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So What Is Cloud Computing?

Cloud computing is an emerging computing technology that uses the internet and central remote servers to maintain data and applications. Cloud computing allows consumers and businesses to use applications without installation and access their personal files at any computer with internet access. This technology allows for much more efficient computing by centralizing storage, memory, processing and bandwidth. Cloud computing is broken down into three segments: "applications," "platforms," and "infrastructure." Each segment serves a different purpose and offers different products for businesses and individuals around the world.

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Cloud Computing Segments

Applications: It's all On Demand So far the applications segment of cloud computing is the only segment that has proven successful as a business model. By running business applications over the internet from centralized servers rather than from on-site servers, companies can cut some serious costs. Furthermore, while avoiding maintenance costs, licensing costs and the costs of the hardware required to run servers on-site, companies are able to run applications much more efficiently from a computing standpoint.

In July 2008, HP, Yahoo! (YHOO), and Intel (INTC) announced a joint cloud computing research project called the Cloud Computing Test Bed. The companies are jointly designing and producing the internet based testing platform to encourage further development in cloud computing technologies. The test bed is beginning at six physical locations, each hosting a cloud computing infrastructure utilizing HP hardware and Intel processors. •Salesforce.com (CRM)
•Google (GOOG)
•NetSuite (N)
•Taleo (TLEO)
•Concur Technologies (CNQR)

Platforms: Many of the companies that started out providing On Demand application services have developed platform services as well. The platform segment of cloud computing refers to products that are used to deploy applications. Platforms serve as an interface for users to access applications provided by partners or in some cases the customers. Some examples included Salesforce.com's platform force.com, which allows subscribers to access their applications over the internet. NetSuite, Amazon, Google, and Microsoft have also developed platforms that allow users to access applications from centralized servers.

Active platforms - The following companies are some that have developed platforms that allow end users to access applications from centralized servers using the internet. Next to each company is the name of their platform. •Google (GOOG) - Apps Engine
•Amazon.com (AMZN) - EC2
•Microsoft (MSFT) - Windows Live
•Terremark Worldwide (TMRK) - The Enterprise Cloud
•Salesforce.com (CRM) - Force.com
•NetSuite (N) - Suiteflex
•Mosso - Mosso, a division of Rackspace
•Metrisoft - Metrisoft SaaS Platform

Infrastructure: The final segment in cloud computing, known as the infrastructure, is very much the backbone of the entire concept. Infrastructure vendors provide the physical storage space and processing capabilities that allow for the all the services described above. The products in this segment are slightly more varied than those in the other areas of cloud computing but include ones such as managed hosting, and development environments (such as Google gears) that allow users to build applications. Cloud storage, such as Amazon's S3, is also considered to be part of the infrastructure segment.

What does a Shift Towards Cloud Computing Mean?

So who is affected by a paradigm shift in the computing industry? The shift would affect companies a few different sub-industries including software companies, internet service providers and hardware manufacturers. Companies in each of these industries will face significant change if cloud computing is to be the next step for the industry. While it is relatively easy to see how the main software and internet companies will be affected by such a shift, how companies in the internet and hardware industries will be affected is slightly more easy.

Who Gains? Software Producers that could gain from a shift towards cloud computing include: •Google (GOOG)
•NetSuite (N)
•Salesforce.com (CRM)
•Taleo (TLEO)
•RightNow Technologies (RNOW)
•Concur Technologies (CNQR)
•Omniture (OMTR)
•Hyperic
•Quest Software (QSFT)

Internet-based companies that could gain from a shift towards cloud computing include: •Amazon.com (AMZN)
•Yahoo! (YHOO)
•Microsoft (MSFT)
•Google (GOOG)

Consulting companies that could gain from a shift towards cloud computing include: •Cloud Technology Partners
•SAVVIS (SVVS)

Who Loses Out? Traditional software producers that could have some catching up to do if cloud computing ultimately wins out include: •Oracle (ORCL)
•SAP AG (SAP)
•Blackbaud (BLKB)
•Lawson Software (LWSN)

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What benefits will Cloud Computing bring?

•Users can avoid capital expenditure on hardware, software, and other peripheral services, when they only pay a provider for those utilities they use; •Consumption is billed as a utility or subscription with little or no upfront cost; •Immediate access to a broad range of applications, that may otherwise be out of reach, due to: The lowering barriers to entry; •Shared infrastructure, and therefore lower costs; •Lower management overhead. •Users will have the option to terminate a contract at any time, avoiding return on investment risk and uncertainty. •Greater flexibilty and availability of 'shared' information, enabling collaboration from anywhere in the world - with an internet connection. •Increased Storage:Organizations can store more data than on private computer systems. •Highly Automated-No longer do IT personnel need to worry about keeping software up to date. •More Mobility-Employees can access information wherever they are, rather than having to remain at their desks. •Allows IT to Shift Focus-No longer having to worry about constant server updates and other computing issues, government organizations will be free to concentrate on innovation.

What are the associated risks to Cloud computing?

•Cloud computing does not allow users to physically possess the storage of their data which leaves responsibility of data storage and control in the hands of their provider; •Cloud Computing could limit the freedom of users and make them dependent on the cloud computing provider; •Privileged user access - how do you control who has access to what information? •Security of sensitive and personal information lay with the vendor. How do you explain this to your customers when their data is compromised without sounding like you're 'passing the buck'? •From a business continuity stand point, can you rely on each vendor to have adequate resilience arrangements in place? •Long-term viability — ask what will happen to data if the company goes out of business; how will data be returned and in what format


Impacts of Cloud Computing

The promise of cloud computing is arguably revolutionizing the IT services world by transforming computing into a ubiquitous utility, leveraging on attributes such as increased agility, elasticity, storage capacity and redundancy to manage information assets. The continued influence and innovative use of the Internet has enabled cloud computing to utilize existing infrastructure and transform it into services that could provide enterprises both significant cost savings and increased efficiency. Enterprises are realizing there is a potential to leverage this innovation to better serve customers and gain business advantage.

By offering enterprises the opportunity to decouple their IT needs and their infrastructure, cloud computing has the likely ability to offer enterprises long-term IT savings, including reducing infrastructure costs and offering pay-for-service models. By moving IT services to the cloud, enterprises can take advantage of using services in an on-demand model.

Less up-front capital expenditure is required, which allows businesses increased flexibility with new IT services. For all these reasons, it is easy to see why cloud computing is an attractive potential service offering for any business looking to enhance IT resources while controlling costs. However, it should be noted that along with the benefits come risks and security concerns that must be considered. As IT services are contracted outside of the enterprise, there is added risk with increased dependency on a third-party provider to supply flexible, available, resilient and efficient IT services. While many enterprises are accustomed to managing this type of risk in-house, changes are required to expand governance approaches and structures to appropriately handle the new IT solutions and enhance business processes.

As with any emerging technology, cloud computing offers the possibility of high reward in terms of containment of costs and features such as agility and provisioning speed. However, as a “new” initiative, it can also bring the potential for high risk. Cloud computing introduces a level of abstraction between the physical infrastructure and the owner of the information being stored and processed. Traditionally, the data owner has had direct or indirect control of the physical environment affecting his/her data. In the cloud, this is no longer the case. Due to this abstraction, there is already a widespread demand for greater transparency and a robust assurance approach of the cloud computing supplier’s security and control environment. Once it has been determined that cloud services are a plausible solution for an enterprise, it is important to identify the business objectives and risks that accompany the cloud. This will assist enterprises in determining what types of data should be trusted to the cloud, as well as which services might deliver the greatest benefit.