All business literature is in an uproar these days about Cloud Computing. Many executives aren’t sure they fully understand what cloud computing means, and in many cases, CIOs aren’t sure what the term means. However, many feel that it is the answer to all their information technology problems. Oh if it were that simple!

Let’s start by defining the term Cloud Computing. In its most general form, it refers to any scenario in which computing resources outside the company are used to provide software and/or hardware systems for the company. Therefore, the ultimate in cloud computing would be a scenario where the company hires an information technology hosting company to provide all of the company’s hardware and software needs on a monthly or annual fee. This is the opposite end of the classic spectrum where all computer hardware, software, and technical expertise are owned by the company.

Cloud computing or hosting has been available in one form or another for 30 years. The big difference now is communications through the Internet and the ease of current platforms that provide multiple outsourcing options. In most cases, the justification for moving to cloud computing is reduced cost. However, in most situations, the reduced cost is primarily a lower cost of entry. In the long run, the cost of outsourced hosting is often more expensive than in-house hosting. That said, there are excellent reasons to outsource or use cloud computing. The important thing is to understand the various outsourcing options and the advantages/disadvantages for the company of the option being considered.

Some of the key options for using cloud computing are as follows:

1. Website Hosting – Many don’t think of this as cloud computing or outsourcing, but it is the simplest form of cloud computing. There are still some companies that host their own websites. This results in significant bandwidth and server capacity requirements for the business. The infrastructure required to support hosted websites is very expensive, and nowadays web hosting is incredibly cheap. Most web hosting companies provide hosting services for less than $100 per month.

2. Microsoft Exchange Server Hosting: The larger the company and the more email addresses, the more expensive this type of hosting will be. However, for smaller companies, outsourcing Exchange Server is a very good option. The outsourcing company assumes all responsibility for maintaining the Exchange software and will provide bandwidth and server capacity upon request. The only downside to this cloud computing option is that the company must have bandwidth to support all email transactions.

3. Hosting of particular applications such as CRM (Customer Relationship Management), ERP or other key operational applications. This use of cloud computing needs to be closely evaluated. Since pricing for these types of apps is typically based on users per month, this model can get expensive very quickly, especially as the number of users increases. Also, operational applications often need to integrate with other applications often in real time. This can create communication issues when applications are hosted in different locations. Before making the decision to host operational applications in the cloud, you need to assess key questions such as who will use the application, how it will be used, and what options are available to move the system in-house.

4. Hosting Company-Owned Applications on Cloud Servers – This option provides the ability for the company to own its applications and have technical support provided by a professional IT infrastructure team. This is another great cloud computing option, which should be evaluated before making a final decision. If all the company’s applications are hosted on cloud servers, the main concern is the communication bandwidth between the hosting location and the company. However, if the limited applications are hosted on the outsourced servers and other applications are hosted internally or on other cloud servers, then the issues identified in option 3 come into play.

Cloud computing options definitely have a place and should always be evaluated as part of a system decision-making process. However, it should not be seen as a panacea or solution to all IT problems. Business executives should have a professional IT assessment, either from internal IT staff or external IT experts, before making IT outsourcing decisions.