Cloud Sherpas to host Webinar featuring OffiSync, ScheduleOnce and SherpaTools

On Thursday, December 10th, Cloud Sherpas will be hosting a webinar featuring OffiSync, ScheduleOnce and SherpaTools, three must-have add-ons to Google Apps. This is an exciting opportunity for both end-users and administrators of Google Apps to learn about ways to enhance their Google Apps experience.

Sign up here to reserve your spot!

The webinar will open with a brief presentation of the first SherpaTools module for Google Apps, Directory Manager. This tool from Cloud Sherpas allows Google Apps administrators to easily manage the User Profiles and Shared Contacts directory in Google Apps. We will then hear from the leaders of OffiSync and ScheduleOnce who will speak and answer questions about their solutions. OffiSync offers a best-of-both-worlds functionality platform between Microsoft Office and Google Docs, and ScheduleOnce is a meeting scheduler for Google Apps that streamlines the scheduling process and finds common meeting times quickly and efficiently.

If you’re a Google Apps administrator, or if your business or organization has adopted Google Apps, don’t miss this great opportunity to learn how you can do more with Google Apps. Sign up today!

Cloud Sherpas to host webinar on migrating enterprise messaging and collaboration to the cloud

Businesses are responding to the value proposition of Google Apps in a big way. According to a tweet by Dave Girouard, President of Google Enterprise, more than 5000 businesses signed up for Google Apps last Thursday alone!

For those of you Novell GroupWise users considering the switch, we welcome you to join our webinar on Thursday, December 3rd from 2:30-3:30pm EDT. During this one-hour event Cloud Sherpas will share our specialized approach for migrating GroupWise enterprises to Google Apps. You’ll also hear Jay Kenney, CIO of Lincoln Property Company, tell his story of migrating his GroupWise users to Google Apps, and have an opportunity to ask questions. As a business executive or IT professional of your organization, you don’t want to miss this webinar — reserve your spot today.

Update: The slides from the GroupWise webinar are now available:

A new platform that delivers enhanced management and end user features to organizations that have #gonegoogle

As Cloud Sherpas continues to help businesses and organizations adopt Google Apps, we have found that many customers, regardless of location or industry, request a common set of additional management controls and end user features for their Google Apps environment. Until now, the response to most of these inquiries was that organizations had to develop custom applications that work with Google APIs to achieve their goals.

Today Cloud Sherpas announces the start of a beta program for SherpaTools for Google Apps, a new platform that enhances the functionality and ease-of-use for administrators and end-users. Delivered as a service and requiring no installation or updates, we invite Google Apps administrators to signup for the beta program, free of charge, and instantly take control of their domain.

The first module in SherpaTools is Directory Manager, which today enhances an organization’s ability to effectively communicate by granting administrators greater autonomy and management control over both User Profiles and Shared Contacts. Coming soon is an automated bot that retrieves data from your directory from any device connected to Google chat. Also on the horizon is a Compliance and Reporting module that will provide scheduled reports, automated alerts and powerful privacy and content sharing controls.

SherpaTools is the easiest, most cost-efficient way to extend Google Apps in your organization. The suite addresses many common use-cases to provide a more user-friendly and self-directed Google Apps experience. Take one of the limited spots in our beta program and see for yourself the benefits of SherpaTools for Google Apps.

To view a quick, 3 minute video overview and to learn more about SherpaTools for Google Apps, please visit www.sherpatools.com.

Cloud Sherpas is proud to announce that our own Director of Professional Services, Jeff Miller, has been invited by the Cloud Computing Conference & Expo to lead the seminar, Migrating Collaborative Applications to the Cloud. The upcoming event held between Nov. 2-4 invites the cloud computing community (developers, software professionals, IT managers, CIOs, etc.) to Santa Clara, California to examine the latest resources, ideas, and examples being introduced by their colleagues. Jeff will draw upon both his extensive experience as an IT executive as well as his time at Cloud Sherpas to address a frequently complicated stage in migrations: the migration of collaborative applications. We look forward to both his seminar and the conference as a whole. Don’t miss out on this great opportunity!

PBS recently aired a special segment on the News Hour with Jim Lehrer on cloud computing. It’s a great segment that highlights the basics of the cloud and why businesses are considering it. Take a look:

Click here to catch the full interview with Eric Schmidt, CEO of Google.

By Ned Smith
June 11, 2009

Netbooks, the mighty-mites of mobile computing, are becoming the sales colossus of the computer industry. Though margins are thin for manufacturers (hardware and software alike), these smaller, less-expensive siblings of the ubiquitous notebooks carried by millions of road warriors are the one ray of hope in this slough of slumping technology spending. And they’re increasingly becoming the portable computer of choice for peripatetic professionals.

Once dismissed as cute novelty devices, netbooks have grown up fast. “It appears that netbooks have already made the leap from consumer toy to business professional,” says Gloria Barczak, the chair of the marketing department at Northeastern University’s College of Business Administration. “According to some sources, netbook sales in the first three months of 2009 (5.5. million) were greater than last year’s hot new product, the iPhone. Expectations are that the netbook market will grow by 80 percent in 2009 with Gartner predicting that by 2012 annual netbook sales will be over 50 million.”    

Economics and the advent of cloud computing have made this evolution possible. With the recession, Barczak explains, “Customers, both consumers and business, are looking for an inexpensive device that performs the primary functions they need — Internet browsing, e-mail, typing documents and sharing some digital media. In addition to their functionality, netbooks are low price, very portable due to low weight and typically have longer battery lives than some laptops due to lower power requirements. So overall they are convenient, affordable and functional. They appeal to a wide variety of users — students, senior citizens, parents and even business people who may be tired and hurting from trying to type e-mails on their Blackberries or iPhones.”

Netbooks, which trace their DNA back to Nicholas Negroponte’s One Laptop Per Child project to create inexpensive laptops, have come into their own and gained a growing cohort of enthusiasts because of the blossoming of cloud computing. It is the enabling technology that has helped netbooks reach a tipping point to make the leap from toy to tool. “As more applications move to the cloud and all you need is a connection and a browser to get work done, netbooks become hugely valuable and cost effective for almost any business,” says Jason Throckmorton, a co-founder of bi-coaLaunchsquadstal tech PR company Launchsquad. “Netbooks running Linux and free application suites like OpenOffice could be a real game changer when it comes to economics and productivity.”

In a survey conducted by market research and consulting company Techaisle,, nearly a third of small and midsize businesses said they were looking at netbook purchases as they consider upgrading their core desktops and notebooks.

The confluence of cloud computing and netbooks is the perfect digital storm that drives the business model for Cloud Sherpas, a pure-play cloud computing integrator headquartered in Atlanta. “Cloud computing is our bread and butter,” says Michael Cohn, CEO. “The specific technology we do is Google Apps. Our consultants are using netbooks as their primary work stations. We have to eat our own dog food, so to speak, so we live and breathe on the cloud. We are a truly server-less environment.”

For Cloud Sherpas, the cloud computing/netbook combo is not a hard sell. “Our customers who are also embracing Google Apps in general are asking us about netbooks because they see us walk in with these little netbooks that practically fit in your pocket,” says Cohn. “And we’re able to administer their entire system from them, and we’re able to do e-mail, create documents and spreadsheets and collaborate in real time.”

Netbooks and the cloud aren’t for everyone, Cohn admits. “A netbook is not the right tool if you’ve got to run tons of software on your machine. That’s not what it’s designed for. If you have to run Office on a desktop, that’s going to suck up all your resources. But if you’re using tools like Google Apps, there are a lot of advantages with a netbook.”

It’s all a matter of tradeoffs. “We’re either going to spend three times as much on a laptop and have to lug it around, or we can spend $300 on a netbook and not even feel it in a backpack. If an organization can operationalize its IT to the point where they’re finally embracing cloud computing, using netbooks in a no-brainer.”

Cohn predicts that netbook use will be adopted function by function, rather than company wide. “There are certain functions where netbooks make much more sense,” he says. “Netbook for a sales guy, a consultant or a road warrior is a no-brainer. But I don’t see graphic designers, for example, jumping on the netbook bandwagon quite yet because they require all this heavy software like the Adobe suite to be installed.”

The allure of netbooks has even fanned the flames of technolust in the august provinces of white shoe law firms. Browning Marean, a partner in the San Diego office of DLA Piper one of the world’s largest law firms, has bailed on laptops in favor of his Aspire netbook sidekick. “I’m on the road just about every week,” he says, “and I do a lot of presentations. Using the Aspire as a substitute works perfectly well. It projects just as well as a full-fledged laptop and I can do 95 percent of the things I need to to do. When you’re on an airplane and that pesky person in front of you decides to recline, you still have some room to work with your computer.”

Because of their low price points (generally $300 to $400), Marean says, “Netbooks are really becoming consumables.”
Though the first wave of netbooks was driven by the Linux operating system and Taiwan-based hardware manufacturers, their increasing popularity has made them a force — and market — that must be reckoned with. Hardware manufacturers and software developers sitting this trend out do so at their own peril. Though late to the game, Microsoft retaliated by offering netbook makers a bargain-basement version of its old Windows XP operating system. Redmond promises that its next OS, Windows 7, will run on netbooks when it hits the market this October.

It had better. Acer and Asus, two Taiwan netbook titans, said June 2 that they will launch netbooks that run on Android, the free operating system Google originally created for cellphones. Will Apple be next?

Stay tuned. It’s getting interesting.

(Editor’s note: This was written with Google Docs on an ASUS 1000HE netbook.)

Ned Smith is a New York-based writer who reports on business and technology. He can be contacted at nedsmith@gmail.com.

Leverages Google’s Cloud to Enable Deep Enterprise Integrations

Atlanta, Georgia — April 8, 2009 — Cloud Sherpas, a leading Google Apps™ systems integrator, announced today the formation of a Google App Engine™ development practice dedicated to extending the utility of Google Apps in enterprise deployments. The team will leverage Google App Engine and eventually the new Java™ language support to enable deep integrations and build innovative products for the Google Apps ecosystem.

“The drive to reduce cost has created a groundswell of demand for Google Apps among large institutions and enterprise customers,” says Michael Cohn, CEO of Cloud Sherpas. “With Java language support, Google App Engine offers an open, scalable platform for organizations to integrate Google Apps with other applications, build custom workflow applications, and migrate legacy workloads to the cloud.”

Google App Engine is built on Google’s computing infrastructure and is optimized to run Web applications. Unlike other infrastructure services, applications deployed on App Engine more reliably autoscale to meet spikes in demand without the need to buy excess capacity. And since customers are only billed for actual usage, App Engine is an ideal pay-as-you-go platform that further drives cost down.

“Cloud Sherpas has repeatedly demonstrated an ability to execute in Google Apps deployments, said Scott McMullan, Google Apps Partner Lead. “We’re excited to have them at Campfire One and expect to see their dedicated team develop unique Google Apps extensions and stand-alone products.”

At Google’s Campfire One event tonight, Google announced an early look at App Engine’s Java language support. “Google has responded to developer feedback,” said David Hoff, VP of Technology at Cloud Sherpas. “The new set of App Engine features, including scheduled tasks, more secure access to firewalled data, and of course, an early look at support for Java programming language, allows enterprise customers to extend Google Apps like never before to meet the unique challenges of their business.”

Cloud Sherpas also published a white paper today entitled “Extending Google Apps with Java for App Engine.” The white paper offers a high-level overview of the Google App Engine stack and describes an approach for integrating custom applications with Google Apps. Please visit www.cloudsherpas.com/whitepapers/gae.html to download the white paper. You can also meet the Cloud Sherpas team at the upcoming Google I/O conference on May 27-28.

About Cloud Sherpas
Cloud Sherpas (www.cloudsherpas.com) is a cloud computing systems integrator and application developer. As a leading Google Enterprise partner, Cloud Sherpas helps organizations leverage Google Apps and Google App Engine to dramatically reduce IT expenses. The company delivers deployment, change management, support and development services to commercial, enterprise and educational institutions seeking to adopt cloud computing.

Cloud Sherpas is a Google Apps Authorized Reseller and enterprise deployment partner. The company also supports cloud computing solutions from EMC/Decho, TriCipher and other best-in-breed vendors.

Google, Google App Engine, Secure Data Connector, Google Enterprise Partner, Google Apps and Google Apps Authorized Reseller are trademarks of Google Inc. Java is a trademark of Sun Microsystems, Inc.

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The Darwinian Theory of the Corporate Datacenter (or: How I Learned to Stop Worrying and Love the Cloud)

By: Barry Lynn
Aug. 15, 2008 09:00 AM

There have been multiple white papers and articles written by analysts – Is Cloud Computing Ready for the Enterprise? The question is asked so many times now – Is Cloud Computing ready for the enterprise? So, I have to ask – Is the enterprise ready for Cloud Computing?

I’ll start this discourse with a few PC and sincere comments (the two are not mutually exclusive unless one is running for political office).

First, I love Corporate CIOs and IT managers (not in a romantic way, of course, but with great admiration).

Second, they have the most difficult jobs in the corporate universe. They are the brains and the central nervous systems of large enterprises. They are also the most taken for granted of all executives. They represent cost centers who get no credit for their corporations’ profits, while keeping the corporation alive. If they achieve 99.99% availability of their services, an iota of kudos is given for that 99.99%, but a mountain of wrath is doled out for the other 0.01%.

Finally, I spent 27 of my 37 year career in information technology as an enterprise IT manager and Fortune 500 CIO. You guys and gals are my comrades.

So, why do I feel the need to put my comrades on a pedestal? Well, it started with some comments I made at a Wall Street conference and variations of it that I made to members of the technical press and analyst community. I used the following analogy.

If you woke up in the morning and read in the Wall Street Journal that an eCommerce company like Overstock.com had stopped using the USPS, UPS, FedEx, DHL, etc. to deliver their goods and, instead, leased airport hubs all over the world, bought a fleet of jets and bought thousands of trucks and started delivering the stuff themselves, you’d think they were out of their minds. So, why is is not equally insane for financial services companies, health care institutions, manufacturing companies, bio-tech companies, pharmaceutical giants, etc. to be spending a billion dollars or much more each year on information technology infrastructure?

Well, that analogy has prompted several to accuse me of thinking that corporations are insane and corporate IT managers and CIOs are stupid. I assure you that it not the case.

Then what do I do? I really put my foot in my mouth. I title this treatise “Are Enterprises Ready for Cloud Computing?”, as if to arrogantly proclaim that we are ready but enterprises are not.

But there is expiation for that as well (and I am not running for office, so this is a thought embellishment rather than flip flop).

Intellectually, of course you are ready. Of course you have the experience and skill to adopt Cloud Computing. And most of you have the resources. Most significantly, you have always risen to the occasion when disruptive technologies have been thrust upon you.

But, practically speaking, whether you, I or anyone thinks that the future holds a world where all enterprises will get computing on demand and only pay for what they consume, we know that this will not happen over night. I do see a world, though, in six or seven years, where this will be very much the norm and corporations owning datacenters will be the exception to the rule.

So, here’s where the Darwinian Theory of the Corporate Datacenter comes to play.

I have said many times that Cloud Computing is the most disruptive technology that has come along in a very long time. Respected technology analysts say it will be bigger than e-Business and it’s potentially a quarter of a trillion dollar market (that’s almost enough to fund a fraction of a war!). So, people ask me – Do you think Cloud Computing is a revolution or an evolution?

My answer is a resounding “Both”.

I believe that all evolutionary change starts with revolutionary change. In Darwin’s Origin of the Species evolutionary changes start with a mutation. Those mutations are the revolutions that result in evolution. In most cases the mutation comes about as a mechanism to heighten the chance of survival – you know, to make the species more fit. Subsequent to those revolutions, the evolutionary process gradually occurs as the most fit survive and the mutation becomes the norm – the standard.

Cloud computing is the mutation – the revolution. Enterprise IT and Corporate CIOs/IT Managers will jump on the opportunity to evolve as they always have when revolutionary technology mutations have occurred.

So, here’s an example of a scenario of how the evolution will happen.

During the next couple of years two things will occur.

First, enterprises know that the hardest things to plan for with regard to capacity, performance, etc., are on line applications offered on the web. They really have no control over who may log on, how many may log on, when they may log on, what they may do once they log on, etc. So, the natural evolutionary step to mitigate this is to run those applications on massively scalable infrastructure that scales up and down dynamically as needed, using resources on demand, always there when needed and only paying for what is consumed. These infrastructures are what we are now calling Clouds.

At the same time, the mission critical data and systems of records that are the enterprise life blood residing in their datacenters need to be isolated from these on line applicatons exposed to every internet user. This will be accomplished through the use of secure virtual gateways in the Cloud, connecting, in a loosely coupled manner, rather than a fully integrated manner, to the enterprise datacenters, their databases and systems of record.

These gateways will take many forms. They may be SOA gateways using XML and virtual XML firewalls, virtual messaging systems such as MQ, virtual EAI appliances or customized appliances encapsulating organizations’ proprietary techniques for reliably and securely communicating among systems (and anything new that comes along to supplement or replace these things).

Second, infrastructure/architecture agnostic Cloud platforms (what we at 3tera call Cloud Computing Without Compromise) will be installed in enterprise datacenters. There will be two factors that will drive this.

(1) As more and more apps are offered on line, those same apps will often be used internally by the enterprise employees. Why incur the cost of having separate experiences for employees and customers who are accessing the same information and functionality. Also, when connecting the on line apps in the Cloud to the datacenter and SORs, having them on similar platforms will make it seamless and efficient. ‘

(2) A Cloud infrastructure done right, behind the corporate firewall, enables the enterprise to run their datacenters as metered utilities. It enables them to more efficiently use their hardware resources by provisioning what is needed for each application on demand and releasing those resources when no longer needed for other applications to use. It enables them to more efficiently use intellectual capital by shifting IT administrators from managing machines to managing applications. And, most importantly, it greatly decreases time to market because the lengthy provisioning, configuring, etc., of hardware and infrastructure resources is, pardon the pun, virtually eliminated. So albeit humongously significant, forget all the talk about cost reduction and avoidance. Cloud Computing in the enterprise has the potential to greatly increase revenue and beat the heck out of competitors implementing like products using traditional datacenter deployment methods.

OK – so what’s the next step in the evolution?

At the same time that enterprises are growing comfy with apps in Clouds and realizing the upside of dynamic provisioning and scaling, they will be developing new applications and replacing/changing existing ones. They will start building the new apps in Clouds and as they change existing apps, will consider migrating them to the Cloud in the process. This will afford them the advantages of much faster times to market, the ability to run applications on demand in multiple datacenters (globally if appropriate) creating their first truly complete disaster recovery abilities and concentrate on their core businesses which may be financial services, health care, manufacturing, etc., but certainly is not datacenter operations (they will leave that to the companies whose core business IS datacenter operations).

Now the final step (well, as my limited vision can see it – of course there will be much more beyond this):

Enterprises will find themselves with datacenters that only contain data. Finally, a datacenter will be what its name implies. All of their functionality – all the non-data tiers of their services, will be in Clouds connected to the datacenters’ data. At that point, evolution will have to start behaving like the datacenter is an appendage. Over time, the corporate data will move to the Cloud just as many smaller businesses without datacenters are using storage services in Clouds today. The corporate datacenter will be a vestige, and eventually evolution will cause it to disappear.

Discussion of this step always raises questions of privacy and security. I maintain that when corporate data is in the Cloud it will actually be more protected than it is in the enterprise datacenter. But I’ll save that for a separate, devoted future posting.

In short, the corporate datacenter is not a stupid useless entity. There have been no alternatives. My hat is off to the brave men and women who devote their careers to thanklessly operating them. They are profound necessities. But neccesity truly is the mother of invention, and the corporate datacenter, with all of its overhead, has bred Cloud Computing.

So, as I started this with a PC comment, I feel like ending it with one. As I composed this, I did realize that there are many people out there that discount Darwinian evolution in favor of Creationism. I assure you that I have the utmost respect for all beliefs, no matter how different from my own. And my references to evolution here, obviously have to do with the evolution of technology, not of the human race. Furthermore, I am very happy to depict the corporate datacenter as the eventual dinosaur with a saddle on it’s back being ridden by a member of the Cloud Computing species.

The company will continue to add new apps to its hosted software suite, but the price will stay the same

By Juan Carlos Perez, IDG News Service

August 05, 2008

Google plans to aggressively add new applications and capabilities to its Web-hosted Apps software suite for businesses and will likely leave the price unchanged as it builds out the service, a company official said Tuesday.

The comments signal a move that will likely heat up the competitive fire between Google and Microsoft in the market for office productivity, communication, and collaboration software.

Google, a recent entrant to this market, has opted to provide its suite via a SaaS (software as a service) model, a newly popular approach in which vendors host the software and data, and deliver it to customers via the Internet.

Microsoft, a longtime player with its ubiquitous Office suite and Outlook/Exchange messaging and collaboration platform, is starting to react to this trend, although its software is still primarily designed to be installed on customers’ own servers.

Currently, Google offers a free, ad-supported Apps version designed for individuals and very small businesses, and a fee-based version called Premier that is aimed at companies of all sizes and costs $50 per user per year. That is considered an aggressive price versus the cost of comparable Microsoft software.

Although the individual and business versions share the same core applications, such as Gmail, word processor, calendar, spreadsheet, and presentation programs, Apps Premier has a variety of IT management tools as well as APIs for integration with other software.

“Our intention is to really put more value at that price point and offer some amazing proposition to companies,” said Dave Girouard, president of Google’s Enterprise unit, at the Pacific Crest Technology Leadership Forum.

While not ruling out adding other pricing tiers for certain technology, Girouard stressed that the current strategy is focused on increasing the user base by making the suite more attractive without increasing its cost.

“We expect to hold the price point and add more and more value at that price point,” he said. “We want to have commercial relationships with lots of companies, and it matters more that we have that than exactly how much dollar per user we’re getting.”

“We can certainly hold that price point. We can continue to put more capabilities there. The cost of an additional application to us is tiny, it’s hardly material. There are certainly types of applications that we could add that would add cost and we would price appropriately, but I don’t expect the price to climb. That wouldn’t be my expectation,” he added.

Girouard didn’t provide any specifics about the types of applications or new features Google is planning to add to Apps.

More than 500,000 businesses and universities have signed up for the free and fee-based versions of Google Apps, resulting in about 10 million active users of the suite, Girouard said.

Apps Premier customers don’t generally object to the suite’s subscription price, he said, adding that their most common concerns before adopting it are about the security of hosting the software and data outside their premises, and about Google’s future plans for the product.

He said Google isn’t trying to provide all the features in, say, Microsoft Office, in which applications are generally considered to be richer in functionality. Instead, Google focuses on what it thinks Apps can do better, like simplifying collaboration and sharing in workgroups. As hosted software, Apps is designed with collaboration in mind.

“I’d like all the holes [in the feature set] to be filled, but I’ll say generally we’re not in the model of trying to replicate the products that work really well for what they do,” he said.

For example, Google’s spreadsheet application today isn’t designed to win over financial analysts who spend a lot of time building very complicated models in Microsoft Excel.

“Excel is very good at that. [But] there’s a million things you can use our spreadsheet product for that we think we’re much better than Excel at,” he said. “If you’re looking for feature parity, you’ll probably never see that.”

A major shift in the way companies obtain software and computing capacity is under way as more companies tap into Web-based applications

by Rachael King

At first, just a handful of employees at Sanmina-SCI (SANM) began using Google Apps (GOOG) for tasks like e-mail, document creation, and appointment scheduling. Now, just six months later, almost 1,000 employees of the electronics manufacturing company go online to use Google Apps in place of the comparable Microsoft (MSFT) tools. “We have project teams working on a global basis and to help them collaborate effectively, we use Google Apps,” says Manesh Patel, chief information officer of Sanmina-SCI, a company with $10.7 billion in annual revenue. In the next three years, the number of Google Apps users may rise to 10,000, or about 25% of the total, Patel estimates.

San Jose (Calif.)-based Sanmina and Google are at the forefront of a fundamental shift in the way companies obtain software and computing capacity. A host of providers including Amazon (AMZN), Salesforce.com (CRM), IBM (IBM), Oracle (ORCL), and Microsoft are helping corporate clients use the Internet to tap into everything from extra server space to software that helps manage customer relationships. Assigning these computing tasks to some remote location—rather than, say, a desktop computer, handheld machine, or a company’s own servers—is referred to collectively as cloud computing (BusinessWeek, 4/24/08), and it’s catching on across Corporate America.

The term “cloud computing” encompasses many areas of tech, including software as a service, a software distribution method pioneered by Salesforce.com about a decade ago. It also includes newer avenues such as hardware as a service, a way to order storage and server capacity on demand from Amazon and others. What all these cloud computing services have in common, though, is that they’re all delivered over the Internet, on demand, from massive data centers.

A Sea Change in Computing

Some analysts say cloud computing represents a sea change in the way computing is done in corporations. Merrill Lynch (MER) estimates that within the next five years, the annual global market for cloud computing will surge to $95 billion. In a May 2008 report, Merrill Lynch estimated that 12% of the worldwide software market would go to the cloud in that period.

Those vendors that can adjust their product lines to meet the needs of large cloud computing providers stand to profit. Companies like IBM, Dell (DELL), and Hewlett-Packard (HPQ), for instance, are moving aggressively in this direction. On Aug. 1, IBM said it would spend $360 million to build a cloud computing data center in Research Triangle Park, N.C., bringing to nine its total of cloud computing centers worldwide. Dell is also targeting this market. The computer marker supplies products to some of the largest cloud computing providers and Web 2.0 companies, including Facebook, Microsoft, Amazon, and Yahoo (YHOO). “We created a whole new business just to build custom products for those customers,” Dell CEO Michael Dell says. “Now it’s a several-hundred-million-dollar business, and it will be a billion-dollar business in a couple of years—it’s on a tear.”

One of those customers, Microsoft, has made cloud computing one of five priorities for fiscal 2009, according to a recent memo from CEO Steve Ballmer. Microsoft’s version of cloud computing, Software-plus-Services, is designed to let customers choose whether they want traditional software, software services, or a combination of the two. In the memo, Ballmer promised that employees would hear more about the company’s cloud computing platform initiatives in the next version of its Live and Online technologies, scheduled to be unveiled in October. About 9% of IT managers who responded in a Goldman Sachs (GS) survey said they planned to use Microsoft for software services this year in addition to those they already use.

Reliability Is a Concern

Many chief information officers remain concerned about the reliability and security of cloud-based services. Events like the six-hour outage on July 20 of Amazon’s S3 service, designed for developers who want easy access to storage over the Internet, give CIOs reason for pause. “It’s hard to turn a big ship very quickly,” says Daryl Plummer, managing vice-president of consulting firm Gartner (IT). “You have technologies that are like cement in these businesses—they’re hard to change and get rid of.” Plummer says that about $8 out of every $10 spent on technology in corporations is for maintaining systems, rather than innovating.

At Sanmina, spurring innovation is one of the main motivations for investment in Google Apps, Patel says. “One of our strategies to be competitive on a global basis is to be innovative in terms of how we work with our different teams, with our customers, and our suppliers,” he says, adding that his company operates in an extremely competitive industry. The price doesn’t hurt, either. The enterprise version of Google Apps costs $50 per user per year, while a license of Microsoft Office Professional retails for $499.99. True, Google Apps lacks some of Office’s features. But Google Apps compensates in that it’s more adept at fostering collaboration among employees scattered across the globe, Patel says. “We see [cloud computing] as a very compelling proposition in the long term,” he says.

As appealing as the prospect of cloud computing may be, many CIOs, analysts, and even vendors themselves, see it emerging only gradually in the enterprise. “It will be a draining of the pond,” says Dave Girouard, president of enterprise for Google. While more than 500,000 organizations of varying sizes use Google Apps, more than half use the free version, according to Girouard.

Moving HR Functions to Google Apps

Now that he has let employees dabble in Google Apps, Patel is considering moving applications related to human resources, such as absence reporting and expense reporting, to cloud computing. He is also eyeing Amazon’s Web services, which include both storage and server capacity. “Clearly from an enterprise standpoint we’re going to take some baby steps first, try out some lower-priority applications to be sure it’s a strong platform,” Patel says.

In general, CIOs say cloud computing, whether it’s software services or additional server or storage capacity, needs to improve a bit before enterprises will adopt on a larger scale. Security and reliability are big challenges. When Amazon’s S3 storage service went down, many companies had trouble doing business. For smaller companies, the trade-off between the cost savings of using Amazon’s service and the occasional hiccup in reliability is worth it. “With Amazon, the benefits of easy scalability and low price far outweigh the occasional downtime,” says Peter Yared, CEO of iWidgets a small company, who estimates he spends four times less by using Amazon Web services vs. conventional server hosting. Although Yared’s Web site worked on July 20, he had trouble for about six hours with some user-generated code that was stored on Amazon’s S3 service. Still, larger companies typically require a higher degree of reliability.

Another issue that worries CIOs is the ability to comply with regulations, including Sarbanes-Oxley rules that govern corporate financial reporting, and the Health Insurance Portability & Accountability Act (HIPPA), which sets rules for security and privacy of health records. ITricity, a European provider of cloud computing capacity, couldn’t previously offer services to companies that required compliance with financial and health-care regulations. Currently, though, the company is installing what’s known as a private cloud using IBM’s Blue Cloud software and services, which turns a corporate data center into its own cloud. Since a private corporate cloud is blocked off from the Internet with firewalls, it provides a level of security that will make it possible for iTricity to offer services to the accounting, financial, and health-care markets.

Finding a Middle Way

In the past six and a half months, iTricity has spent more than $779,000 upgrading to IBM’s new technology. That technology promises to give iTricity much more agility in offering services to customers. Now, customers who want additional computing capacity must wait a week. IBM’s approach will cut that lag time roughly to an hour or less, iTricity says. “Our new slogan with iTricity capacity in the market is power by the hour and power within the hour,” says Robert Rosier, founder and CEO of iTricity.

Because companies have such a large investment in existing technology infrastructure, many people think there will be a hybrid approach where companies will do some of their computing internally, possibly in a private cloud, while other tasks will be offloaded to the public cloud. “One of the key challenges for corporate IT departments, in fact, lies in making the right decisions about what to hold onto and what to let go,” writes Nicholas Carr in his book, The Big Switch.

Girouard at Google says he is confident more and more companies will get comfortable with letting go. “Over time as larger and larger businesses decide to use Google Apps, there will be an upswing in the revenue,” he says. Right now, Google’s strategy is to get as many people and companies as possible comfortable using Google Apps. To that end, the company is doing things like providing Google Apps for free to universities. “We’re generating millions of users for life,” he says.

Patel and a growing number of employees at Sanmina may well be among them.

King is a writer for BusinessWeek.com in San Francisco.