Improvements to Web infrastructure have allowed cloud computing to prosper. Now firms can run applications online, alowing their employees to be far more flexible

Whenever a computing expert makes a diagram of an IT system, it's become standard practice to draw a picture of a big, fluffy cloud to represent the internet. Which is how the term "cloud computing" came about. The phrase is used to describe the process whereby elements of a company's computer needs—software applications, processing power or data storage—are provided via the internet as a service, rather than through an in-house IT system: it's about computing as a utility.

For example, instead of a piece of software being managed by your own staff, sitting on your own servers held on your premises, it is accessed through a web browser, with the actual data stored somewhere else in the world.

You may well have come across cloud computing and its various subgroups under other headings: utility computing, software-as-a-service, application service providers. What is common to all is the way that they challenge the traditional boundaries of an IT department. It is irrelevant where the hardware or software that supports the service actually is: it's just somewhere in the cloud, and that could as easily be a data centre in Luton or a server in Hawaii.

Until recently, the cloud computing market has mostly been left to niche suppliers, but increasingly giants such as Microsoft and Google are getting involved, and customers large and small are planning to move to cloud computing services to exploit the flexibility it offers. Here's how it works.

Access
To access most cloud computing services all you need is a web browser, whether it's a word processor, your email, or something much more complicated, such as your sales system, just as you would access a website. Being browser-based means you don't always have to be sitting at your desk in the office to access cloud services. In many cases, because you don't have to download anything to your computer (as all the software and data is held in the cloud), you don't even have to be on your own computer to get access. That means working from an airport internet cafe or someone else's office suddenly becomes much easier.

Applications
Cloud computing is not a new idea. What is different now is the sheer number of applications available, and improvements in internet infrastructure that mean it is now quite feasible to run applications, even ones central to your business, over the internet. Smaller companies can get access to applications that previously would only have been available to large organisations that could invest in their own hardware and IT staff.

A lot of cloud applications are already very popular with consumers—millions have Hotmail or Google Mail as their personal email address—but businesses are catching up fast. US technology analyst Gartner predicts uptake of cloud email could reach 20 per cent of the business market in the next four years. And once organisations are comfortable with email, they are likely to find other cloud-based applications just as appealing. For example there are a growing number of office suites—word processing, spreadsheets and presentation software—that are available as services to businesses, in many cases for free.

Google Docs is one of these. It allows you to create and edit basic documents from scratch and upload existing files in a number of popular file formats. Recently Adobe launched a beta version of its Acrobat.com, a suite of free, hosted office software that includes an online word processor and comes with 5GB of free storage space.

The vast majority of staff will be familiar with Microsoft's Office suite, and Microsoft Office Live Workspace is the company's version of online collaborative working—a free service that allows its users to save, access, and share documents and files, which means no more saving files onto a memory stick or emailing them to yourself.

Microsoft's Workspace comes with 500MB of storage, which Microsoft reckons is the equivalent of more than 1,000 average-sized Microsoft Office documents. Microsoft is working on something known as Live Mesh, which aims to allow you to share files and folders between a network of devices including desktop PCs, laptops and smart phones. The company will launch Microsoft Online Services in the second half of this year, which will allow businesses to access software online, via a subscription service, rather than paying licences for on-site applications. Applications offered include Exchange Online, Microsoft Office Live Meeting, and its Dynamics CRM software.

Storage
Storage is another growth area in cloud computing. Amazon S3 (Simple Storage Service), a sideline of the Amazon e-commerce giant, is an example of what is available at the moment. The service is used to store data that can be retrieved any time, from anywhere on the Web. Customers pay only for what they use, with no minimum fee. For example, for European customers, storage costs $0.18 per gigabyte, per month, with additional costs for transferring data in and out. So a company could use S3 to back up important data, or to host a sophisticated Web application that can make use of that internet storage model.

Services
Another service making the crossover from consumer to business is Skype. This allows you to make phone calls over the internet from your desktop or laptop. If the rest of your organisation, or your clients and contacts, are also part of the 200 million people who use Skype, you can call them for free. You can also integrate it with other cloud applications, such as those produced by salesforce.com. For businesses, Skype also offers a Web-based tool that allows for the central management of staff expenditure using the service.

One of the strengths of providing services over the internet is that it's an easy way of bringing teams together. An application such as Huddle allows you to create a team workspace and manage projects, and share files and information online. Like most of these applications there is no client to download so you access it through your Web browser, with prices for the package ranging from free up to £50 a month. It's also not just about office applications-you can also get access to raw computing power without the need to invest in lots of high-end hardware. For example, Sun Microsystems offers access to vast amounts of processing power on a pay-per-use basis at  $1 per CPU-hour.

And it's not only individual software companies that you can go to. Perhaps one of the clearest signs that cloud computing is getting to be a serious option for many businesses came earlier this year, when BT signed up several hosted service providers, including Netsuite, to offer customer relationship management, accountancy and e-commerce packages. BT also offers other hosted applications, including project management and expenses packages.

Benefits
There are plenty of potential benefits of cloud computing. Users don't have to worry about buying software, installing it and managing it—or recruiting expert IT staff. The supplier takes on all the responsibility for maintaining the software and upgrading it to the latest versions.

For the supplier, the benefit is a steady stream of income (many of them charge on a per month basis). They also don't have to worry about supporting multiple versions of their software, because all their customers will be using the same software, and thus benefit from economies of scale not open to individual customers.

Downsides
Of course, there are potential downsides of cloud computing that need to be considered too. With many of these applications, if you lose your connection to the internet then you lose access to the application, so you can't get anything done. Service outages—at least for the big, established players—are rare but do happen, as this is still an in-development technology. Cloud computing isn't the only way to go for companies looking at changing their IT architecture. There are other ways of delivering remote access to users, such as using terminal services to provide applications to clients or handheld devices, with all the operations being performed centrally. Companies developing these kinds of systems include Citrix, and Aqua Connect for Mac (as used by Director for this issue).

Whatever method adopted, you still need to have a backup plan in case things go catastrophically wrong with the supplier or the IT infrastructure—just as you would if your internal IT systems broke down.

Security
Security is a big issue with cloud computing. Consider what data you are comfortable entrusting to a third party, especially one that might also be hosting data for your rivals. Check what your company's corporate security policies are before you start loading documents into any of these services. And find out what the supplier's policies are and how they secure data (with encryption, for example). Find out where it is stored and, if relevant, how data protection legislation in that part of the world compares with the UK. All this will help make sure that while your IT might be in the cloud, you won't be left in the dark.

Steve Ranger is the editor of business and technology website silicon.com