Cloud Computing: Eyes on the Skies

The tech credentials behind remote computing continue to gather, but the concept remains, well, cloudy to many. Here, a closer look

Editor's note: This is an extended version of a story published in the May 5, 2008, issue of BusinessWeek magazine.

When Hewlett-Packard's (HPQ) chief strategy officer, Shane Robison, visited BusinessWeek recently, we asked him to define cloud computing, one of the hot new terms in tech. He laughed and politely refused. We asked again. He offered some general thoughts, but again avoided a precise definition.

It was an unusual response from a renowned thinker in the technology industry. Yet Robison's reticence shows how difficult it is to get clarity about cloud computing these days. Almost every week, there's a new initiative unveiled using the term. Most recently, Google (GOOG) and (CRM) announced a joint effort, with Google Chief Executive Eric Schmidt declaring this "the computing cloud age." And as the buzz about clouds has grown, the term is being stretched to cover a whole host of very different activities. Here's a guide to see through the confusion over clouds.

What is cloud computing?

While different people use it to mean different things, the broadest definition refers to any situation in which computing is done in a remote location (out in the clouds), rather than on your desktop or portable device. You tap into that computing power over an Internet connection. "The cloud is a smart, complex, powerful computing system in the sky that people can just plug into," says Web browser pioneer Marc Andreessen. Here's his take on clouds.

What's new about that?

Cloud computing is similar to what the tech industry has been calling "on-demand" or "utility" computing, terms used to describe the ability to tap into computing power on the Web with the same ease as plugging into an electric outlet in your home. But cloud computing is also different from the older concepts in a number of ways. One is scale. Google, Yahoo! (YHOO), Microsoft (MSFT), and (AMZN) have vast data centers full of tens of thousands of server computers, offering computing power of a magnitude never before available. Cloud computing is also more flexible. Clouds can be used not only to perform specific computing tasks, but also to handle wide swaths of the technologies companies need to run their operations. Then there's efficiency: The servers are hooked to each other so they operate like a single large machine, so computing tasks large and small can be performed more quickly and cheaply than ever before. A key aspect of the new cloud data centers is the concept of "multitenancy." Computing tasks being done for different individuals or companies are all handled on the same set of computers. As a result, more of the available computing power is being used at any given time.

What are the most common uses?

For consumers, there are Web services that require immense computing power, including Web search and social networking sites such as Facebook and MySpace (NWS). In addition, many small Web companies can't afford to operate their own data centers, so they use the data centers of Google and Amazon. Google announced a public test of its service, called AppEngine, on Apr. 7.

Most of these projects are simple Web sites and applications, but business analysts are beginning to tap Amazon and Google's computers to analyze data on the Internet for business intelligence. Google and IBM have formed an alliance aimed at providing cloud computing services for university researchers. "Large numbers of Internet users are contributing data, pictures, and blogs to the Web sites. We need to be able to mine information out of those huge amounts of data," says Dennis Quan, chief technology officer of IBM's High Performance On-Demand Computing initiative. Here's a view on clouds from Irving Wladawsky-Berger, visionary emeritus at IBM.

Are there different kinds of clouds?

There are. While Google's cloud is ideal for sifting through data,'s is best for running business applications like customer-relationship management and accounting. It offers companies the ability to write their own programs to run on its servers, something it calls "platform-as-a-service." Starbucks (SBUX), for instance, used the platform to create its new My Starbucks Idea Web site as an online community for employees and customers to share ideas about coffee, food, and the Starbucks experience. It took just one month to get up and running. Starbucks Chief Information Officer Chris Bruzzo says the company handles most of its own computing, but is considering running pieces of its business on other companies' clouds.

Marc Benioff,'s chief executive, has been extolling the virtues of this kind of computing ever since he started the company a decade ago. "I'm not one man and a drum and a monkey anymore," he says. "There's a whole industry emerging."

How mature is the cloud computing technology?

The newest concepts and technologies are still in short pants. There are different schemes for plugging applications into the various platforms—and they're still being refined. Facebook allows other Web developers to create applications that can be used on peoples' Facebook pages, but the developers have to run the applications on their own servers. If demand suddenly spikes, they might not have enough computing power to handle it. On the other hand, Ning, a company co-founded by Andreessen that makes it possible for individuals to operate their own social networks, runs all of the applications on its cloud. One notable Ning customer, rapper 50 Cent, has set up a custom-designed site there, and doesn't have to worry about a sudden rush on the site by the 200,000 people who are members of his Ning fan club.

Where's Microsoft?

The software giant runs its consumer search and communications services on large cloud computing data centers. Just now, it's launching new cloud services for businesses, including e-mail and collaboration, under the Microsoft Online brand. Microsoft's mantra is "software plus services," so its cloud services for businesses are tied in to some extent with its desktop applications such as Word, Excel, and Outlook. While Google now offers such applications in the cloud, Microsoft doesn't. Not yet, anyway.

Are large companies into cloud computing?

So far, few are using it extensively. Corporate software maker SAP (SAP) is looking for ways to offer the efficiency and flexibility of clouds to its customers. IBM (IBM) has built a cloud computing center in Ireland to showcase the new technologies. But analysts say corporations are smart to proceed slowly until the technology advances. "This is Silicon Valley cranking up the dream machine," warns analyst Bruce Richardson of AMR Research.

As more tech companies glom onto the cloud label for marketing purposes, the true potential of the phenomenon is likely to become even more foggy. But eventually, where consumers and business customers find value, tech suppliers will find profits.

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