Cloud Computing - Big Threat for Microsoft

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The information technology world loves creating terminology making concepts that are already difficult to understand even harder because you basically need to learn another language. The latest craze is about cloud computing and there is no clear definition of what it is. 

It depends on who you talk to - everyone seems to have their own definition.  Some analysts believe cloud computing is any computing that is done over the Internet.  If that definition holds true, hosted applications such as Sales Force, Google Apps, or Hosted Exchange are included in the cloud computing realm.  But don't these applications already have a classification - Software as a Service (aka SaaS) or on-demand software.  Why do we need to spend so much time and energy further classifying concepts? 

There is also another definition for cloud computing that makes a lot more sense to me.  Cloud computing is a platform or a set of development tools for programmers.  Programmers use these tools to build applications that their customers or end users, if it is a company specific application, need to use the Internet to access it.  Amazon offers a development platform with its S3 and Elastic Compute Cloud (Amazon EC2) and Google is set to do launch its cloud computing platform, Google App Engine later this year. 

Even though cloud computing, as I have defined it, is in its infancy, many companies are taking advantage this development platform because of its huge cost savings.  Currently, most of the apps currently leveraging this technology are not mission critical applications which shouldn't surprise anyone.  However, as this technology matures, businesses will make the leap because it's a fraction of the cost of housing applications on internal servers. 

It will be interesting to see which companies win the cloud computing battle. I've got to believe Microsoft is working around the clock to figure out how it is going to defend its turf.  As we all know, Microsoft makes a tremendous amount of money ($1 billion in profit per month) selling its operating system as well as its office suite through OEMs.  In the past, they've been able to defend their turf because they've owned the distribution channel - anytime you buy a PC or server; it's preloaded with Microsoft's OS and in many cases Microsoft's office suite.  

When cloud computing matures, Microsoft's current distribution channel will be of little use because businesses will use the Internet to access applications.  Google and Amazon are not building their cloud computing platform on Microsoft's OS, they are using open source which has a price point Microsoft can't compete with - free.  Microsoft is an amazing company and they've been able to not only protect their revenue, but grow in a very competitive industry.  It will be interesting to see how they weather the cloud computing storm.

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