One of the most widely discussed technology buzzwords of 2009 has been Cloud Computing. However, unlike other hyped technology, this one exhibits significant substance. It is worth understanding what it is and why it matters.

While the term is relatively new, some of the core features have existed in different forms for some time. Cloud Computing is all about hosting business technology, typically in an external environment, with application support, infrastructure, and operations managed by a third party. Does anyone remember application service providers (ASP’s)? Since the enterprise is less concerned with where the service lives and more focused on the functionality it enables; it is said to exist somewhere in the cloud — with complexity hidden from view. Similar to the shared nature of municipal power stations, enterprises are able to tap into a supply of technology resources as needed. Since it is on-demand, cost is determined by consumption and the required level of service. Simply put, when utilization of IT resources increases, so do costs; but equally, costs decline as usage decreases.

Cloud computing provides an organization with scalable and disposable technology services without the need to procure and manage a large, internal infrastructure. It provides a pay-as-you-go model for software applications, software services, and full-service application development environments. These can be complemented as needed with the ability to easily reconfigure performance, bandwidth and storage. For example: if you need more space? Simply request it!

The advantages of cloud computing largely depend on the size and nature of the business. For a small organization or start-up, the benefits are clear: low-cost (often free) applications, no infrastructure costs, and considerable speed in making essential, core IT services available to users. With larger organizations, there are additional considerations when evaluating cloud computing as an option. Typically processes are more complex and therefore require a larger degree of systems integration. Currently, this integration makes the cloud option riskier; however this will become less of an issue in the future.

Finally, in all scenarios, security concerns remain central to any hosting solution (but when has security not been a concern?). The organization must assess the ability for the cloud vendor to ensure the integrity of data and applications. For most organizations, cloud computing is not an all-or-nothing proposition. It is likely that applications and data inside and outside the firewall will co-exist in a hybrid manner.

Today we already see this model implemented across businesses. In many ways, large organizations have the ability to evolve their own infrastructures to provide an internal cloud. IT architects and other technology professionals need to consider a cloud computing delivery model to solve business problems. Business leaders should be informed about the opportunities, costs, security and risk considerations.

What should you do now? If you’re a business or technology professional, I encourage you to learn more about cloud computing. This important technology paradigm is rapidly rising in importance and will become an essential part of your technology toolkit. It’s time to put your head in the cloud!