Do I need an umbrella for my server?
Not quite. Cloud computing is a broad term used to describe technology services delivered over the internet. Rather than companies’ running their IT infrastructure inhouse, it is provided remotely via the web, usually on a subscription basis.

Like what?
Cloud computing is made up of three main elements: infrastructure as a service, platform as a service and software as a service.

Infrastructure as a service sees elements such as computer processing power and data storage bought in as online resources, with businesses having access to remote servers to store and process data.

For platform as a service, a range of tools that help developers build and run applications on third-party servers is added.

Cloud computing also encompasses applications delivered over the internet, otherwise known as software as a service or on-demand applications. Software as a service includes applications such as CRM, ERP and office applications.

Any other factors to take into account with cloud computing?
A key part of cloud computing is multi-tenancy, which means cloud providers run applications for different customers simultaneously on the same physical servers. These servers use virtualisation technology to separate the data and processing belonging to each customer.

Scalability – or the ability to increase or decrease the computing resources available to users depending on demand – is another prerequisite of cloud computing. Virtualisation is also a key technology in making this possible as it allows for virtual machines to be rapidly created or switched off.

If physical servers always need to be started up or switched off, the process of adding or removing computing power is much slower and the service is considered to be hosting rather than cloud computing.

So does cloud computing always mean vendors provide everything?
Not necessarily. Another cloud computing option that has emerged is the private cloud.

Public cloud is where a business pays a subscription to access a service run by third-party suppliers – Google Apps and Salesforce.com are both examples of this.

Private cloud, on the other hand, is where organisations redesign their IT infrastructure to create a single virtualised environment where resources are pooled for employees to access when they need it.

By doing this, IT departments can divert processing and storage power to wherever…

…it’s needed according to demand, creating efficiencies and flexibility similar to those found in public cloud computing.

It also means companies that are uncomfortable with their data being held outside their four walls, or firms that operate in a heavily regulated industry, can benefit from cloud technology without having to send data over the public internet.

For example, Microsoft has made it possible for customers to run a private cloud version of its Azure platform. The company has developed an appliance that businesses can install in their datacentres that includes Azure, SQL Azure and Microsoft-specified configuration of network, storage and server hardware.

Companies that are happy for their data to be held outside of their company but want to know their data is kept separate from other organisations can use hosted private cloud computing, which the likes of Amazon Virtual Private Cloud and HP offer.

Sounds interesting – but is cloud computing really a big deal?
Gartner certainly thinks it’s going to be big. The analyst house has predicted that cloud services will generate $148.8bn by 2014 – more than double 2010’s total.

Who are the big names in cloud computing?
There are a bunch of companies that have risen to prominence around cloud computing such as Salesforce.com, which started off providing on-demand CRM but has branched out to having its own cloud computing platforms. Another big name is NetSuite which provides other business applications as software as a service, while Google Apps is also making inroads into corporate IT.

On the processing and storage side of things, Amazon has become one of the big players after diversifying from its ecommerce business. Rackspace is also becoming more prominent in this area.

Traditional technology providers are also getting interested. Microsoft has Azure but recently started to provide cloud-based versions of its Office software as well.

Meanwhile, business software giant SAP has stepped into the on-demand applications arena with its Business ByDesign ERP system which is slowly being rolled out to customers.

Dell and IBM, Intel and HP are also working to provide cloud computing technology, having announced significant investments into the technology in the past year.

What are the benefits of cloud computing for business?
Well, there are several key benefits that vendors tout with cloud computing, the first being that it reduces implementation costs for businesses. Because cloud services are offered on a subscription basis, the high upfront costs associated with traditional on-premise software are avoided.

This means organisations can convert software costs from capital to operational expenditure and just pay for the services they use, rather than shelling out to run and maintain datacentres that are rarely fully utilised.

And due to the economies of scale that running software in huge datacentres produce, cloud computing can theoretically lead to lower costs – which will obviously appeal to CFOs looking to reduce costs.

So it can be cheaper. What else?
Another major benefit of cloud computing is the flexibility it provides. If businesses need more computing power, storage or additional instances of applications, they simply request additional resources. They can then add additional seats to their subscription or add extra processing time.

In the traditional on-premise approach, if businesses need more software they have to buy it in, or, if additional computing power…

…is needed they have to request their IT department to set up more servers or create virtual machines.

Location also becomes less important as organisations can move data or access software regardless of where it’s held.

Reliability is also cited as a benefit. If a physical server fails within a private or public cloud set-up, the virtual machines running on it can be transferred to another server with minimal disruption to the user. Multi-tenancy also means updates can be rolled out across all users at the same time so they don’t have to upgrade technology themselves.

Another advantage is that IT departments don’t need to worry about looking after the applications and servers, so they can look at other ways in which tech can be used to help improve the business.

There must be some downsides surely…
Security and regulatory issues are the main concern for businesses as public cloud services require data to be held outside the organisation’s firewall.

And due to the multi-tenancy model, some organisations are concerned that virtual servers running next to each other on the same machine could pose a risk of data ending up in the wrong place.

In addition, there are concerns about locating data once it’s in a vendor’s datacentre, meaning organisations operating in heavily regulated industries are less keen to adopt cloud computing.

Vendors are addressing these issues. Amazon Web Services recently announced that businesses could choose to use its virtual private cloud technology in any of its global regions, which allows for a more accurate idea of where data is being held.

There are also concerns about reliability of service as downtime will mean companies can’t access their data or vital applications, although traditional corporate networks are equally prone to downtime. And some vendors are now working on technology that allows people to work on cloud applications offline, meaning loss of connectivity is less of an issue.

Suppliers are also pretty confident about the reliability of their services. When Microsoft launched Azure, it promised businesses 10 per cent of their money back if connectivity dropped below 99.95 per cent and access to the storage and processing services dropped below 99.9 per cent. If availability for either drops below 99 per cent, 25 per cent credit will be offered.

There is even the possibility that security services themselves could be hosted in the cloud with malware and spam-detection applications already available.

But are businesses actually using cloud computing?
Although cloud computing has been hyped for a while it’s only recently that businesses have started to look at the technology as part of their IT strategy.

Research by silicon.com found that 2011 could be a breakthrough year for cloud computing, with software as a service leading the charge as many organisations plan to step up their use of cloud services. One in 10 respondents even predicted that their organisation’s entire IT would be in the cloud in a year’s time.

But the research also showed that cloud computing is still a long way from being the dominant means of delivering IT: 76 per cent of respondents said they have less than a quarter of their technology infrastructure in the cloud.

I bet the public sector is steering clear of cloud computing though…
You’d be surprised – the UK government is also starting to take cloud computing seriously with the G-Cloud, which will be a platform to host all of the software used by the public sector.

One of the reasons why the government is pursuing this is it could cut costs through economies of scale. This would save a significant amount of taxpayers’ money, which would help Whitehall cut down on the £16bn the public sector spends on IT every year. An app store for the G-Cloud has been piloted since February for applications such as HR, ERP and email.