If virtualization was last year's hottest water-cooler topic, cloud computing has to be this year's. Vendors are scrambling to adapt their business models and "cloud enable" offerings to take advantage of an increasing willingness by all sizes of IT shops to use hosted services, including for storage. In fact, in a recent InformationWeek cloud computing poll, storage--including archiving and disaster recovery--was cited as the service category most likely to be outsourced to the cloud, ahead even of business applications.

But not all cloud storage offerings are created equal in terms of enterprise-class capabilities. One distinction is between private and public storage clouds.

"People think about cloud storage as Amazon S3, but whether you rent or buy, a cloud is a cloud," says Sajai Krishnan, CEO of cloud storage platform provider ParaScale. Krishnan suggests thinking in terms of private and public, with private cloud storage defined as using commodity hardware whose capacity you can expand on the fly. In contrast, public cloud storage can be thought of as a file system whose back end sits on the public Internet. (Find out more about two startups covering both sides of this model; see story, "Upstart Cloud Providers Challenge Status Quo".)

There may be little distinction from the perspective of an end user between public and private, but for IT there's a world of difference in terms of startup and ongoing costs, management, bandwidth use, and control.

There's also skepticism centered on the "private cloud" concept. Clearly, vendors are seizing on a hot terminology, but we see opportunity because commodity servers retired by virtualization efforts can be recycled as a clustered network-attached storage system, with the only startup cost being a software licensing fee.

So without further ado, let's jump into the top five ways enterprise IT can take advantage of cloud storage--and three ways you could get burned.

>> Opportunity No. 1: The second "D" in D2D2T. Several factors are contributing to the explosive growth of storage systems that use inexpensive ATA drives, sometimes referred to as Tier 2 storage. Top among them: the mandate to avoid backing up large amounts of data from production systems directly to tape. The standard strategy for tackling that problem is adding a middle storage tier--a disk-to-disk-to-tape, or D2D2T, setup. By replicating production data to the Tier 2 volume and performing backups against that storage pool, you remove the impact of backing up to tape on your servers and the network.

That efficiency doesn't come cheap, however--you could be looking at tens or even hundreds of thousands of dollars for hardware and software from a big-name vendor like EMC or Brocade.

Security vendor Blue Coat Systems was looking for inexpensive Tier 2 storage and decided to get creative by using the direct-attached storage available in commodity server hardware as a replacement for an expensive NAS setup. By combining ParaScale Cloud Storage software with Veritas NetBackup, the company built a private cloud and saved big--Blue Coat estimates a NAS system from a top-tier vendor capable of servicing its initial 4-TB need would have cost $20,000 to $25,000. In contrast, it spent just $4,500 to acquire commodity servers with similar storage capabilities. Factor in ParaScale's approximate software licensing cost of $1,000 per terabyte, and Blue Coat saw total capital savings of around $14,500. As storage grows, these savings will multiply. The licensing fee is a one-time outlay, and annual support costs are a bargain compared with what EMC charges for maintenance.