Digital Heft Through Cloud Computing

Running a business that needs heavy-duty computing power at irregular intervals is a challenge. Those big jobs have to get done, of course, but who wants to look at hundreds of thousands of dollars in high-end computer gear sitting idle on the off days?

No, this isn't a story about outsourcing. Pathwork Diagnostics, a 35-employee biotech company in Redwood City, Calif., develops tests for hard-to-diagnose cancer tumors—a complex, highly proprietary process too sensitive to trust to outsiders. So the venture-backed company decided to try a promising new technology called cloud computing, which allows companies to run business applications over the Internet on remote, shared servers on a pay-as-you-go basis. Ljubomir Buturovic, the company's chief scientist, figures his company has saved hundreds of thousands of dollars by using the cloud rather than buying its own hardware.

Pathwork's business is unusual, but its problem isn't. On a typical day, the Web site of Sixth Seal, a 3-person video production company in Austin, Tex., doesn't get many hits. But when founder Luke Korem puts up a hot new video, traffic spikes. And Korem doesn't want to deal with the complexities of streaming high-definition content. "I know a lot about video, but not about Web servers," he says.

Korem turned to Rackspace, a company that manages servers for large businesses and also offers cloud computing. "When the site gets busy, the service expands to meet the demand, and I don't have to do a thing," says Korem, who pays $100 a month for an occasional boost in bandwidth and processing power.

Pathwork signed up with, which, through its Web services group, has built a server-for-hire network it calls the Elastic Compute Cloud, or EC2. At the very simplest level, a customer pays about 13 cents an hour to run Windows applications on Amazon's servers. But your per-hour charge could be higher. That's because the bill is keyed to the amount of computing resources your jobs require and the amount of time the servers are needed. Moreover, getting complex applications to run in the cloud can require the services of an in-house developer or the expensive help of a systems integration company.

Running applications and storing data on someone else's computer may seem a little scary, but security is not a big worry for small businesses using cloud computing, says James Staten, an analyst with Forrester Research in Cambridge, Mass. "It's likely that an Amazon or a Rackspace will do a better job securing your data than you would," he says.

There is, however, another issue. "You should be able to change your mind," Staten says. So when you're done with the service, you need to be sure you can retrieve your data in a form that will run on your own servers or those of a different vendor.

Staten's warning is even more pertinent if you use one of the many online storage sites for digital music and files. By and large, these services, a simpler version of the cloud, will keep your data safe. But a few have gone out of business or suffered catastrophic failures, leaving customers unable to retrieve their music, photos, and other files.

The best precaution is simply to ask the provider how well it secures clients' files and application data. If it doesn't store the information on more than one server and doesn't replicate it as often as you need, go somewhere else. And be sure you can get your data back in usable form without incurring extra costs.

Cloud computing isn't for every business. But if your network is regularly bogged down when demand peaks, that cloud could have a silver lining indeed. Return to the BWSmallBiz June/July 2009 Table of Contents

    Before it's here, it's on the Bloomberg Terminal.