How to stop worrying and love “the cloud”

IaaS, PaaS, SaaS, cloudware, private clouds, cloudsourcing, utility computing … even the word “platform” gets overused and abused, rendering it nearly meaningless. What do all these terms mean? It’s easy to get lost in them if you’re not already deeply wrapped up in the cloud.

So I’ll be honest:  I started out as a serious skeptic of all things “cloud.”

Here’s why: The cloud was originally a symbol used in network architecture diagrams, where it stood for “the Internet” — basically, a bunch of servers and networks that the network architect didn’t really want to think about in detail. Thanks to the standardization of communications protocols like TCP/IP, it wasn’t necessary to think about all those other servers and networks — you could treat them as a single, addressable resource that did some magic, transmitted some data from one place to another, and then brought it back to earth in another part of your network.

The cloud was the network architect’s equivalent of “then a miracle occurs.” But thanks to the Internet, it was a miracle that happened every single day, until it became so commonplace that we didn’t even notice it any more.

Eventually, it seems, product marketers latched onto that cute little “cloud” icon scrawled in these diagrams and decided that it would make a friendlier face for their Web applications.

“Cloud” is a more approachable term than “Web application” or “Internet-based service,” after all, so the marketing shift makes perfect sense. But it doesn’t have much content. You could substitute “Internet” anywhere you see the word “cloud” and it would mean just about the same thing.

However, there is some hard reality underlying the, um, fog of hype.

“In my mind, cloud is a somewhat vague term, but it has a very specific implication, which is it’s all about making IT more responsive to the needs of business,” said Dan Scholnick, a general partner at venture capital firm Trinity Ventures.

Business IT services delivered over the Internet — what we can call, in general, cloud services — are in fact driving a major shift in the way companies think about and use information technology. Cloud services are cheaper and faster to deploy, at least initially, because there’s no on-premise hardware or software installation needed. Cloud services can scale more quickly than software or services that you run yourself. If you need to add 100 more users to your contact-management system, you can turn them on in minutes using a cloud-based service provider like Salesforce.com or Microsoft’s Office 365. If you need to subtract 100 users, it’s just as easy.

By contrast, if you are running your own sales force management software on your own servers in a datacenter somewhere, every time you want to add a significant number of users you’ll have to buy additional hardware, install it, get additional site licenses, make sure all the software was up to date, and so on. If you then go through layoffs, you’re left with a bunch of capital that you can’t get rid of easily.

Indeed, in some cases cloud services are making it possible for companies to have tools and resources that previously were only available to the largest of corporations.

To take one relatively minor example, a cloud based inventory management system gives small-time Etsy sellers the ability to get sales-channel reports and customer insights that you used to only get if you were willing to spend hundreds of thousands of dollars on an enterprise resource management system.

“We couldn’t have existed before the cloud,” Eloqua CEO Joe Payne said recently. His company uses at least a dozen cloud-based services, including Salesforce.com and his own company’s marketing automation tools, but also including cloud-based Web-conferencing, accounting, contract management, payroll processing, software version control, collaboration, recruiting and training. It may sound like overkill, but all those services give Eloqua flexibility and speed that it never would have had before, and have helped drive the company to grow its revenues at a cumulative 54 percent per year over the past 5 years.

It’s hard to say exactly how big the market for cloud services is, partly because the term is so broad that it comprises a whole bunch of disparate categories. To take just one slice of the pie, cloud infrastructure services, awkwardly called “infrastructure as a service” or IaaS, are a $4 billion market by themselves.

Software-as-a-service, which most people call SaaS but which I think could be more simply called “software services” or “cloud software,” has been a $21 billion market in 2011.

On the consumer side, services delivered over the cloud are already huge. Online games were a $19.3 billion market in 2010. Services that let people store data online (storage-as-a-service, which could also abbreviated SaaS by cloud terminology chumps) will hit $3 billion by 2012, IDC predicts.

And, heck, if you consider webmail a cloud service, there are approximately a gazillion people using email-as-a-service, or EaaS. (I just made that last term up.) Of course, most of us don’t pay anything for webmail, and we don’t consider it a “cloud” service, which leads me to my final point:

By the time an Internet-based service gets truly ubiquitous and everyone is using it, we no longer think about the Internet part of it. We don’t send each other “Internet emails,” we just email each other. We don’t look things up on the Web any more, we just look them up.

Eventually, companies won’t be buying “cloud services,” they’ll just be buying services — and those services will be delivered, like everything else, over some combination of public and private networks, all of which are based on underlying Internet protocols and technologies.

In short: And then a miracle occurs