David Smoley is no stranger to cloud computing. The CIO of Flextronics International has overseen no fewer than four software-as-a-service implementations during his three-year tenure, with two of those currently being rolled out.

See Also: Cloud Computing's Sky-High Hype

A new cloud-based IT management tool is not only less expensive to implement when compared with the maintenance fees on the software it’s replacing, it also reduces the number of forms that have to be completed to configure a business process from 300 to just three. Meanwhile, an online HR application—which lets Flextronics pay based on usage patterns—went live for 16,000 employees in the U.S. and Canada in May, with another 40,000 employees in China, India and Mexico slated to get access next year.

CIO Insight contributor Tony Kontzer recently spoke to Smoley to get his thoughts on the cloud. An edited excerpt of that interview follows.

CIO Insight: What’s your current outlook on the cloud, especially as it relates to use by large companies?

Smoley: My outlook is extremely bullish. I think the cloud is another tool in the toolbox. It’s a tool that, to be honest, has been around for a number of years. But we’re beginning to hit a tipping point, at which the maturity of the services and software being offered and the economic pressures are coming together to make it much more attractive to large companies.

We’re at a point where companies are frustrated with the same old way of doing business with the big guys. You pay millions of dollars up front for licenses, you pay millions of dollars for big consulting firms to install software, and you pay millions of dollars forever in maintenance and updates that have little value.

Do you have issues with the business models offered when big vendors offer cloud services?

Smoley: Pure cloud computing leverages commodity computing resources to blow away packaged software in speed, cost and usability. That, to me, is a whole different classification from the cloud computing many firms are offering, which is just a hosted solution. It’s no different from the outsourcing of the last 20 years.

What experiences have led you to have this view?

Smoley: With CRM software, HR software, and more recently with helpdesk and IT ERP, we’ve found solutions in the cloud that are 40 to 60 percent less expensive to run when compared with packaged software—huge magnitudes of order better in terms of usability, and probably 50 percent better in terms of cycle times from purchase to use.

What’s your strategy for the cloud going forward?

Smoley: In the app-development space, I’d say our strategy is one of active pilots and experimentation. There are some concerns related to big development projects, so we’re looking at small SWAT projects that give us departmental benefits. We’re doing some pilots with Amazon and Force.com [Salesforce.com’s platform-as-a-service offering].

In the business-process or large-app space, the cloud isn’t the only solution we’ll consider. But we’re finding that the last couple of times we’ve looked for a solution, the cloud solutions have been the least expensive and the most compelling. As opportunities come up where the business says we want to go back and look at the supply chain, for instance, that’s when we’ll look at it, but there’s nothing queued up at this point.

Then there’s the worker productivity space. To me, that’s a major space of interest in the next year. This involves the convergence of e-mail, voice, video, chat and other forms of collaboration with rapid innovation occurring at legacy providers as well as new entrants.

I wouldn’t write off packaged software because there will be spaces where that might be the best answer. But most companies that do packaged software are carrying this albatross in terms of code and business models that make them not as compelling.

What needs to happen to make the cloud match, or at least approach, the hype?

Smoley: I think it’s simply a learning curve. To me, the cloud has been overhyped because you have this fear, uncertainty and doubt being talked up by third-party providers. They either confuse people by offering cloud solutions that don’t fully leverage the cloud, or they disparage the cloud offerings as unsafe and unscalable. People need to get out there and experiment with it, and they need to understand that the value of the cloud is low cost, simplicity, speed and unparalleled usability. But it’s clearly not the answer to everything.