How Cloud Computing Is Changing the World

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"With Amazon, the benefits of easy scalability and low price far outweigh the occasional downtime," says Peter Yared, CEO of iWidgets a small company, who estimates he spends four times less by using Amazon Web services vs. conventional server hosting. Although Yared's Web site worked on July 20, he had trouble for about six hours with some user-generated code that was stored on Amazon's S3 service. Still, larger companies typically require a higher degree of reliability.

Another issue that worries CIOs is the ability to comply with regulations, including Sarbanes-Oxley rules that govern corporate financial reporting, and the Health Insurance Portability & Accountability Act (HIPPA), which sets rules for security and privacy of health records. ITricity, a European provider of cloud computing capacity, couldn't previously offer services to companies that required compliance with financial and health-care regulations. Currently, though, the company is installing what's known as a private cloud using IBM's Blue Cloud software and services, which turns a corporate data center into its own cloud. Since a private corporate cloud is blocked off from the Internet with firewalls, it provides a level of security that will make it possible for iTricity to offer services to the accounting, financial, and health-care markets.

Finding a Middle Way

In the past six and a half months, iTricity has spent more than $779,000 upgrading to IBM's new technology. That technology promises to give iTricity much more agility in offering services to customers. Now, customers who want additional computing capacity must wait a week. IBM's approach will cut that lag time roughly to an hour or less, iTricity says. "Our new slogan with iTricity capacity in the market is power by the hour and power within the hour," says Robert Rosier, founder and CEO of iTricity.

Because companies have such a large investment in existing technology infrastructure, many people think there will be a hybrid approach where companies will do some of their computing internally, possibly in a private cloud, while other tasks will be offloaded to the public cloud. "One of the key challenges for corporate IT departments, in fact, lies in making the right decisions about what to hold onto and what to let go," writes Nicholas Carr in his book, The Big Switch.

Girouard at Google says he is confident more and more companies will get comfortable with letting go. "Over time as larger and larger businesses decide to use Google Apps, there will be an upswing in the revenue," he says. Right now, Google's strategy is to get as many people and companies as possible comfortable using Google Apps. To that end, the company is doing things like providing Google Apps for free to universities. "We're generating millions of users for life," he says.

Patel and a growing number of employees at Sanmina may well be among them.

King is a writer for BusinessWeek.com in San Francisco.