Benefits

Capital expenditures

Hardware and software costs can be very costly, especially if you have a smaller company. Cloud computing allows entry into just about any type of software at a very low cost, very often at a per user rate.

Scaling/Flexibility/Elasticity

The architecture inherent in cloud platforms like EC2 brings the ability to add and remove virtual machines and other resources as needed.
Example:
A small company offers a solution that lets customers stress test their web-based software (browsermob.com). A customer can specify 2500 browsers with automated test scrips to access their own web page at the same time, and the cost for that is a mere $500. This kind of testing was only available to very large companies like Microsoft just a few years ago.

Accessibility

Anywhere you have access to the web, you have access to the cloud. As time goes on, accessibility gets both more common, faster, and maybe even cheaper.

Data/File sharing

This can be a culture changer. Through the use of Wikis, websites, web-based software like Google Docs, and many other means, people across the planet can share documents and other data. I believe we're only scratching the surface of this. We're are the 1985 Wordstar version of data and document sharing.



Risks

Security

Since you can access the cloud from anywhere on the Internet, anyone else on the Internet can possibly access the same thing. Strong passwords, security-aware programming, and smart firewalls can greatly mitigate the risk, but a small risk remains.

Downtime

SAAS vendors are starting to address this through very strong contracts and service level agreements. In addition, communications companies that provide the wired and wireless based access to the Internet, as well as the backbone, have improved and are continuing to improve Internet quality.

Loss of control

A lot of IT shops struggle with this issue. They have learned the hard way that hardware and software upgrades, and new software installations can wreak havoc with systems, and can have a very hard time with relinquishing that control.

Communication between applications

This item is still in its infancy in Web-base applications. Most data-intensive systems have import and export features, but haven't been build to accommodate communicating to another application from somewhere else. The need for this feature is quite high, though, and is a priority of many SAAS vendors.

Immaturity of products

In some ways, the concept of cloud computing is decades old. But in its current evolution, it is only a few years old. Software development methodologies and tools are lagging behind, and operating systems and virtualization have just reached the point of commoditization. I don't feel this is bleeding edge, but it's certainly leading edge, with corresponding risks and rewards.

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