Cloud computing is one of the most talked about topics in the industry today. In general terms, cloud computing is delivering hosted services over the internet.  Shared resources, software, and information are provided on demand just like an electricity grid. The name cloud computing was inspired by the cloud symbol that’s often used to represent the Internet in flowcharts and diagrams.

Cloud computing is broken down into three segments (services) : applications, infrastructure, and platforms. Each of these segments serves different purposes and offer different products for businesses and individuals. So far the applications segment of cloud computing has proved more useful as a business model.

Generally, Cloud computing customers do not own the physical infrastructure, thereby avoiding cost. They consume resources as a service and pay for the resources that they use. It also gives them the flexibility to customize the applications. Imagine companies having data centres with floor spaces, power, cooling, bandwidth, networks, servers etc. And a team of experts managing them. Cloud computing reduces these efforts and cut down the cost drastically. Now they can run on shared resources. Just login, customize it and use it.

A cloud can be private or public. A public cloud sells services to anyone on the Internet. (Currently, Amazon Web Services is the largest public cloud provider.) A private cloud is a proprietary network or a data center that supplies hosted services to a limited number of people. Rackspace is a good example of this kind of services.  Private or public, the goal of cloud computing is to provide easy, scalable access to computing resources and IT services.

However, there are concerns related to cloud computing in terms of  security and privacy. People may be reluctant to hand over important data to another company. Corporate executives might be hesitant to take the advantage as they may not be able to keep company’s information confidential. Privacy is another issue. If a client can login from any location to access data and applications, it is possible that the client’s privacy is compromised. Cloud computing companies will need to find ways to protect client’s privacy. One way is to use authentication techniques such as username and password. Another is to provide authorization where in the users can access data and information which are only relevant to them.

Lately there has been an inordinate amount of industry hype over terms such as cloud computing and SaaS (Software as a service).  For a  CIO testing the waters, it can be extremely challenging before he takes the plunge and moves his on-premises infrastructure to the cloud. As mentioned before, data privacy and compliance issues are major challenges. Economy of Scale is also a major factor and the comparative costs factored in over a period of time.  For example, for a small traditional firm with 20-50 odd users operating from a single location , it does not makes financial sense to port common applications such as EMail and Payroll onto a hosted infrastructure. when the same can be hosted in the premises in probably one or 2 servers. For an internet startup offering web-based services, hosting on the cloud is probably the way to go, as the infrastructure can be scaled up easily in order to manage performance and addressing the needs of a growing user base. Similarly, for IT projects with a finite timespan, cloud based hosting would make sense, as it cuts down on hardware/infrastructure investments, which would be useless after the duration of the project.  However, for mega corporations with thousands of employees, it  makes more sense to manage their core data and applications (like ERP, Mail) in house, and probably port applications such as employee intranet or Vendor management onto the cloud. As a matter of fact, a staggered approach to porting to cloud is probably the best way to make the transition without undertaking major risks.