Several file-sharing cloud providers build clouds within clouds, using Amazon Web Service's Simple Storage Service (S3). It’s a solid concept: Why place your own equipment in a data center when another cloud service can do it for you? It makes economic sense because you’re not buying the hardware and software, and most important, you don’t have to absorb the costs of the people, technology, and processes needed to maintain it.
There are even clouds built on clouds that in turn build on clouds. Let’s call them cloud to the third power. Examples I've seen include SaaS applications that are built on cloud-based database services, which in turn are built on a major IaaS provider.
Although this sounds complex, it’s easy to design. Why? Because the more primitive cloud services are abstracted from the cloud services built on the primitive services. Thus, the SaaS application interfaces with the cloud database, and the cloud database interfaces with the cloud storage. As long as the primary cloud service that supports the secondary cloud service works effectively, the third-tier and higher-tier cloud services built on those services will work as well.
IT has been building complex nested solutions for years, but we typically used tightly coupled software systems, such as storage, databases, processes, and security. What’s new here is that the systems are loosely coupled and widely distributed as remote cloud services.
Indeed, the sky is the limit with these kinds of architectures. In fact, we’re beginning to see cloud services that compose as 10 cloud services. Why build it when you can get it as a service?
Of course, the concern is resiliency. If one service goes down, the entire system could stop working. In that scenario, you need to get creative, as well as understand which cloud services make up your system. The more links in the chain, the more likely that one of those links will break, so you need to dial that into your design.
In fact, you’re likely using nested clouds today -- but don’t really know it. It's great approach, but do it intentionally.