Another decade, another buzzword. If you are involved in IT it is likely that you will have seen terms like Software-as-a-Service (SaaS), Application Service Provider (ASP) and Utility Computing appear in technology and business media more frequently. Whatever you care to refer to it as they all essentially mean the same thing. In the US it is known as Cloud Computing.

What exactly is Cloud Computing?

The Cloud Computing concept is one based on the outsourcing of computing resources. Rather than purchasing certain hardware or software at relatively high capital expenditure, companies instead rent applications from service providers and access them over the Internet. An alternative to managing traditional IT resources – a host company takes care of the background technicalities and you simply connect to your services through a secure Web-browser, using them whenever needed. These services are hosted online on secure servers – a network of computers collectively referred to as ‘the cloud’. If you have ever had a free MSN Hotmail or Google Mail account you will have used a Cloud Computing service in the form of hosted email.

Nicholas Carr, technology writer and former chief editor of the Harvard Business Review, recently claimed that cloud computing is “a paradigm shift similar to the displacement of electricity generators by electricity grids in the early 20th Century”. The idea is that in the future a company’s IT infrastructure will be viewed as a utility expense not dissimilar to that of a water or electricity bill. It might seem far fetched, but it is quickly becoming a reality.

What does Cloud Computing mean to the small-medium sized business?

Firstly, a utility based delivery of IT services can have a huge cost advantage for the SME. By avoiding the initial expenditure of hardware and software licences, companies can save money and utilise resources. Their system infrastructure now becomes only an operational expense – since there is no hardware to purchase or maintain. IT staff no longer need to spend time on maintenance jobs and can set about improving efficiency in other areas of the company. The Cloud model can also help companies avoid return on investment (ROI) risk and uncertainty. Should their cloud service not work for them they can easily cancel their subscription and switch to an alternative provider – avoiding the nightmare of fixed asset failure six months down the line.

This ‘pay-as-you-go’ model also offers improved scalability. Businesses can allocate more or less funds to their cloud provider depending on how many licenses they need – increasing or decreasing over time. Cloud computing is a great advantage to start-up companies. By avoiding upfront capital expenditure, small firms can get up off the ground and running much quicker. This can be a massive benefit – with no initial cost barrier holding them back they can drastically decrease time to market.

The advantage of location independence is another key benefit of cloud services. Advances in 3G and Wireless Broadband technology have made accessing the Internet on the move easier. Users can connect to their software applications and store data and information instantly over the net. The result is freedom from the office. For companies with multiple users in the field, applications no longer need to be installed directly onto the user’s machine making them run more efficiently and securely.

What are the disadvantages of Cloud Computing?

Some argue that Cloud Computing will not take off because users are too reliant on Internet connections. Google has already anticipated the delay in open connectivity and user-preference for local computing by making some of its cloud applications downloadable – characteristically covering all bases. This a sign of uncertainty from normally the most confident of companies.

Others also suggest that accessing key company applications over the Internet poses some serious questions regarding security. However, cloud providers will argue that their services are no less secure than internet banking – in many cases more so. Using certain cloud-based applications means less critical data resides unsecured on company hardware and the reputable cloud-service companies all employ sophisticated encryption technologies.

Is Cloud Computing the future?

Some might say. But like all new technologies and concepts Cloud Computing needs it’s ‘killer app’ – something to really validate the proposition to the masses. The internet, for example, had email – so what do the experts think is killer app for Cloud Computing? Microsoft founder and former CEO Bill Gates thinks it is online backup and storage. Gates believes that cloud storage is cloud computing’s proof of concept because its use is “without tradeoffs”.

Whatever your opinion of Cloud Computing, it cannot be denied that many small business are already profiting heavily from its adoption. Perhaps the biggest advantage of cloud computing is it’s ability to deliver focus. Without having all the time-consuming IT maintenance tasks holding them back, organisations can concentrate on performing core competencies to their highest potential. With more focus, companies can maximise efficiency in their core tasks.