Robert Jaques

It is said that every cloud has a silver lining, but it is still unclear if finance directors should accept that this upbeat aphorism applies to the rather nicely named “cloud computing”. Though recent hype surrounding it has been intensive, fundamental questions remain over what cloud computing actually is, yet alone what business benefits it can potentially deliver and at what cost.

At its most basic level, the concept of cloud computing is a return to a centralised model reminiscent of the days when mainframes ruled the IT world, but now executed over the internet. For a nice analogy, imagine that the web is a cumulonimbus cloud raining down its stormy arsenal to nourish the ground for the propagation of life, or in our case, information. Cloud computing sees IT resources such as centrally-hosted applications (software as service, or SaaS) and other services delivered to clients over the internet.

But beyond this basic definition, confusion still reigns (or rains) as cloud computing means different things to different people, and this disagreement is creating confusion in the market, denting cloud computing’s uptake. Industry experts say that it is imperative both technology end-users and IT vendors understand all the different perspectives and set proper expectations to obtain the anticipated benefits. But to say the term itself is nebulous could be argued as linguistically, symbolically and technically accurate.

Research house Gartner says the term has already split into at least two “very different” things. For the first definition, the focus is more on the cloud than on local computing, the emphasis on access to services across the internet. The second interpretation focuses on computing services delivered by the cloud, rather than centering on the cloud itself. Basically, the former would access information inside the cloud via the net and the latter would be using an intranet-style cloud which only covers their own organisation and no third-party service providers.

Whatever the agreed definition, cloud computing has now come of age with the arrival of persistent, reliable and fast internet connectivity, say the technology’s proponents. Google has long been crowned king of cloud computing and Microsoft’s recent adoption of cloud computing shows this is more serious technology trend than fad. Microsoft has long eschewed the cloud computing concept and, indeed, the whole idea of internet-based computing. This stands to reason because it makes billions of dollars in revenue from selling traditional boxed software and would have the most to lose if the cloud model went mainstream. But the launch of Microsoft Live, offering the software company’s applications over a Microsoft-controlled cloud, signals the reluctant arrival of the company at the cloud computing party and goes some way to backing up the idea that it could be marketable and profitable. Microsoft has even said it is developing a version of Windows tailored specifically for cloud computing.

So the concept has powerful backing, but this hasn’t made cloud computing any easier to comprehend.

And besides, what can the cloud actually do to help your business? Many of the arguments will spark a distinct sense of déjà vu for finance directors who previously grappled with the idea of outsourcing business services. As with traditional outsourcing, the cloud model means companies do not have to budget for a large upfront capital expenditure for hardware, software licences and implementation services. Nor do customers have the ongoing expense of administering in-house hardware and continuously updating software. This means companies can be more agile with their IT, only paying for what they need and buying extra capacity when required. So companies can benefit from a predictable subscription or pay-as-you-go pricing model backed up by a service level agreement. This could be a useful offering in the current economic climate for many companies focusing on cash management and limiting expenditure.

However, against these advantages, significant concerns remain over the loss of control of potentially business-critical systems. Experts warn that questions around performance, availability and, crucially, security of cloud-delivered IT services need answering. Integration of relatively inflexible cloud services with existing in-house systems is also a potential barrier to adoption.

Parallels between cloud computing and outsourcing are striking and it is clear that the cloud is lagging some years behind traditional outsourcing in its development and adoption cycle. Gartner recently predicted that cloud computing will hit the corporate mainstream in two-to-five years. Analysts IDC agree the cloud currently remains the preserve of a small number of early-adopter companies, forecasting it will take three years to “cross the chasm” from hype to adoption.

The question facing FDs is whether cloud computing will rain on their business parade or deliver a solution to wash away several IT infrastructure and management headaches. As it stands now, the answer for the vast majority of companies, is that it is just too soon to call the weather on this one.