As CIOs consider new corporate computing options, they often find themselves awash in cloud metaphors thanks to the overwhelming desire to achieve the promise of cloud computing.

The potential for cloud computing is compelling. For business, it promises faster access to technology and better alignment to demand. That offers agility, which can deliver significant competitive advantage. For example, a retailer can use the vast capacity of the cloud to quickly analyze consumer behavior and respond with pricing changes, different inventory levels or new advertising—even when its own server capacity is fully taxed. That can make the difference in a quarter’s financial results.  

Cloud computing has the potential to make that extra computing capacity available in minutes or hours and provide the flexibility to turn it off as soon as it’s no longer needed without the residual capital asset and operating costs. The problem is that it’s hard to tell the difference between clouds and smoke. There is a lot of hype in the market. CIOs have heard many of the promises before with utility computing.
 
But things are different this time. We’ve already adopted cloud services into our personal lives with technologies such as the iPhone, and that’s taken place as CIOs redefine the functions that really need to be done within the walls of the enterprise.

Bottom line: We’ve seen how cloud computing has benefited consumers, and many CIOs are ready to try it within the enterprise. Small and midsize businesses (SMBs) are already adopting cloud computing, since they lack the “advantage” of complex legacy environments that constrain their larger competitors. 

Services such as Salesforce.com and Google Apps are well-established within the SMB market and are rapidly expanding.  

CIOs of large companies are beginning to adopt certain proven services (again, Salesforce.com and Google Apps come to mind) while piloting cloud computing services for broader uses such as development and test platforms as they seek to understand the new service delivery option available to them.  

So, what do CIOs need to know to tell the difference between a real cloud and the smoke of marketing hype? Consider three things:

• Decide how to best harness the cloud for your business needs. Develop a plan that fits cloud computing into your IT service delivery model. That means understanding when technology services must remain within the organization and when they can be shifted outside. Consider the complexity and integration of your application portfolio. And understand both your local regulatory environment and your company’s willingness to move services and data outside your firewall.

• Recognize the limits of cloud computing. Understand the market and what it can deliver today. Compare your current costs to the price of available services. Compare available service levels to your needs. Recognize the constraints of your current agreements and what you can do to remove them.

• Set expectations for what the cloud will do for your company and when. Partner with your customers to progressively introduce new services and gain their support. Determine how cloud computing will be incorporated into your IT governance and get agreement among your corporate leadership.

Cloud computing offers real advantage to companies that can see through the smoke and get a clear view of the new business technology landscape.
 
Kevin Smilie is a partner in the CIO Services division of TPI, a Houston-based consulting firm. 

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