What’s all the buzz about? Cloud computing is one of Gartner’s top 10 strategic technology trends for 2009 – #2, right behind virtualization. Analysts say the economics of cloud for customers are truly compelling, with expected savings for business applications of 3-5x. That’s not chump change – particularly in today’s recessionary economy.

But the most compelling benefits of the cloud aren't just cost-savings. They're the increased flexibility, elasticity and scalability available to optimize efficiency and best serve the needs of the business.

What is Cloud Computing
Whether you're an enterprise or small to medium business, you'll soon be benefiting from the cloud.  But what is cloud computing exactly?

Cloud computing is essentially the ability to acquire or deliver a resource on demand, configured however the users chooses, and paid for according to consumption.  From a supplier's perspective, including both internal IT groups and service providers, it means being able to deliver and manage resource pools and applications in a multi-tenancy environment, to deliver the user an on-demand, pay-per-use service. A cloud service can be infrastructure for hosting applications or data storage, a development platform, or even an application that you can get on-demand, either off-site at a provider, such as SunGard or Salesforce, or built onsite within IT.

It's important to note that while many view cloud computing as services consumed externally, innovative CIOs have taken the steps to transform their IT groups into internal service providers.  This strategic shift gives them control and accountability for usage and resources, while providing a dynamic, self service model to accommodate the needs and SLAs required by the business units.  To see how one enterprise did this, you can view their video story online at: www.vmware.com/cloud.

For those of us who remember the good old dot com days, before the bust, we saw the concept of hosted services emerge.  Everyone jumped on the ASP, ISP, MSP (application service provider, internet service provider, managed service provider, respectively) bandwagons and built offerings to deliver online services or variants thereof, such as on-demand software and software-as-a-service (SaaS).

Remembering back to the xSP days, however, we must also remember that there were issues with the services hosting model. One issue was that few were comfortable with the concept of having their information hosted outside of their immediate control, as well as the fear of being locked into a relationship with particular vendors.

So, as the new concept of the cloud emerges, many are asking how it's different this time around and what should we expect?   Unlike those previous hosting models, we see well-established companies diversifying their business models to offer new services, based on established core competencies. This fundamental difference will help shape and stabilize the new concept of the cloud.

VMware CTO Steve Herrod keynoting SYS-CON's 3rd Virtualization Conference & Expo in New York. Read an Exclusive Q&A wth Herrod here.

But even more importantly, we have seen new technologies evolve over the past decade that are essential to the notion of the cloud.  The key technology is virtualization. In addition to some amazing cost savings and goodness for the environment, virtualization's ability to separate the OS and application from the hardware give it ideal properties to best deliver these on-demand cloud services. Charles King, Principal Analyst at Pund-IT put it succinctly: "Without virtualization there is no cloud- that's what enabled the emergence of this new, sustainable industry."

Challenges of the cloud
Today, new and established vendors are vying to deliver cloud services.  The challenge for users becomes choosing the right offering.  Many of the offerings are really designed to encourage development on the vendor's proprietary platform, limiting switching abilities and propagating the offering through applications built for the external cloud only.  This is appealing to the development community as it enables quick access to infrastructure and development platforms on which to create a cloud application.  But this can become a nightmare for IT when the application has to come back into the enterprise for production-level support, as well as dealing with SOX and IP risks. The viability of this solution is potentially the unearthing of a more significant problem, the inability of IT to deliver infrastructure on demand to meet the dynamic needs of these groups.  However in many cases, unless you're building an application from scratch, most businesses don't have the time or resources to rewrite their production applications to work in the cloud on a proprietary platform.

Users should choose a cloud strategy that enables the fastest development time for new applications, with the broadest support for various OSs and development environments, as well as the ability to support production-level applications on- and off-premise as needed.

The other challenge is mobility and choice in location for running applications, internally in a private cloud or externally in a public cloud.  Another approach we see in the market is the "superstore phenomenon." Organizations such as Amazon, Microsoft and Google all plan to battle it out over whose superstore datacenter will be the place your developers will build and house their cloud applications. It is true that these are all stable brands and their infrastructure will likely be a safe place to run your applications; however, in the event of outages, downtime and the inability to access your applications, what options will you have? Additionally, how will you manage these instances, where they live long term and what risks will be imposed by keeping them off site?  Users should be able to move their applications at will from one cloud to another, whether internally or externally.

Obviously, the encapsulation offered in virtualization and the mobility found in technology like VMware VMotion - which enables a live virtual machine to be moved with no downtime for the application - increase a user's ability to move virtual machines as needed. VMware's approach to the cloud is not about vendor lock-in , but is about enabling its ecosystem of partners to build and deliver services on a common platform, allowing users to simplify the federation of clouds, on or off premise as needed, to a broad base of service providers.

Lastly, you'll want to look at innovation and stability in providing the technology to leverage your virtualization investments into internal or external cloud options. If your production environments are running on VMware and you chose that platform due to the robust innovation cycles, reliability and technology advancements offered today, you want nothing less in a cloud services provider off-premise.  Say you want to establish a relationship with a service provider to offer some flex capacity at the end of the quarter for financial reporting activities.  You'll still want the reliability of your production system, control of that environment and the ability to move your VMs when and where you want. Also, as you build your internal clouds, look for vendors that are building for the future and whatever new technologies and application infrastructures might come along, visionary vendors that are future-proofed for new trends and have proven that they can deliver technology innovation in a timely manner.

Why does virtualization matter when building or selecting cloud services/vendors?
Clearly, there's a new trend emerging with lots of options, but also many challenges that could cost big money to reverse. How does virtualization address these challenges and allow a seamless transition to a cloud strategy, either on- or off-premise?

As mentioned above the key requirements you should demand from your cloud providers are: broad application support without lock-in, ease in mobility of environments, broad choice of locations (internal or external), and innovation that drives simplified federation of on- and off-premise clouds.  Additionally, as an enterprise you'll want to look for innovation in building the internal (private) cloud to evolve your ability to offer dynamic services.

As noted, virtualization is the key. Most companies' first step on the virtualization path is to consolidate their servers, using virtualization to run multiple applications on each server instead of just one, increasing the utilization rate of (and getting more value from) every server and, thus, dramatically reducing the number of servers they need to buy, rack, power, cool, and manage.

Having consolidated servers, you realize that not only have you substantially cut the capital and operating costs of your server environments, but as a result the entire datacenter has become far more flexible. Along the way, you may have started to think about and to use IT resources - including servers, storage, networks, desktops, and applications - not as isolated silos that must be managed individually but as pools of resources that can be managed in the aggregate.

This means that you can now move resources around at will across the network, from server to server, datacenter to datacenter, and even out into the cloud, to balance loads and use compute capacity more efficiently across the entire global IT environment.

In other words, users are able to look at the compute power as a centralized resource that they can now allocate to business units on demand, while still maintaining control and operational excellence. Leveraging virtualization to better serve users gives your organization the obvious lower TCO, but also allows for accountability of usage, simplifies and meets the needs of on-demand infrastructure requests, and allows for your ability to serve, control and manage SLAs.

Hence, virtualization has played and will continue to play a huge role in cloud computing. It is the technology that has allowed service providers to deliver lower-cost hosting environments to businesses of all sizes today. Just as virtualization enabled you to consolidate your servers and do more with less hardware, it also lets you support more users per piece of hardware, and deliver applications - and the servers on which they run - faster to those users.

As the leader in virtualization, VMware recently launched its vCloud initiative.  With its proven, reliable platform deployed in over 120,000 customer environments today, VMware is committed to working with enterprises who want to build internal clouds with the ability to federate to external providers to meet the changing needs of thier business.  VMware's virtual datacenter operating system, enables internal clouds with features such as self-service provisioning, chargeback, and many other advanced automation and management features.

In addition, VMware is leveraging its huge ecosystem to bring new cloud offerings, such as security for clouds, to market.  The virtualization market leader's approach leverages the infrastructure and expertise of hundreds of partners worldwide, including brand names such as Verizon, Hosting.com, SunGard, Terremark and Savvis to deliver the VMware platform and cloud services.  This, in combination with the technology for internal clouds, lets enterprises run their applications where they want, when they want.

With the largest choice of location and interoperability of platforms, the broadest application and OS support, and leading virtualization and cloud technologies, VMware and its cloud strategy offer users a safe, reliable, and robust on-ramp to the cloud, whether on or off premise.

So, if you're a VMware user, you're in good hands and you've already taken steps toward the cloud simply by virtualizing your servers on a proven platform that offers rich management and automation features. You will see VMware continue to lead the market in delivering cloud innovation for both on- and off-premise clouds.

If you're not a VMware user but want reliable infrastructure on demand, many service providers offer VMware Infrastructure 3 with pay-per-use models.  For more information about VMware vCloud or to find a partner that can help you realize the benefits of the cloud, visit: www.vmware.com/vcloud.