Tag Archives: ERP

Cloud Gives CFOs Chance To Get Involved With IT

Google research says financial bosses will take more active role in buying IT services

Cloud computing will give chief financial officers (CFOs) the chance to become more influential on the technology side of a business, according to a new study.

According to the research by Vanson Bourne on behalf of Google, half of the senior financial decision makers quizzed believe that as the adoption of cloud computing within enterprise continues to grow, CFOs will become more influential in the purchasing and management of IT services.

The survey also revealed that many CFOs agree with the IT department that cloud computing can have a positive impact on the business.

Two-thirds (66%) of respondents the cloud increases the IT department’s contribution to corporate strategy while 69% believe that cloud computing increases the IT department’s ability to innovate.

Many CFOs are pinning their hopes on cloud computing: a massive 93% said that cloud computing will be important to the success of their company over the next 12 to 18 months, and 94% believe that cloud computing provides their business with quantifiable benefits, such as reduced IT maintenance costs (44%), reduced IT spend (47%) reduced operational costs (47%) and improved process efficiency (34%).

Most business surveyed (68%) said their company has either already implemented cloud services or has plans to.

“To date, enterprise cloud adoption has been largely driven by the IT function. However, today we see ourselves having more discussions with CFOs, COOs and CEOs and it is not hard to see why,” said Thomas Davies, Head of Google Enterprise for the UK and Ireland.

“The benefits of cloud computing go far beyond the obvious cost savings on software and reducing the burden of maintenance. The strategically significant role it can play within an organization in terms of driving innovation and productivity is making it an increasingly attractive option for businesses that want to remain competitive and agile,” he added.

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PaaS To See Strong Growth

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Platform as a service (PaaS) is a core layer of the cloud computing architecture, and its evolution will affect the future of most users and vendors in enterprise software markets, according to Gartner.

“With large and growing vendor investment in PaaS, the market is on the cusp of several years of strategic growth, leading to innovation and likely breakthroughs in technology and business use of all of cloud computing,” said Yefim Natis, vice president and distinguished analyst at Gartner. “Users and vendors of enterprise IT software solutions that are not yet engaged with PaaS must begin building expertise in PaaS or face tough challenges from competitors in the coming years.”

PaaS is a common reference to the layer of cloud technology architecture that contains all application infrastructure services, which are also known as “middleware” in other contexts. PaaS is the middle layer of the end-to-end software stack in the cloud. It is the technology that intermediates between the underlying system infrastructure (operating systems, networks, virtualisation, storage, etc.) and overlaying application software. The technology services that are part of a full-scope comprehensive PaaS include functionality of application containers (servers), application development tools, database management systems, integration middleware, portal products, business process management suites and others — all offered as a service.

Gartner analysts said 2011 was a pivotal year for the PaaS market. As Gartner predicted last year in the report “PaaS Road Map: A Continent Emerging”, the broad vendor adoption in 2011 amounted to a sound industry endorsement of PaaS as an alternative to the traditional middleware deployment models.

In 2012, the PaaS market is at its early stage of growth and does not yet have well-established leaders, best use or business practices or dedicated standards. The adoption of PaaS offerings is still associated with some degree of uncertainty and risk.

“However, PaaS products are likely to evolve into a major component of the overall cloud computing market, just as the middleware products — including application servers, database management systems (DBMSs), integration middleware and portal platforms — are the core foundation of the traditional software industry,” Mr Natis said. “The tension between the short-term risk and the long-term strategic imperative of PaaS will define the key developments in the PaaS market during the next two to three years.”

Some of the newly announced PaaS offerings will reach general availability late in 2012, and by the end of 2013, all major software vendors will have competitive production offerings in the PaaS market. By 2016, competition among the PaaS vendors will produce new programming models, new standards and new software market leaders. However, until then, users will continue to experience architectural changes to technologies, business models and vendor alignments in the PaaS market.

As vendors continue to invest in PaaS services, and the major software vendors look to deliver comprehensive PaaS service portfolios, activity in all segments of PaaS will accelerate and the fast pace of growth and change in the PaaS market will create confusion, making user adoption decisions more difficult.

“While there are clear risks associated with the use of services in the new and largely immature PaaS market, the risk of avoiding the PaaS market is equally high,” said Mr Natis. “The right strategy for most mainstream IT organisations and software vendors is to begin building familiarity with the new cloud computing opportunities by adopting some PaaS services now, albeit with the understanding of their limitations and with the expectation of ongoing change in the market offerings and use patterns.”

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Reasons To Include The Cloud In Your Business Strategy

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The issue of success or failure in moving your company data, IT storage, servers or software to the cloud is often driven by technical issues, including performance, bandwidth, security and total-cost-of-ownership (TCO) considerations. While many of these factors are key criteria for selecting cloud solutions, they usually don’t align with the bigger picture that C-level executives must consider when adding new IT solutions.

How IT can help sustain or create a competitive advantage has never been more apparent than today through the use of cloud computing. This technology boasts benefits such as reduced costs and scalability, just to name a few, but many companies fail to find the right fit for cloud within their business. [Disclosure: The Open Group is a sponsor of BriefingsDirect podcasts.]

This is because cloud computing is not ‘one size fits all’. Performance, network bandwidth, security, and total cost concerns can be allayed through a better portfolio and investment approach that considers the multitude of options available.

How cloud computing fits

In industries where working capital bears a high price and is in short supply, businesses often have to make ends meet and have limited investment available. Therefore, being able to source the lowest cost and drive efficiencies even further is critical to growing business and market share.

For companies with limited working capital resource or cash flow funds, the use of on-demand services becomes an attractive option for consumers to avoid upfront costs or maintenance of services. Likewise, companies seeking to provide better profitability from their operation and vendors managing their cost center can leverage on-demand models to target areas of their portfolio to reduce cost and maximize return.

When adopting cloud computing, companies are often driven by cost effectiveness, rather than looking at the bigger picture and asking what cloud solution is the best fit for the business. Cost savings, longevity of product, and performance aren’t mutually exclusive, and all should be factored into the decision-making process when researching and purchasing a cloud solution.

Here are four questions, which include key metrics and drivers, to ask when researching cloud solutions that will maximize the value of cloud computing for your organization:

Why is investment being spent on areas of IT that are not differentiating your business and can be commoditized?
Key Metric: The balance of percent of investment on non-core commodity IT
Key drivers: TCO needs to consider where to focus IT investment

How can IT grow and adapt with the ever-increasing expansion of data storage and the growth of computing demands eclipsing on-premise facilities?
Key Metric: The cost of storage and archiving , recovery and continuity
Key drivers: Latency of network and storage costs can be targeted through considering the whole IT portfolio, not just niche use cases of cost-performance. Look at the bigger picture.

How can access to new markets and new channels be better served through extending networks and partnerships?
Key Metric: Size of markets and effectiveness of sales channels, both internal sales and external direct sales and reselling
Key drivers: Total cost of acquisition can include the creation or use of third-party distributed marketplaces and self-service portals and platforms

Is your own IT fast enough to beat your competition or drive the cost savings or revenue and margin growth plans you need?
Key metric: Speed of IT delivery and its cost and quality of service.
Key drivers: Performance can be offered through selected service provisioning. Question whether all knowledge needs to be in-house. Skills can be as-a-service too.

Author: Dana Gardner
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How to Enter the Cloud

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Cloud computing is a reality, and it’s a force that I believe IT professionals need to come to terms with quickly. The economic motivation for cloud is high; business need for speed and agility is like never before, and the technology has reached a level where it makes prudent investments in cloud services not only possible but fast and easy.

The cloud is here and it won’t go away, but what is it really, why should organisations use it and what are the risks? If you live in a corporate IT organisation, responsible for IT infrastructure, what factors do you need to consider?

What we really mean when we talk about cloud
“Cloud” has become a catch-all term for utility or on-demand compute, but there are a lot of things that cloud isn’t. Let’s start by establishing some common terminology:

Cloud: generally IT as a Service (ITaaS)
Cloud computing: a business model for delivering IT as a service
Cloud services: the deliverable or what you actually get. This encompasses the following areas of ITaaS:

Infrastructure as a Service (servers, network, storage, management, reporting)
Platform as a Service (application building blocks and standards)
Software as a Service (applications)
Storage as a Service (primary, back-up, archive, DR)

In my experience the best way to define cloud is actually to look at the problem it is trying to solve. For instance, when customers ask me about cloud, most of the time what they are thinking about falls into three main areas:

Decreased storage costs: achieved via storage efficiency
Data centre efficiency: achieved via virtualisation and internal or private clouds
Conversion of capital expenditure into operational expenditure: achieved via external or public clouds

Whether to create your own cloud, or use a third party
The big question behind cloud computing is whether a company should build or expand its own data centre (a private cloud), or whether it should outsource and access computing resources remotely over the Internet (a public cloud).

The solution is individual to every organisation; there is no single blueprint to apply and IT strategists and architects have to do their own homework. Organisational factors such as the need to balance opex with capex, attitude to risk, security, criticality of applications and the need for redundancy are unique to every organisation and demand a unique cloud analysis and definition.

How to define a cloud infrastructure and “cloud-safe” data management policy
There are two fundamentals to developing a robust cloud-based IT infrastructure:

Governance and compliance for outsourced public cloud applications
The creation of internal cloud services to drive down costs and time to market for in house applications

If your organisation is just beginning to explore the cloud, you need to identify which services can reside in the cloud and which should be internal. Determine what systems and services are core to your business or store your crucial intellectual property. These should be categorised as high risk and not considered cloud opportunities in the near term.

You also need to develop a sourcing strategy to achieve the low cost, scalability and flexibility your business is seeking. This should include all the necessary protections such as data ownership and mobility, compliance and other elements familiar from more traditional IT contracts.

Implementing an external / public cloud infrastructure
Since there are applications (CRM, ERP, messaging and collaboration) that are common to every company, outsourcing to an external cloud provider that can do a better job managing the application at a lower cost structure makes sense. Governance plays a central role in deciding which applications can be safely outsourced, and how to manage the processes. You will need to assess the applications and build policies based upon the type of data. Factors to consider include: how it is accessed and by whom, security and compliance aspects, and the strategic importance or competitive advantage the application or data offers.

Second, you need to assess the cloud service provider’s service offerings. Look at their capabilities, security, SLAs on availability and performance to see if they meet the levels required by the applications before agreeing to cloud-outsource the application.

What are the risks of using an external cloud?
You should pay careful attention to:

Service Levels. Understand the service levels you can expect for transaction response times, data protection, and speed of data recovery.
Privacy. If someone else hosts and serves your data they could be approached by the U.S. government to access and search that data without your knowledge or approval. Current indications are that they would be obligated to comply.
Compliance. You are probably already aware of the regulations that apply to your business. In theory, providers of cloud services can provide the same level of compliance for data stored in the cloud, but, since most of these services are young, you’ll need to take extra care.
Data Ownership. Do you still own your data once it goes into the cloud? You may think the answer to this question is obvious, but the recent flap over Facebook’s attempt to change its terms of use suggests that the question is worth a second look.
Data Mobility. Can you share data between cloud services? If you terminate a cloud relationship can you get your data back? What format will it be in? How can you be sure all other copies are destroyed?

As with any service that’s going to be critical to your company, the best advice is to ask a lot of questions and get all commitments in writing.

Implementing internal / private cloud infrastructure
Internal clouds will help the business launch applications faster and at much lower cost. This is about building ITaaS capabilities in house, or building shared infrastructure that is offered as a service to the business. You’ll need pooled infrastructure, policy based automation to simplify provisioning, metrics and charge backs, service assurance and conformance to SLAs, as well as forward-looking capacity planning. Add a self-service portal to your internal cloud and now the applications teams are happy they can deploy faster and lower cost and the corporate IT governance guys will be happy too.

This space is evolving fast, so start with the basics; pool the infrastructure and use a vendor that offers dynamic virtualised infrastructure to quickly activate applications, or repurpose capacity and performance as loads from applications ramp up or down. For this you need unified storage, network, and servers that can cater for wide range of applications requirements and choose highly efficient infrastructure.

Internal cloud services drive down costs and time to market for in house applications is built on a pooled dynamic infrastructure with utilisation levels in excess of 75%. This is achieved through thin provisioning, deduplication, and cloning technologies (which can raise utilisation levels well in excess of 100%). The bottom line is that this approach yields big cost savings.

Summary
Cloud computing is n’t going away. It’s an IT concept we must all sign-up to.

Provisioning an effective cloud infrastructure is individual to every business.
In evaluating public versus private clouds—be aware of what you’re getting into and how to get out of it.
For an external cloud, if there’s too much risk, don’t do it. Be selective about what you choose to put in an external cloud. No amount of IT cost-saving can justify breaking a business.
For internal clouds, make sure you understand what your data centre is capable of and consider vendors that can offer greatest flexibility and real unified computing.

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Cloud Computing Top ‘To Do’ List For Midmarket CIOs

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Business analytics is the top technology priority for CIOs at midmarket companies and organizations through the next five years, according to the results of an IBM survey of 3,000 chief information officers around the globe.

The survey also found a 50 percent increase in the number of midsize organizations that plan to invest in cloud computing, compared to a similar study IBM did in 2009, and a big jump in the number of companies investing in mobile IT.

The survey included 622 CIOs at midsize companies and organizations. IBM has expanded its focus on midmarket customers in recent years and it relies exclusively on the channel to serve those customers.

“This is an area that’s critical to us and our growth,” said Ed Abrams, vice president of marketing for IBM’s global midmarket business, speaking at a press conference where the CIO survey results were unveiled. IBM is investing $100 million this year in such activities as lead generation to aid channel partners’ midmarket efforts, Abrams said.

Eighty-three percent of the midmarket CIOs identified analytics, including the ability to glean actionable insights from large volumes of data, as their top priority for investment over the next five years.

“We see this as a tremendous opportunity for us and our partners,” Abrams said.

That was backed up by Dane Adcock, vice president of business intelligence solutions at Sky I.T. Group, an IBM channel partner that develops business analysis systems for customers based on IBM WebSphere, DB2 database and other products.

Sky I.T. is particularly focused on the retail industry, developing systems that collect data from point-of-sale, EDI (electronic data interchange), supply chain management and ERP systems into a single reporting system. “Customer retention is a primary objective,” Adcock said of what his customers are trying to achieve.

The Boston-area-based pizza chain Papa Gino’s is among the midsize companies that have adopted IBM’s business analytics software, IBM said. The restaurant chain is using the technology to track information from its customer rewards program, measure the effectiveness of customer promotions, and more effectively tailor its online ordering campaigns.

IBM channel partner QueBIT, which resells IBM Cognos business intelligence software, developed and implemented the business analytics system for Papa Gino’s, said Martha Lieber, director of business systems, at the press conference.

CIOs of midsize companies are using a wide range of IT tools to turn data into actionable information, according to the survey, including data warehousing (64 percent of respondents), visual dashboards (64 percent), master data management (63 percent), and client analytics (63 percent).

The number of midsize companies that plan to invest in cloud computing over the next three to five years increased by 50 percent from the 2009 survey, IBM said. “Cloud has moved out of the experimentation phase and into the implementation stage,” Abrams said, adding that IBM offers sales and service opportunities for its channel partners.

And the percentage of CIOs at midsize companies who plan to invest in mobility technology, including smart phones and mobile applications, increased to 72 percent.

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Unlocking the Promise of Cloud Computing

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Cloud computing can help automotive manufacturers gain a competitive edge in every aspect of their business—from product design and manufacturing to global expansion. But, success will largely depend on their ability to fully leverage its capability in response to several emerging trends and challenges.

When assessing what cloud can do for their businesses, automotive leaders need to take into account the distinct and rapidly evolving challenges that their industry faces today. These include the fundamental and ongoing changes in the way that automotive companies communicate and transact with their customers; the need to capture, manage, protect and analyze their ever-expanding collection of customer data; the requirement to decrease their information technology (IT) operating costs while upgrading their capabilities; and the need to expand into new and emerging markets at low cost.

Moreover, companies are facing an expanding multitude of regulations around issues including environmental protection and in-car safety, while rising commodity and raw material prices are also impacting profitability.

Many companies are realizing that cloud computing can represent the next progression from traditional enterprise resource planning (ERP)-style systems. These ERP systems provide most of the management processes and applications used by original equipment manufacturers (OEMs). These may not need to be as flexible as networked, Web-based platforms increasingly used in other industries for activities such as supply chain management and collaboration. As a result, automotive companies are seeking low-price opportunities to upgrade their IT capabilities, while reducing the operating costs of those that will remain. Cloud is being considered more often for this step.

Cloud feasibility

The cost savings and operational flexibility that cloud computing offers can help automakers respond to these and other industry challenges. However, it will be important that companies do not take the potential benefits of clouds at face value, but rather perform a thorough assessment of how best cloud computing can aid them.

First, companies should determine how they will manage cloud capabilities with their existing legacy systems to produce seamless operations. Many are considering this strategy to reduce IT infrastructure costs and increase responsiveness in the marketplace. As customers engage automakers and their collaborative partners through multiple channels, such as In-Vehicle Infotainment (IVI) services, mobile devices and social networking sites, the ability to be more responsive will become critically important.

This will extend to satisfying growing customer expectations for better and differentiated services based on data provided to automakers who are aiming to improve the customer experience. Real-time analytics that can provide predictive analysis for those services will require a great deal of data and computing power that may be well served by cloud computing.

Security and data privacy are concerns that can and must be satisfied to ensure a smooth transition to the cloud. For companies using cloud computing, it will be essential to work with the provider to ensure that it can achieve parity or better levels of security, privacy, and legal compliance than the company currently possesses. The provider also should be required to give a risk assessment and describe how it intends to mitigate any issues found.

Finally, companies will need to look closely into the costs of cloud computing. This should include reviewing rigorous return-on-investment case studies based on actual usage. Savings estimates are not enough. Potential purchasers must evaluate different kinds of cloud services pricing models and develop an effective approach for measuring the costs and return from clouds.

While it is important to take precautions, it is also important to understand that the relatively low capital investment, quick deployment and fast return on cloud services make their widespread industry adoption more a case of when, not if. To avoid missing a distinct competitive advantage, automakers should seriously evaluate cloud computing.

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Every Cloud Has a Silver Lining

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Cloud computing (Infrastructure-as-a-Service) has already proved its value to some businesses and specific applications. It provides a way to deploy and access massive amounts of IT resources, on demand, in real time. It drives better utilization of data center resources, reducing capital expenditures and operating expenses. Most important, it provides the scalability and agility to adapt to changing business needs.
However, challenges remain with the Infrastructure-as-a-Service (IaaS) cloud computing deployment model. For enterprises that have evaluated and deployed on-premise IaaS clouds or those that use public clouds, it’s obvious that IaaS clouds require application developers and IT practitioners to install, configure, customize, optimize, and manage their deployment environments – manual tasks somewhat counter to the promise of cloud computing’s “agility” value proposition. Also, IT administrators and application developers have to maintain deep technical knowledge of multiple software components, and monitor and manage them.

Platform-as-a-Service frees application developers from infrastructure issues

With Platform-as-a-Service (PaaS), enterprises and developers get a higher value. Software stacks are pre-configured and pre-integrated in PaaS and can be available within minutes. The PaaS model abstracts the application layer from the application infrastructure; this step eliminates the need to manage infrastructure software and provides an easy-to-manage, standardized, integrated stack and multi-tenant deployment platform. PaaS technologies provide monitoring, management and auto-scaling engines that resize the resources allocated to each application in real time, taking full advantage of the scalability of the cloud. Additional platform services can be dynamically added to the PaaS globally.

The ultimate benefit is simple: developers can develop. No longer are they responsible for managing, monitoring and dynamic resource scaling. That task belongs to the PaaS platform, managed by a centralized IT department.

In addition, the PaaS model offers flexibility to build and deploy a standard set of shared components so all applications are deployed with a consistent set of software versions and releases. Centralized IT executives have full control to maintain a homogeneous and standardized development and deployment platform across the enterprise, simplifying IT operations and reducing the time needed to deliver IT resources or platforms to their departmental constituents.

Choices for enterprises for applications in the cloud

As IT organizations prepare their applications and infrastructure for cloud deployment, they must deal with enormous complexity. They must consider issues such as new deployment architectures, management and monitoring of cloud resources, application lifecycle management, software support on clouds, licensing, security, scalability, and the thorny problem of migrating existing custom applications to the cloud. Based on the application data security and compliance needs and their goals in adopting cloud computing models, enterprises have the following options to move existing applications or develop new applications:

* Acquire similar applications from SaaS vendors such as Salesforce.com, NetSuite, SuccessFactors, or RightNow. This option best suits database-centric enterprise applications such as ERP, CRM, etc. and may not apply to business-specific custom applications. However, this approach means writing off investments in existing applications and software licenses and can lead to vendor lock-in.
* Move custom applications to a public PaaS, such as Salesforce.com’s force.com, Microsoft Azure or Google App Engine; however, this option also involves a high degree of re-write and vendor lock-in, as public PaaS providers require the use of proprietary SDKs and data models. Current offerings also may not be suitable to some enterprises that must adhere to privacy and compliance standards. Further, these vendors could be a poor fit because of their limited functionality.
* Do-it-yourself PaaS. While technically doable, it is complex and could take six months to a year.
* Off-the-shelf PaaS. Use a PaaS-enablement solution vendor to build a PaaS using the set of application infrastructure components that are currently used within an enterprise and on a choice of private and public clouds.

Enterprise Java PaaS Requirements

Because of Java ubiquity in the enterprise, IT departments have invested heavily to develop and deploy Java applications on software stacks from Oracle, IBM and Red Hat. Ideally, enterprises that wish to move applications to clouds should be able to leverage their investments in skill sets, application code and infrastructure software, without re-writing applications.

Enterprises should also be able to create their own standards-based Java PaaS on public clouds such as Amazon EC2, or private clouds such as VMware, Eucalyptus or Cloud.com using the middleware they already have.

In other words, enterprises should look for a PaaS solution that is truly architected to put IT in the driver’s seat. It must allow enterprises that prefer to run their private PaaS on Amazon EC2 to set up an enterprise-wide master account with access controls, quotas, and hard/soft limits on cloud resources for users and departments to be able to manage capacity, usage, security and compliance. Application developers and QA/testing teams in turn have the flexibility of an on-demand PaaS while maintaining security and compliance, as well as controlling expenses in a manageable fashion. The same functionality should be available for on-premise private clouds.

Opportunities for Cloud Service Providers

As data center outsourcing to hosting providers continues to be one of the primary initiatives in enterprises, hosting providers are evolving their offerings to accommodate IT and management requirements for new SaaS business applications and legacy custom applications. Hosting providers should consider providing Java PaaS solutions as a service to their independent software vendors and enterprise customers. Such standard PaaS solutions give enterprises and ISVs a common platform to deploy new applications and easily migrate their existing applications to the cloud. Hosting providers can also integrate a Java PaaS solution into their own IaaS environments and offer a more valuable, more complete platform solution to customers. Additionally, a Java PaaS offering would enable service providers to compete with proprietary cloud offerings in the marketplace.

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Cloud Computing’s Killer Applications

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The year 2010 will probably be remembered at the year that cloud computing “shaped” itself into a tangible concept, at least amongst those of us who care. 2011, on the other hand, will likely be the year in which IT figures out how to actually use cloud concepts.

Of course there are success stories dating back two or more years, but what is happening so far in 2011 is a growing body of businesses, data, and applications that were born and cultivated in the cloud. Add to that the online and conference communities forming around cloud and new application categories and we are starting to get a clear picture of what the “killer applications” of cloud really are–at least as of today.

I want to step through the three that I think are the most impactful application categories for cloud and show some examples of why cloud enables these applications to exist:

1.Data collection and analytics
There is no doubt that one of the biggest revolutions enabled by the cloud is the ability to store and–perhaps more importantly–process large sets of data, either as very large scale fixed-length jobs or in real time. The economics are simple: without the large upfront capital expense, the total cost of using a large number of systems for the period of time it takes to process the data is significantly reduced; and “downtime” costs nothing more than the cost of storing the data.

I attended O’Reilly Media’s Strata conference in Santa Clara, Calif., last week, which covered “big data” and the various applications of that concept to a variety of problems. I walked away extremely impressed. The innovations on display were mind-blowing. It really felt like a Web conference circa 1999, with talk of almost endless entrepreneural opportunities for those with the right ideas.

I attended sessions on data journalism (which demonstrated how data analysis can be used to find key facts regarding the news of the day) and the application of data capture and analysis to government and academia. Both sessions demonstrated applications that amazed me, including several that used public data sets to give new insights into how we think and act as a society.

Personal data analysis was also on display, such as Strata start-up showcase winner Billguard, a service that will analyze your credit card bills for potentially abnormal activity by combining your statement data with other data sources and “wisdom of crowds” tools. Services like Billguard lead me to believe that consumers will benefit most from “big data” innovations.

The cloud has clearly changed the game for data and it looks like data may in turn may a central role in the future of cloud computing.

2. Online commerce and communities
This is probably the category that most followers of cloud computing would think of first when they think of killer applications for cloud computing. There is no doubt that cloud has changed the game for Web applications and services. Online services and communities are appearing at a dizzying pace today in large part due to the economics of cloud computing.

How is that, you might ask? Well, again, its because the cost of failure is so low in cloud. Want to try a new business idea, or play with a new online service concept? You have plenty of options for building, hosting, and scaling your concept, all of which are on a “pay-per-use” fee schedule–which ultimate means that if you fail, you stop paying and don’t have sunk capital costs to offload or absorb.

This is why the Silicon Valley–and likely worldwide–venture capital community has so quickly changed the nature of financing for online start-ups. It is now almost impossible to get a VC firm to buy you a server. Rather, they’ll tell you to use cloud services to build and test your business concept.

If your idea shows some signs of success, they’ll then tell you to scale the business in the cloud–again, to avoid sunk capital costs. If at some point your business is wildly successful, and a private data center or fixed hosting agreement starts to make more sense, then your VC board members will probably be happy to tell you to take some of your own cash flow and do what you need to do.

The point is that services such as Google App Engine, Rackspace Cloud Files and Cloud Servers, Amazon Web Services, and a laundry list of others have made delivering new software and business concepts to the online market much, much easier, and the associated risks much, much cheaper.

3.Context vs. core
What may surprise many is the increasing adoption of cloud and hosted options for “context” systems (in the “core vs. context” paradigm introduced by Geoffrey Moore in his management books). In short, context systems are those that may or may not be mission critical, but add no real value to the distinct business that they support. Some examples of context systems include e-mail, telephony, and document management.

In my role at Cisco, I’ve seen an increasing number of customers declare goals to freeze or reduce the number of wholly-owned data centers that support their businesses, choosing instead to find online services to meet much of their needs. Where they all seem to be starting is those context systems, with vendors like Salesforce.com, Microsoft BPOS, and several smaller SaaS vendors benefiting.

So-called “core” functions–which are those functions that a business’ competitors would find difficult to replicate–are taking much longer to move to the cloud. This isn’t surprising, considering the sensitive nature of the data and code associated with these applications, as well as the investment made into existing systems by enterprises.

While I believe core systems will move to cloud models in the coming years, I suspect that legal, financial, and technical issues will make that a much slower transition than context applications. That said, familiarity with cloud through those context apps will probably accelerate the rate at which enterprises become comfortable with cloud models, so who knows.

The other “context” function greatly benefiting from the move to cloud models is storage. Backups, disaster recovery, object storage, content management, and many more storage-centric functions are moving to the cloud at a rapid rate. While security remains a consideration, the introduction of encryption and strong authentication technologies are rapidly expanding the market for storage services.

While I have no doubt that other forms of enterprise computing will move to the cloud over the coming year, these are the three categories that stand out for me. What about you? What do you see as the “killer apps” for cloud computing models?

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Unlocking the Promise of Cloud Computing