The Archway

Issue date: 4/17/09 Section: Business

The prospects for "cloud computing" now seem a little less ... cloudy.

Once a term confined to the personal-speak of high-minded tech geeks and derided by critics as a bogus marketing ploy, cloud computing today is arguably the hottest trend sweeping the information technology industry sector, investors, analysts and entrepreneurs say.

"It's a real business that has grown in stature enough to have its own fancy marketing term," said Dan Grigsby, a prominent Minneapolis, Minn., software entrepreneur.

The company enStratus Networks (enStratus is derived from Latin words for "in the clouds"), was recently selected to present at the Under the Radar Conference, a prominent Silicon Valley event for tech start-ups. The Minneapolis-based company designs security applications for cloud computing.

The exact definition of cloud computing is still foggy. George Reese, the co-founder and chief of technology at enStratus, who has written several books on cloud computing, calls it all that "stuff that is not my problem. The black box of technology."

Huh?

OK, try this: Cloud computing refers to a distribution-and-pricing model in which companies, large corporations and start-ups alike can purchase services such as software, bandwidth, server space and Web applications over the Internet on an on-demand basis. For example, a retailer needing a little extra computing power during holiday shopping season can rent out additional server space from "clouds" like Amazon Web Services just for that period.

The economic benefits are huge, experts say. By paying only for what you need when you need it, start-ups can quickly and cheaply scale up their business. And corporations don't need to purchase heavy-duty infrastructure to manage their huge data flows.

"One of the important benefits (of cloud computing) is that the resources scale up and down in a flexible manner," said Michael Gorman, managing director of Split Rock Partners, an early stage venture capital firm based in Eden Prairie, Minn. "If a company has major peaks and valleys in their usage, they are able to accommodate the peaks without paying for full, peak capacity all the time. They only pay for what they use, and they get the benefit of never being out of capacity. For emerging companies, this can substantially reduce the costs associated with starting and running their business."

Cloud computing is nothing new. Firms such as Firepond Inc. and IDeaS Revenue Optimization Inc. already sell supersmart software over the Internet that helps companies set prices and manage sales. But such services tended to focus on a specific niche.

Continued...

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