What is Cloud Computing � and Why Should You Care?

By Laurie McCabe | Posted March 11, 2009

Updated on Oct. 5, 2011 -- How has cloud computing changed in the two years since this article was written? Small business analyst and author Laurie McCabe provides an update on what's new in cloud computing -- and how it benefits small business -- in her article, The Small Business Forecast for Cloud Computing.

What Is Cloud Computing?

Cloud computing is a computing model that lets you access software, server and storage resources over the Internet, in a self-service manner. Instead of having to buy, install, maintain and manage these resources on your own computer or device, you access and use them through a Web browser. Sometimes you might need to download a small piece of client code (i.e., software you install on your PC), but we'd still categorize that as cloud computing, because, for the most part, the real horsepower is supplied from the cloud.

At this point, many of you may be asking, I still don't get why they call this "cloud" computing — why not Internet computing? The answer is that techies have long used cloud icons to represent the data centers, technologies, infrastructure and services that comprise the Internet — and the metaphor has stuck.

You can perform just about any computing task in the cloud. It's likely that you already use several cloud solutions. For example, software-as-a-service (SaaS) or on demand business applications, such as salesforce.com, Intuit QuickBooks Online or Citrix GoToMeeting are cloud applications; you access them from your Web browser, but the software, processing power and storage reside in the cloud.


Free Web services — such as Google Gmail or Microsoft Hotmail, or FaceBook and Twitter, for that matter — are also examples of cloud computing. Likewise, if you use online backup solutions, you're storing your files in the cloud. And many managed services providers supply services such as network and security monitoring over the Internet. Another example is Amazon.com, which sells access to CPU cycles and storage as a service of its cloud infrastructure.

Why Should You Care?

Most small businesses simply don't have the time, expertise or money necessary to buy, deploy and manage the computing infrastructure needed to run these solutions on their own. Cloud computing shields you from these complexities. As a user, you see only the self-service interface to the computing resources you need. And, you can expand or shrink services as your needs change.

Instead of laying out capital to buy hardware and software, you rent what you need, usually either on a subscription basis, or on a utility pay-as-you go model. Many cloud computing vendors offer free services. Some, like Google and Yahoo, monetize free offerings through ad revenues. Other vendors make money by selling optional, integrated fee-based services alongside the freebies — a model that is gaining momentum. A couple to check out in this category include the following:

  • SmartRecruiters (www.smartrecruiters.com), which offers a free applicant tracking system for recruiters in small and medium businesses.

  • FreshBooks (www.freshbooks.com), which has free invoicing, expense reporting and time tracking solutions for freelancers and small businesses.

  • Demandbase's (www.demandbase.com) freebie service is Demandbase Stream, which provides information about who's visiting your Web site, search terms they use, and pages they looked at.

What to Consider

Behind the scenes, cloud computing vendors have to do a lot of work to manage all of the infrastructure, technology and people that make this possible. To provide services easily, flexibly and profitably to thousands or even millions of users, they invest heavily in hardware, virtualization technologies, networking infrastructure and automation capabilities (any one of which would need its own article to fully explain).

There are thousands of cloud computing vendors and solutions out there. But they are not all are created equal — and neither are your needs in any given solution area. Think about how critical a particular function is to your business? What would happen if you couldn't access data or use the application for a period of time? For instance, a small business needs higher service levels for an accounting solution than a freelancer requires for expense tracking. Before moving beyond a trial service, consider your needs for reliability, security, performance and support — and then at how well a vendor can meet them.

Cloud computing providers should provide details about how they protect data and ensure regulatory compliance, and they should explain their policies to provide you with your data if you decide to terminate the service or if they go out of business. If you pay for a service, you should also get a service level agreement (SLA) from the cloud vendor. The SLA documents service requirements, supplies ongoing metrics to ensure these requirements are met, and provides remuneration should the vendor fail to deliver on the agreed metrics.

Did this help you understand cloud computing more clearly? Let me know, and send me any additional questions you have on this topic. Also, please send your suggestions for other technology terms and areas that you'd like explained in upcoming columns. Email me at laurie.mccabe@hurwitz.com, or tweet me at lauriemccabe on Twitter.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

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