What is this thing called "cloud computing"? It's nothing new - that much is certain. Software vendors have been offering applications "hosted" off-site for years. The idea of computer services as a kind of managed utility dates back to the 1960s at least. Salesforce.com, founded in 1999, based its entire business model on the cloud, even if it didn't use the word at the time. Since then, we've seen a variety of takes on what came to be known as Software as a Service, or SaaS. That's now been supplanted by "the cloud," a term which refers to any number of apps that reside in huge banks of servers located far from the client.

Regardless of what you call it, the obvious advantage for cloud users is the elimination of costs related to maintaining software on site. Upgrades are a snap, since the responsibility for getting them up and running is entirely that of the provider. With the maturing of the internet and communications technology, it seems like a logical step forward for corporate IT departments.

All the same, it has taken me quite a while to accept the term "cloud" seriously - or, at the very least, to write it without quotation marks. From the start, it bore the scent of marketing hype, an attempt to re-label old ideas with a colorful new word.

Evidently there are still a number of business executives who feel the same way. Back in 2009, Gartner was already targeting the technology in its five-phase "hype-cycle" reports. Last year, Gartner placed the concept at "just beyond the Peak of Inflated Expectations, and headed for the Trough of Disillusionment." Nearly every vendor to whom Gartner spoke had a cloud-computing strategy, the firm acknowledged, "yet few have shown how their strategies are cloud-centric." In fact, Gartner found evidence of "cloudwashing" in all 34 of the technology areas that it tracks.

Those concerns were only amplified by the outage that struck Amazon Web Services for 11 hours in April 2011. Users who had failed to pay for extra backup or supplement AWS with other services experienced severe disruptions to their businesses. Amazon explained that the problem was triggered by "a network configuration change," likely originating in an East Coast data center, and promised to do better next time.

But even the most reliable hosting service isn't entirely fail-safe. As Gartner research vice president Lydia Leong explained at the time, clients of AWS can experience around four and a half hours of total region downtime a year without the provider violating its service-level agreement. "If you want more resiliency," she said, "you need to run in more than one data center. And on Amazon, if you want more resiliency, you need to not only be multi-AZ [availability zone] but also multi-region."

Fears about the consistency of cloud services - coupled with nagging questions about the security of proprietary business information residing outside a corporation's walls - have kept some companies from fully embracing the cloud. (In literal terms, the impossibility of "embracing" a cloud might be entirely apt in this case.) Others appear to be lagging in enthusiasm due to outright ignorance of the concept. A November 2011 survey of 100 U.K.-based IT managers by the business consultancy Proviti found 74 percent claiming that cloud computing wasn't relevant to their business. Eight percent were relying on the cloud for one or two services, while just 3 percent had adopted it in a widespread fashion.

What was holding them back? Jonathan Wyatt, managing director of Proviti UK, wasn't entirely sure. "It's surprising that so many IT managers appear to see no value in cloud technology," he said. "The cloud takes the opportunities presented by outsourcing to the next level." Cloud services, he argued, can help companies to improve performance while reducing cost.

Proviti's research found security to be the biggest barrier to full adoption of the cloud, followed by concerns over data privacy. IT managers were further worried about business continuity in the event of a network failure such as that experienced by AWS.

On top of that, said Wyatt, a number of companies were suffering from a "fundamental lack of understanding" as to what cloud computing is, and how it can be of value to the organization. Oddly enough, "many firms will already use some form of cloud technology for CRM [customer relationship management] or other marketing services, but in many cases, the IT department is unaware. Such ignorance is posing significant risks to the business."

None of this should stop companies from moving gradually to the cloud, in Wyatt's view. He recommends that they begin with "low-risk" areas of the business, enabling short-term IT savings while shoring up the organization against problems that might emerge with greater reliance on the concept.

Love the cloud or hate it, taking it slowly isn't a bad idea. Cloud technology is far from mature, and newcomers to the concept are still asking questions. How does SaaS differ from hosting? How is the cloud different from both? What about Web services in the cloud, and Platform as a Service? And how does all that relate to the original concept of utility computing?

Nevertheless, it does appear that the word "cloud" is coming to mean more than a marketing buzzword. In terms of Gartner's development model, it's moving steadily toward becoming a technology that offers real value to IT organizations, shorn of hyperbole.

Next: a $3.7bn food company that loves the cloud.

- Robert J. Bowman, SupplyChainBrain

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