By Polly Schneider Traylor, CIO Custom Solutions Group

When it comes to cloud computing, the skies have yet to clear: The big vendors are just starting to launch offerings, while users and analysts are simply confused. Here’s a look at the forecast.

Apparently, cloud computing is still a bit too ephemeral for the vast majority of CIOs. Only 2 percent of those from Fortune 1000 companies say that cloud or utility computing is a priority, according to a September 2008 Goldman Sachs survey on IT spending.

Some analysts suggest that even though many large vendors—including Google, Microsoft, IBM and Dell—are jumping headfirst into cloud computing investments, most CIOs of mid-to-large-size enterprises don’t have a full grasp of what cloud computing is and what it can do.

"It is definitely very confusing; no one knows what it is," says Gary Chen, an independent analyst based in Boston who has covered cloud computing for the past three years. He adds that cloud services are steadily morphing and expanding—enabling on-demand access to an increasing array of business applications, but also an offsite, always-there option for developing applications and managing your infrastructure.

According to analysts, cloud computing offers:

• A means of accessing resources and services to perform tasks with dynamically changing needs;
• Multiple infrastructures across multiple organizations that together deliver a service or set of services in a highly automated fashion;
• The ability to perform enormous scientific calculations in hundreds or thousands of idle machines;
• The ability to run applications on or from network servers over the Internet, or Web-based applications over a network of external servers;
• A switch from centralized data centers providing high-powered computing to vast, distributed networks of PCs, servers and third-party networks shared by many customers;
• The latest form of utility computing, thin clients or application service providers.

Adding Context, here’s how Chen divides the cloud market:

• Software as a service (SaaS)—the oldest and most mature of current cloud-based offerings;
• Platform as a service (PaaS)—which gives developers access to tools and technologies for writing code;
• Infrastructure as a service (IaaS)—access to servers, network bandwidth, hardware and other IT plumbing over the Internet.

Clouds use the Internet and networked computers to take some of the workload off individual IT departments. "Cloud computing can involve any of the computing tasks that we do today, and then moving them to a third party over the Internet," Chen explains. "It could be middleware, apps, infrastructure—and there’s a whole broad array of services you can get."

So is there any difference between cloud computing and hosted services?

According to Charles King, president and principal analyst at Hayward, Calif.-based Pund-IT, the difference is negligible from the user’s perspective. "From a performance standpoint, cloud-based services are not that different than optimized hosted services," he says. "The aim of both models is the same: to ensure that when an application is up, it is fully available and reliable and has headroom to scale."

Yet the cloud, in an ideal state, can be more efficient than many traditional hosted environments, he says. "The whole concept of the cloud is based on highly integrated data center resources that leverage tools including virtualization and grid computing to maximize efficiency and optimize performance."

Cloud computing provides more than just efficiency. "Hosting is offering physical resources—leasing physical servers or renting a data center—but the cloud is virtual," Chen says. "The advantage with the cloud is that it’s on-demand and is meant to have a lot of inherent features in it—backups and other services."

Those services, such as fault tolerance in the event of a server outage, are features that companies in hosted arrangements may have to pay extra for, Chen says. Then, too, companies pay for exactly what they use in the cloud; billing is typically a unit of time versus a monthly fee. "With the cloud, you can buy a server for a few hours to do some testing," he says. With hosting, "it’s not as easy or quick to scale that way as you need it."

The cloud holds promising opportunities for decreasing IT complexity and costs over time. But for now, King’s view is that CIOs will move slowly with cloud projects. "I think that CIOs are contemplating it, but I would not expect them to adopt this companywide in short order," he says. "Companies are going to look at it carefully, adopt an app or two and see how things go. Risk is a big issue and from a logistical standpoint, it’s hard to ask people to talk themselves out of their jobs."