Cloud computing is the buzz phrase of the moment in the technology world, although there seems to be no end to the definitions for the term. Does it mean Internet services? Grid computing? Web 2.0? On-demand computing? Software as a service? All of the above? Some say it is simply any computing capability that takes place outside the firewall.

The very confusion and contradiction surrounding cloud computing signifies its potential to change the status quo in the IT market, according to analysts at Gartner, Inc. Although cloud computing is very much an evolving concept that will take many years to fully mature, Gartner says it heralds an evolution of business that is no less influential than e-business.

While cloud computing may still be different things to different people, Daryl Plummer, managing vice president and Gartner Fellow, makes it clear that the cloud-computing model is not simply the next generation of the Internet.

 “When organizations cross the threshold between the Internet as a communications channel and the deliberate delivery of service over the Internet, then we truly start to head for an economy based on consumption of everything from storage to computation to video to finance deduction management,” said Plummer.

A Technology Rainmaker?

Cloud computing draws its name from the familiar cloud abstraction used to depict the Internet in network diagrams. Besides being an easy way to render the complex infrastructure that comprises the Internet, the cloud is an appropriate metaphor.  Like the Internet, clouds have no clear boundaries or borders and are constantly shifting and changing.

The basic idea behind cloud computing is to harness the massively scalable Internet infrastructure to deliver data, software and services to multiple customers from within the “cloud.” The goal is to lower costs, reduce data center complexity and speed time to market at a time when building or installing commoditized applications or IT infrastructure services no longer provides organizations with any real competitive advantage.

 “During the past 15 years, a continuing trend toward IT industrialization has grown in popularity as IT services delivered via hardware, software and people are becoming repeatable and usable by a wide range of customers and service providers,” said Plummer. “This is due, in part to the commoditization and standardization of technologies, in part to virtualization and the rise of service-oriented software architectures, and most importantly, to the dramatic growth in popularity of the Internet.”

A Perfect Storm

Plummer said that taken together, these three major trends constitute a profound change that creates a new opportunity to shape the relationship between those who use IT services and those who sell them. Essentially it will mean that users of IT-related services will be able to focus on what the service provides them rather than how the services are implemented or hosted.

The types of IT services that can be provided through the cloud are wide-reaching. Compute facilities provide computational services so that users can use central processing unit (CPU) cycles without buying computers. Storage services provide a way to store data and documents without having to continually grow farms of storage networks and servers. SaaS companies offer CRM services through their multitenant shared facilities so clients can manage their customers without buying software. These represent only the beginning of options for delivering all kinds of complex capabilities to both businesses and individuals.

“The focus has moved up from the infrastructure implementations and onto the services that allow for access to the capabilities provided,” said David Mitchell Smith, vice president and Gartner Fellow. “Although many companies will argue how the cloud services are implemented, the ultimate measure of success will be how the services are consumed and whether that leads to new business opportunities.”

Sky’s the Limit

Gartner predicts that the impact of cloud computing on IT vendors will be huge. Established vendors have a great presence in traditional software markets, and as new Web 2.0 and cloud business models evolve and expand outside of consumer markets, a great deal could change.

 “The vendors are at very different levels of maturity,” said David Cearley, vice president and Gartner Fellow. “The consumer-focused vendors are the most mature in delivering what Gartner calls a ‘cloud/Web platform’ from technology and community perspectives, but the business-focused vendors have rich business services and, at times, are very adept at selling business services.”

Branding is a powerful and revenue-generating asset for potential vendors. Gartner analysts cited Wal-Mart as an example of a company that has two brands — one with consumers for its low prices and one in the business world for its supply chain expertise, its core competency, which it capitalizes on to support its consumer-facing brand.

“Companies invest billions of dollars in building up their core competencies, much of which goes into IT,” Smith said. “If companies could lease their core competencies to other companies then they would capitalize on both brands, driving revenue both in the consumer-facing market and the business service market in the way that Amazon has done with technology.”