Beware: Here Comes "Cloud" Computing

In recent weeks, my inbox has become filled with "cloud" computing press releases. The good news: Many of the high-tech industry's smartest companies are allocating resources to hosted services, managed services and software as a service.

The bad news: Just about anybody with a heartbeat in high-tech now claims to offer cloud computing services. Similar to the ASP (application service provider) hype cycle from nearly a decade ago, we should expect some cloud computing companies to thrive -- and many to fail.

Remember: rising tides don't lift all boats in high tech. Not all PC companies succeeded. Ditto with operating systems, networking, applications -- and the list goes on.

Since about mid-2007, buzz about cloud computing has shifted from back-office discussions to the mainstream media. Look at this spike in the number of people searching the term "cloud computing" on Google.

The current cloud computing craze is filled with nimble start-ups. And Companies like Zoho are worth your attention. But for every 100 cloud start-ups, I'm willing to bet that 99 will fail. And I also suspect that traditional enterprise software companies -- IBM, Oracle and Microsoft, in particular -- will eventually get cloud computing right.

Remember, client-server software companies were supposed to destroy legacy Unix application providers. Then, Web front ends and ASPs were supposed to destroy client-server application providers. Now, Web 2.0, cloud computing and open source companies will bury traditional software firms, according to some pundits.

Everything In Moderation

We think that's nonsense. Much in the way that the microwave oven complemented traditional ovens, SaaS companies will complement established software providers., NetSuite and other companies working in the cloud have nice momentum going. And Linux, the platform that drives more and more cloud initiatives, continues to perform well. MSPmentor is generally bullish about open source and on-demand computing.

But if you believe cloud computing and SaaS will quickly bury traditional software companies, you're misinformed. It takes Microsoft a mere 10 hours to generate profits that exceed Red Hat's entire quarterly net income, according to The VAR Guy, our sister site. And Microsoft's annual profit exceeded the combine annual profits of Oracle, Google, Apple and SAP, according to the CIOzone 100.

Still, the hype about cloud computing is getting intense. And there are some great cloud-centric technologies for MSPs to explore. Move forward, but don't let the hype lull you into thinking that all online services are created equally.
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