The grand vision of cloud computing, which promises an end to the stress and cost of supporting internal applications, took a dent in February. The leading proponent of cloud computing, and standard-bearer for the post-dot.com internet, suffered an embarrassing outage.
Google's web mail servers dropped the ball for about three hours and users could not access Google Docs - the rival to Microsoft Office which stores and processes personal productivity applications in the cloud - a virtualised internet-connected server environment.
"Cloud computing may be great in principle," said Observer columnist John Naughton. "But it might not be wise to bet the ranch on it."
But would the problem destroy the argument in favour of the cloud computing model? After all, internal e-mail servers have their glitches, and desk-based PCs do crash.
For Andrew Shebbeare, partner and co-founder of digital marketing firm Essence, cloud computing is still attractive.
Essence uses Google's online mail service Gmail and its online document creation and sharing system, Google Docs.
"We used to run Small Business Server from Microsoft," Shebbeare says. "It was expensive to support and not all that reliable. We had only one server and needed to upgrade it to run Enterprise Outlook, which would have cost £10,000."
The enterprise system from Google costs just £700 a year, he says. Although Gmail is now the company's main e-mail system, Google Docs has not replaced Microsoft Office. Rather, it provides inexpensive online collaboration, he says.
In the end, the return on investment, compared to buying and servicing an in-house e-mail server, was "compelling", Shebbeare says.
Clive Longbottom, service director at analyst company Quocerca, says small and medium sized enterprises (SMEs) will be able to save time and money by investing in cloud computing for certain applications. "SMEs do not have a datacentre, they have a computer room. When the realise they cannot cope with the workload, what are they going to do?
"By outsourcing, you can say to the cloud provider: we do not know what the workload will be, we plan for our main ongoing needs, but if it goes above that you provide extra resources [at a cost]. If we do that regularly we renegotiate the main deal."
This means businesses can increase costs incrementally, alongside demand for a service, instead of making a large investment once demand goes above a certain threshold.
Microsoft's cloud offerings
Although it dominates the desktop application market, Microsoft also sees strong benefits in cloud computing. It already offers its ubiquitous Microsoft Office applications as a service, hosted in the cloud, in a similar way to Google Docs.
Microsoft is also offering its suite of Microsoft Dynamics business applications, including customer relationship management (CRM) and enterprise resource planning style packages, to small businesses via the cloud. In a partnership with the Institute of Directors (IoD) in the UK, it is offering a hosted version of its Dynamics CRM package for £35 a month for IoD members.
Robert Epstein, head of SMB sales and marketing at Microsoft in the UK, says a community of service partners will develop in cloud computing, in a similar way to the company's distributor network. "Businesses may want help integrating cloud applications with their Active Directory, for single sign-on, for example; our partners can help in this."
Salesforce.com, which hosts CRM applications in the cloud, also sees an ecosystem of providers growing around cloud computing. However, it will still host the main CRM application and publish services to other providers, which in turn offer the application front-end to users.
For salesforce.com, users and third-parties must be able to know who they can trust for the cloud computing model to grow, says Robin Daniels, senior manager of product marketing at Salesforce.com.
This is the reason the application provider dedicates a website to live server availability statistics and historic performance data. "Trust has got to be integral to cloud computing. This is why we have decided to open the kimono. I do not know of another company doing that. When you put trust in someone's data services you need to know what their reliability is," Daniels says.
Despite all the enthusiasm for cloud computing, businesses should still be cautious, according to Jon Collins, managing director of analyst firm Freeform Dynamics. "You do not do something just because everybody is talking about it," he says.
SMEs in the cloud
Research from Freeform Dynamics shows that despite the hype few small businesses are investing in cloud computing. Cloud computing could offer the best way to support complex applications that become periodically hungry for resources, such as in scientific computing or business intelligence programmes. In these cases, server resources bought by the mips can save a lot of capital investment in hardware.
Chris Lindsay, general manager for business applications at BT, says smaller firms that have no experience of business applications would benefit most from cloud computing. "Most SMEs have the CRM on spreadsheets. Getting a business application is too big and too scary," he says.
He says hosting companies offering "try before you buy" deals can help SMEs understand the benefits of these applications running their business data with relatively low risk.