The Cloud: more than a buzzword by Jon Fortt @FortuneMagazine August 4, 2009, 1:15 PM EST E-mail Tweet Facebook Google Plus Linkedin Share icons Box.net CEO Aaron Levie. Photo: Box.net. Cost-conscious businesses are looking online for IT By Aaron Levie, CEO and co-founder, Box.net Something is clearly happening in the cloud. Two major juggernauts – the government and Microsoft – have both recently made cloud-related announcements. The government (hardly ever considered an early adopter) is planning to launch a cloud computing ‘Storefront’ to ease the federal deployment of these online services, with the ultimate goal of streamlining operations and saving money. Microsoft has finally detailed its plans to launch a web-based version of Office, albeit not until next year. Check the press, and article after article mentions this trend: IT departments are increasingly relying on web-based shared computing and storage, rather than owning and managing the hardware and software themselves. What is pushing this forward? Let’s take a look. It starts with the bottom line. In a recession, every business wants to reduce its cost of operations. A quick review of the total cost of ownership for traditional technology includes IT personnel, data centers, servers, support licenses, and professional services – and that’s before you add in the actual cost of the software. The current economic crisis is causing businesses of all sizes and competencies to rethink where they want to invest their human and financial capital, and in most cases it’s not in managing a costly IT infrastructure. The key advantage of web-based solution providers is that they tap into true economies of scale by shouldering the infrastructure burden themselves, running technology efficiently, and passing the savings to their customers. For example, Salesforce.com manages thousands of companies’ backend sales systems and requires far fewer resources than if all its customers were to host the solution themselves. Another driver of the cloud trend is an increasingly mobile, global workforce. The culture of business has changed as laptops, wifi and web-connected cell phones have introduced more opportunities for unique work-life balance. As teams become increasingly distributed, technology must continue to empower efficiency even while spread across multiple time zones and languages. Cloud-based services are in the best position to enable workers to stay connected at all times on day one. Whether it’s through messaging, conferencing, collaboration or customer relations, businesses on varying networks can now seamlessly interact as if they were in the same building. Of course, there are problems that threaten to slow the adoption of cloud services. At the top of the list are security and data portability. As we saw with the Twitter-hacking fiasco, cloud solutions are only as strong as your password, and combining this with the weaker data management policies of consumer-focused web services can cause a nightmare scenario. Unlike the on-premise model of virtual private networks and tighter application privileges and permissions, users can generally register and access cloud services with a single password and email address (which is often considered a big benefit as it’s easy to get started). However, these flexibilities create problems of unwieldy proportions for an IT person tasked with making sure users’ data are safe and secure. To solve this, we need more centrally managed authentication systems (think LDAP for the web), application providers to provide highly-secure authentication practices on their own, and deep visibility and control into who and when information is accessed. In addition, cloud services often lack complete data portability. Yes, there are many useful APIs that allow us to mash up various services together, but there’s a clear absence of simple and obvious ways for applications to communicate uniformly and move data back and forth. When companies can securely and seamlessly move their cloud file system from one provider to another, or between email applications, or even just share data between two online word processors, we’ll start to see full enterprise cloud adoption. The good news is that fixes for these (and other) issues aren’t far off. Businesses have been building their own solutions, startups are popping up to offer better security, and many cloud companies are building this additional layer of protection themselves. The timer has been set, and it won’t be long until the whole concept of the ‘cloud’ will become dated as people will wonder how they ever did without it. Aaron Levie is the CEO and co-founder of Box.net, a Palo Alto, CA-based provider of online collaboration tools.