Determining the combination of local and remote resources for Cloud Computing that best fits your business is complex and has critical short-term effects and long-term consequences for your business viability.
The ability to implement portions of Cloud Computing technology has been around for many years, and many enterprises have utilized some portion of its features. These technologies are referred to by such names as Software as a Service (SaaS), Hardware as a Service (HaaS), and others. Only recently has Cloud Computing been widely used to describe the superset of these technologies. Consequently, one does not know what is specifically meant by Cloud Computing without determining what is best to meet your specific business needs.

Only in the past few years has the technology developed to the point where it is often compelling to SMBs. The catchy name “Cloud Computing” coincided with its technical and economic ripeness for wide-spread implementation, contributing to its increasing acceptance in the marketplace.
One of the key factors to effectively utilize Cloud Computing technology is Virtualization, which separates the dependence of software, e.g. the operating system (Windows or Linux) and/or the business applications from the physical hardware that it runs on. This is typically accomplished by inserting another level of hardware and/or software between the physical computer and the operating system. Years ago, this virtualization layer degraded performance significantly, but recent hardware improvements have minimized the loss, making Virtualization much more efficient.

The big advantage to virtualizing Cloud services is the ability to run multiple small virtual servers on any compatible larger physical server. This provides significant economies of scale, flexibility to move virtual servers to other physical servers, and the capability to quickly adjust to increased or decreased resource demands.

There are several driving forces rapidly propelling the computer industry in the direction of Cloud Computing. These forces are so compelling that this trend has become another significant business-changing technology milestone:

• Economics:
  Usually significantly lower costs, reduced capital expenditures, and more flexible/quicker implementation and scalability. These factors limit many SMBs from effectively utilizing technology today.
• Risks:
  Some risks are reduced by effective implementation; others are increased, but can be minimized by proper implementation. The potential for failure is huge, but the tools to address the problems are plentiful.

Special attention must be given to contracts:

• Data protection – accidental destruction & who owns/controls the data
• Termination (reasons and notice)
• Amendment terms
• Laws of another jurisdiction
• Liability for loss

Real life examples:

• Amazon Web Services (AWS) can change its terms or terminate accounts without notice.
• April 2011 AWS outage in its Elastic Block Store (EBS) service critically impacted business systems for thousands of users. But that contingency wasn’t even mentioned in Amazon’s terms of service, which guarantees an SLA of 99.95% uptime for its Elastic Compute Cloud (EC2) only. AWS gave back credit for affected users, but it wasn’t obligated to do so.
• A June, 2011 survey showed 200 US companies (500+ employees) using Cloud providers had a 39% security lapse or issue within the last 12 months (Trend Micro) (Survey).