The term ‘Cloud Computing’ has been creating a buzz in the Information Technology space for a couple of years. There are so many articles, blogs, pod-casts and web-casts available in the Internet about Cloud Computing. More and more companies are moving to tap the opportunity in it to stay competitive. Merrill Lynch predicts that Cloud Computing will be $95 billion industry in 5 years and 12% of the software industry would be pulled into it. So what’s Cloud Computing all about? Why is it considered as an unprecedented solution to reduce the IT costs?

According to Wikipedia, Cloud Computing is “Internet-based computing, whereby shared resources, software and information are used by computers and other devices on-demand, like a traditional utility.” In simple words, we can say that, “The delivering of services that is hosted in the Internet”. Google Apps, Sales-force.com, Zoho web applications are all examples of services hosted in the Cloud. Amazon Elastic Compute Cloud (Amazon EC2) is another example of a web service that provides re-sizable computing capacity in the Cloud. The Internet is often represented in diagrams and flow charts by the Cloud symbol and from that the name has been derived.

Cloud Computing is broadly classified into three categories – 1. Software-as-a-Service (SaaS) 2. Infrastructure-as-a-Service (IaaS) 3. Platform as a Service (PaaS).

1. Software-as-a-Service (SaaS) – In Software-as-a-Service model, the vendor hosts applications on the server and it is distributed to the customers over the Internet. The price will be based on the usage of a subscription. It has been estimated that this model will be worth $15 billion by 2011 and take way more than 30% of the software market. Salesforce.com is a good example.

2. Infrastructure-as-a-Service (IaaS) – In this model, the vendor owns the infrastructure like storage, networking devices, hardware etc and will be responsible for facilitating and maintaining it. The user will pay for the service on the basis of the usage. This model is often helpful for web 2.0 start-ups who are keen on reducing their IT costs. IaaS model also helps companies to reduce their expenses in creating and maintaining data centers, which contributes heavily to the capital expenditure of the IT companies. Amazon web services is an example of IaaS model.

3. Platform as a Service (PaaS) – In PaaS, the vendor will host a set of software and product development tools on a provided space. The biggest advantage is that the user needs just a computer and internet connection to start building applications and he doesn’t have to worry about the infrastructure. Some vendors even provide pre-built business applications, which helps developers to build applications from the scratch. Google Apps is a perfect example for this model.

We have seen the different types of services offered in Cloud Computing. Now, the Cloud itself can be classified into three – Private, Public and Hybrid Clouds. In Public Clouds, the vendors offer services ranging from storage, servers and other services to different customers within the Cloud. The vendor can achieve ‘economies of scale’ through this endeavour and is considered as an effective pricing model even in recession. Data Security is an issue, which the vendors have to deal with and that is the only disadvantage these type of Clouds possess.

Private Clouds are often used by individual companies, who deal with service level issues and want data security. In Private Clouds, the particular company controls the access, the applications that run on the Cloud and the complete administration. They own all the facilities including networks and servers.

Hybrid Clouds are the combination of Private and Public Clouds, i.e., in a controlled way, the vendors use some part of the Cloud and share other parts. Hybrid Clouds are useful for customers who own simple applications that will not require any synchronization or have complex databases.

There is no doubt that Cloud Computing will revolutionize the entire IT Industry and it is just a matter of time before majority of the players move to this platform. By 2020, at least 40-50% of the entire software providers will embrace cloud computing.