It's hard to miss all the coverage in the last few months devoted to "cloud" computing -- it seems to be everywhere. Is this more than just the latest technology fad? We'll try here to help sort it out for you.

First, a definition. Cloud computing is usually used in the context of computer applications that are run entirely over the Internet (the "cloud" in most Network diagrams). The program is run from a Web browser, and the data is somewhere on the Internet. Instead of buying the program to run on your PC or on a company server, you "rent" the use of the program and the space to store the associated data on the monthly basis, per user.

One of the best examples of cloud computing is Salesforce.com, which provides a popular sales tracking program. Users with a paid account log into the on-line application and update their sales activities, without the need to know or care where the data is stored.

Anytime you hear the words "hosted application" it usually is also referring to cloud computing. Another popular hosted application is Microsoft Exchange. Instead of buying a server and Exchange software, you can rent Exchange on a monthly basis directly from Microsoft or from a number of hosting providers.

So why is cloud computing gaining so much attention, and in many cases, market share?

• Low up-front investment. Instead of buying hardware and software, you can just rent what you need, kind of like renting a car when you need to travel vs. buying a car. If you don't have the money to buy the car, you can still get around.
  
  
• High availability. A big reason for the popularity of Salesforce.com and competing products (Microsoft's Dynamics CRM, SugarCRM and many others) is the ubiquity of the Internet. Your distributed sales force doesn't need to worry about troublesome synchronization -- everything they need is available with a PC and Internet connection. So wherever you have distributed computing needs, a cloud application may be a fit.
  
  
• Redundancy. You are basically transferring the risk of a system crash or other, more serious problem to the host of the application. Most of the data centers that are the hosts for cloud computing applications have big company redundancy in power, servers, Internet, etc.

The downsides?

• Higher long-term investment. You will almost always pay more for hosted, cloud computing than the cost of licensing software on your own server. For example, you can typically pay for a server and Exchange software, including maintenance, with about a year and half worth of monthly user fees. X dollars per user per month doesn't sound too bad at all until you start doing the math.
  
  
• Too dependent on the Internet, and on the host, or cloud provider. All of your data is now "in the cloud" on some server somewhere that is only accessible via the Internet, and only if the provider stays in business and their servers keep running. Also, the provider may have the right to increase monthly user fees without providing much advance notice. If there is billing dispute, you may find yourself without access to important data.
  
  
• Security. The other issue that many companies have about storing their accounting data in the cloud is the security aspect. The data is on a server somewhere, along with the data from other companies. What happens if someone makes a mistake and somehow allows your data to be accessed by unauthorized users? You have a little more control with your data within sight, as long as you take the necessary precautions.

Cloud computing is more than a fad and will be an appropriate solution for some small businesses, depending on your situation. The decision is dependent upon your overall technology strategy.

Feel free to contact us to discuss the pros and cons for your specific situation.

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