files directly or make changes to a local file and sync with the cloud. When multiple people make changes to a file they can either do it sequentially (i.e. one person makes a change, uploads to the cloud, next person downloads the files, makes the changes, upload, and so forth) Or one person creates the material (for example: a presentation or a proposal) uploads the file(s) and then multiple people download and make changes simultaneously. While the cloud cannot resolve the edit conflicts, it will keep the revisions separate and organized. Someone has to get the editor's pen, download the versions, consolidate the edits and upload the consolidated version. Many cloud services offer a locking feature to minimize edit conflicts.
The cloud also enables access to the files from any device, including mobile phones, tablets and laptops.
That doesn't mean the security is lacking. In fact, the reverse is true. The cloud storage enforces uniform permissions across the multiple devices, as well as creating access logs. Usually the enterprise admin defines folder and file permissions depending on the roles of the users and monitors access via the logs.
Usually the cloud storage provider has client-specific applications. For example Egnyte offers the Personal Local Cloud (PLC) application for laptops running Windows, Mac OSX or Linux, native apps for iOS, Android and Windows Mobile, Office Local Cloud(OLC) for NAS boxes and Enterprise Local Cloud (ELC) packaged as a virtual appliance, thus covering the spectrum of ubiquitous access. See also "What is hybrid cloud storage?"
Another aspect of the cloud is the ability to collaborate with partners and customers. Customer or partner users may be granted access to the specific project folders required for collaboration. Once the appropriate permissions and access methods are setup, it becomes easy to share files.