Technological innovation is constantly changing the way that companies do business. With so many terms being added to our IT vocabulary, it is sometimes difficult to grasp all of the new concepts and truly know which ones have staying power. One of the newer entrants is cloud computing. In a nutshell, cloud computing allows businesses to deliver applications, store data, or do computations (among other services) via the infrastructure of an external provider, i.e. a network of computers, instead of using internal resources.

Typically, companies not only have to purchase computers for each employee, but also buy individual software, software licenses, and servers to handle the networking aspect of connecting the individual computers. When applications and content are in the cloud, employees can access them through the Internet and, therefore, do not need to have the software installed on their machines.  In fact, the computers used to access the Internet can be lower priced, stripped-down models.

Through cloud computing, companies cut down on capital expenditures and reduce the physical space needed to support their own technology infrastructures by using the resources of cloud computing providers who already possess large data centers with powerful servers.  Indeed, one of the most innovative features of cloud computing is its on-demand, pay-by-use model. It allows for an elastic environment that can contract or expand at minimal costs with little service from the cloud provider. Through this, businesses can pay for the amount of computing capacity and/or hours that they need, which reduces the fixed expenses of hardware and internal IT support, and more cost effectively balances supply and demand. Users also gain from the ability to access applications and information from any location that has an Internet connection.

There are many names crowding the cloud computing space. One of the biggest players is Amazon (AMZN), which is a company probably better known for its Web-retailing services. Considered a pioneer and true innovator of Web-based computing, Amazon, through its Web Services division, provides database Web services, content delivery services and message storage services in addition to its core cloud computing products. Based on its IT infrastructure, Amazon turned its ability to deliver information and services at a large scale to its own employees and consumers on its shopping site into a service now utilized by tens of thousands enterprises, small businesses and individuals.  Another giant in the cloud computing arena is Google (GOOG). The company's foray into Web-based services includes an array of productivity tools, such as the popular Gmail service, office productivity tools (word processing, spreadsheet app, etc.), a series of email and Web security services and the Google App Engine (a service that allows developers to build and host applications on Google servers). Companies such as Salesforce.com (CRM), Citrix (CTXS) and VMware (VMW) are among some of the many smaller entrants that are also vying for a share of this growing market.

With any new technology comes risk. One of the primary concerns in cloud computing is the protection of the data on the servers of the providers. In that regard, cloud computing providers are taking many measures to secure the information and privacy of their clients, because at the end of the day their success depends on it. Although they are a bigger target, due to the vast amount of data they collect, their infrastructures will likely have more safeguards in place against hackers than the businesses they supply, making it less likely for their systems to be compromised. 

While the full scope of cloud computing’s potential remains to be seen, the concept is undeniably appealing. Providing enterprises with the ability to securely assemble, store and deliver applications and information with maximum efficiency at much lower costs clearly would represent an evolution in business process.