Cloud computing, once an object of skepticism, even taunts, is taking center stage at a handful of companies.

There's InterContinental Hotels Group, which is building a private cloud environment to move its core CRM systems off mainframes and onto industry-standard equipment. It's using public cloud infrastructure for application development and testing, and also to host Web content closer to customers worldwide. And it's evaluating moving key proprietary systems such as room reservation software into the cloud

RehabCare Group, a 28-year-old provider of therapeutic services, is using hosted software and an unlikely device--the Apple iPod Touch--to make its field workforce of 11,000 physical therapists more effective.

Then there are startups such as ServiceMax and NVoicePay that might not exist if not for cloud infrastructure, on which they've built their businesses' growth plans.

Why are they moving to the cloud? Rarely because it's considered cheaper. In some cases, the cloud represents a faster, more flexible way to get a new system up and running. Oftentimes, it's the ease of integration afforded by the cloud servers, using standard Web service practices, that lets a company launch a new mobile application faster or run a business process that cuts across many partners more efficiently.

These companies understand the cloud's shortcomings, whether it's Amazon's weak service-level agreements, Microsoft's less-than-complete Azure service, or their own companies' inexperience with managing cloud resources. Nevertheless, as a group, they show the real-world potential of cloud computing.

InterContinental: Cloud True Believers

InterContinental Hotels Group, with more than 600,000 hotel rooms under seven brands, including Holiday Inn and InterContinental, laid the foundation in 2010 for greater use of software as a service, infrastructure as a service, and, ultimately, hybrid cloud computing that blends an in-house cloud data center with public cloud services from providers such as Amazon. "We are massive believers in the cloud, all versions of it," says Bryson Koehler, senior VP of revenue and guest information.

IHG uses Salesforce.com CRM. It conducts much of its software development and testing on Amazon Web Services' Elastic Compute Cloud infrastructure, letting developers access pay-as-you-go servers in minutes. It's in the process of moving its core room reservation system off a mainframe by rewriting it as a distributed Java system. That move will give it the option of running the system on third-party cloud infrastructure that's physically closer to travelers around the world, making the Web site more responsive. (IHG is the largest Western supplier of hotel rooms in China.) And it's developing a private cloud in its own data center. That will let it run on industry-standard hardware, which means, among other advantages, IHG won't have to hunt for increasingly scarce mainframe talent.

It runs branded Web sites such as HolidayInn.com from two vendors' data centers--Verizon's in Washington, D.C., and Savvis' in Santa Clara, Calif. The two highly virtualized data centers also run InterContinental's call center. InterContinental's on-premises systems still run the room reservation systems that feed information to the large aggregate travel sites, such as Travelocity and Expedia. The room look-up systems running at Savvis and Verizon are "a hot/hot environment for each other," Koehler says, so they're production servers capable of also acting as failover and disaster recovery sites for each other. The company speeds responses to inquiries by distributing the room lookup systems to Web sites in data centers 3,000 miles apart, so content can come from the facility closer to the customer. IHG wants to extend this mode of operation, using cloud providers rather than building new data centers worldwide.

IHG considers these highly virtualized Savvis and Verizon data centers cloud resources, but there's a key distinction--in reliability and guarantees--from standard pay-as-you-go resources such as Amazon's. IHG has tested Amazon EC2's Singapore data center, to see if it's faster to serve Chinese customers from there. (Koehler declined to disclose the result.)

While IHG conducts much of its software testing and development in the Amazon cloud, it wouldn't yet be comfortable moving something like the reservation system, which generates 50 million to 60 million transactions a month, into EC2. An outage that led to an hour of downtime would bring revenue losses in the millions of dollars, but Amazon's SLA offers only credit toward more hours of computing on EC2, not penalties tied to lost business. "We view infrastructure as a service as a best-effort business model," says Koehler. "For the dot-com startup, it's fine. But for a company like ours, we need to know a heck of a lot more about how it's being operated."

Nevertheless, IHG expects the cloud to keep improving, and it's building its next-generation data center capacity in a way that'll make it possible to connect to Amazon or a similar public cloud for additional capacity.

IHG is building a private cloud it calls Camelot, using an Hewlett-Packard BladeSystem Chassis and VMware virtual machines and management tools. IHG's loyalty program, its analysis of current guest activity information and historical records, and its system for pushing out promotions suited to individual guests run on Camelot. Also slated for Camelot is IHG's core revenue management and room yield system that determines room rates.

All of those systems involve highly proprietary information that IHG isn't willing to risk in the public cloud at this stage. But Koehler says he can see executing PCI-compliant credit and debit card transactions one day soon in the public cloud. (Amazon recently said EC2 is capable of PCI-compliant transactions.) And all the private cloud workloads are designed so that they could be shipped over to Amazon's infrastructure as a service.

IHG's private cloud is built with Eucalyptus Systems software as well as VMware. Eucalyptus supplies open source APIs compatible with EC2, so an internal call for a VM server or cloud storage won't need to be changed if IHG deploys the same application in Amazon--or if it mixes private cloud and external clouds. "We are educating ourselves to become experts in this space," Koehler says.

Although IHG is using at least three cloud delivery methods--SaaS, infrastructure as a service, and a private cloud--Koehler's well aware of the shortcomings of each.

While it's satisfied with Salesforce's cloud-based CRM, Koehler expressed skepticism that Salesforce could be more than a specialized application provider. From his point of view, the company's Force.com platform makes some sense for developers, but he's not convinced it will work "for large, ongoing loads on the platform. The ROI doesn't pencil for me," he says.

In terms of online infrastructure, so far the cloud isn't a big cost saver, though Koehler thinks the economies of scale will make it cheaper over the long haul. Today, the savings come in other ways, he says, such as improved flexibility and the ability to deliver a more tailored experience to end users. And there are his doubts about public cloud SLAs.

IHG's own private cloud needs work as well, to become more responsive. The development teams have been happy with it, Koehler says, but "the big challenge has been providing the right management user interface to it so developers can feel they get the same speed as [directly using] EC2." EC2 can give developers access to a VM in minutes; internally, there are hoops to jump through that make it take much longer. "With us, there's the matter of cross-charging: Who do I bill this usage to? What approvals do I need so the financial reconciliation is right?" Koehler says. "We still have a lot of issues related to paperwork to fix."

RehabCare: Going Mobile

RehabCare Group, founded in 1982, has grown to be the third largest supplier of acute care rehabilitation services in the U.S. Its staff includes 11,000 physical, occupational, and workplace therapists providing services to patients in 1,270 care facilities in 42 states.

With such a distributed workforce, it struggled to provide a reliable system for capturing the details of treatments--such as the therapies used and the time they took--to supply the necessary reports and claims to health care insurers. The evolution of end-user devices alongside cloud-based software turned RehabCare's traditional business into one where IT's now at the heart of its services. It started out in 2000 trying to run an individual therapist's simple time and treatment app on a Palm Pilot, with data uploaded via PCs in local hospitals to central servers. The upload step was cumbersome, and lines of therapists would often form around the PCs at the end of the day.

It's now running its own custom-built software on the iPod Touch, which it delivers through Apple's App Store. It syncs data using servers and software provided by a third-party vendor, Casamba, with which it co-developed the software.

RehabCare CIO Dick Escue remembers when he first pushed the idea of bringing Apple devices into the company, and how that thinking helped forged an alliance with CEO John Short. "It turned our CEO into a mad man," Escue recalls, laughing. "He said, 'Now we can put a computer into the hands of every employee. This is how we create stickiness to the therapist so he never, never leaves you.'"

Over the past four years, RehabCare has equipped each of 7,000 therapists with a $300 iPod Touch, to run an application called Point of Care that captures the time spent on a treatment, which it periodically uploads to servers run by Casamba. A therapist pushes the application's start button as a patient session begins and a stop button at the end; the time and rate of billing is captured in a standard report for loading into any claims that are prepared. The app also captures details of the therapy, such as medicines and equipment used, along with related billings.

Beyond the 7,000 iPod Touch users, 800 therapists use the same Point of Care software on the iPhone, since they're more mobile and need cellular connections; and another 140 therapists use the iPad, because they need the larger screen to read documents or take notes.

Capturing billing details on a standard claims form is a time and money saver. Modules in the application now handle patient scheduling and capture a therapist's notes written during a treatment. This approach has eliminated the daily crunch where multiple therapists tried to finish their workday by filling out reports on their facilities' limited number of PCs. Escue also sees "anecdotal evidence" of another gain: fewer rejected claims, because the application consistently captures treatment data as care is being administered.

RehabCare also gives therapists Google's cloud-based e-mail and productivity suite, Google Apps, for which it pays $50 a year per user, instead of buying Microsoft Office. The Apple devices were easy enough to use that the transition from Palms went quickly. Far from shunning the consumer aspects of the iPod Touch and iPhone, "we encouraged them to put their personal stuff on the device," Escue says. "We believe they'll take better care of the device if they do."

As RehabCare looks to expand its mobile software, cloud-based development platforms are at the center--in particular, Salesforce's Force.com platform. RehabCare is working on a pre-admission screening application that should require less paperwork to add a new patient. The application will have an iTouch/iPhone front end written in Objective C capable of running on the Apple devices, and a Force.com back end to manage data capture and manipulation. Recognizing Apple's growing importance in business IT, Salesforce added a software development kit last summer that lets applications be developed in Objective C, using an object wrapper to issue SOAP calls to Force.com. Bottom line: Applications that run on Apple's iOS can be hosted by Force.com. RehabCare thinks it will be able to let therapists use other smartphones eventually as well.

RehabCare's also planning to use Force.com for a new Apple device application to let therapists collect information on how a patient was referred. Referrals are the most important feeder to all the other services that RehabCare provides, and Escue wants to know why some healthcare providers are consistent referrers and others are intermittent or nonreferrers.

Relying on a cloud provider can have its setbacks, Escue admits, whether the servers are in a Casamba, Salesforce, or even Apple data center. Recently, an update to iOS disabled the clock that RehabCare's software used to record treatment times. "We'd tell people, don't take that update yet," Escue says. "Some download it anyway." Likewise, RehabCare may want to add functionality to its custom client app that Casamba isn't ready to support in its server-side software.

Cloud-based software as a service promised to remove complexity, letting the SaaS provider take care of all the maintenance. But the software many companies, like RehabCare, want to use is too specialized to be delivered as one-size-fits-all SaaS. RehabCare shows how companies are blending the model, using pure SaaS such as Google Apps where it fits, but also using cloud-based platforms like Force.com for custom development. This approach adds some complexity for the IT organization, Escue says, as software changes now involve more external parties and more coordination.

Yet when Escue thinks back on the decision to give every therapist an iPod Touch, with cloud-connected software fine-tuned to their jobs, he sees it as the beginning of a fundamental change at RehabCare--where IT, instead of continuing as a supplier of traditional data center services, became an agent "to grow the business," he says.

Startups: ServiceMax And NVoicePay

Unlike established companies such as InterContinental and RehabCare that add cloud computing onto their businesses, startups are built on it. Startups ServiceMax (on Force.com) and NVoicePay (on Microsoft Azure) rely on the cloud as their primary architecture, while running as little of their own data center infrastructure as possible.

NVoicePay wants to help small businesses automate invoice payment, something that's still a paper check process at many small companies. It looks a bit like an individual's online bill payment from a bank, though with links to the accounts receivable system in QuickBooks and Great Plains accounting software, and integration with other software for tracking which vendors accept electronic payment.

When an NVoicePay customer pays a vendor, the actual transaction, by credit card or direct funds transfer, is executed in a small data center run by NVoicePay. Those in-house servers store customer information and execute the actual transaction between businesses. NVoicePay says that approach keeps transactions PCI-compliant, because it never puts customer identity and other sensitive information into a cloud infrastructure. But it relies on the Microsoft SQL Azure cloud platform for the rest of its computing horsepower, such as notifying parties of payments and updating their customers' accounting systems. NVoicePay uses the Azure cloud as an accounting hub that handles only an encoded version of the customer's identity, so even if the information were to be intercepted, the customer couldn't be identified. It also uses Azure to do accounting updates through the synchronized database services that Azure's AppFabric service bus supports.

To get started, NVoicePay is targeting auto dealerships. NVoicePay is certified to work with the ADP dealership management software, which is used by 25,000 dealers. The NVoicePay system eliminates the need for a costly integration of a local accounting system with an electronic payments system, an expense that most small and midsize businesses have avoided, sticking to their checkbooks.

CTO Shaun McAravey predicts NVoicePay will be handling $250 million in annual invoice payments by the end of this year. To grow, NVoicePay needs to develop payment apps tuned to more industries. Using cloud infrastructure lets McAravey and his team focus on development rather than infrastructure. "I don't want to manage servers," he says. "I want to build a whole class of payment applications [for different vertical markets] and push them out into the cloud."

That approach has its limits, given the immaturity of cloud platforms. McAravey says he's administering NVoicePay's virtual machines in the cloud as if they were a part of the company's own data center, but the database services in the cloud still lack some of the reporting capabilities that he has on premises. Also, he thinks NVoicePay must, for compliance reasons, keep sensitive client information on the company's own servers. Still, he doesn't worry about the reliability or availability of the virtual cloud servers NVoicePay does use, relying on that cloud infrastructure for uptime and low capital costs. "We're an always-on hub for payments," McAravey says.

The future of ServiceMax, a startup that provides SaaS for managing field technicians, faces a different challenge. Its survival could hinge on how well it adapts to new devices, particularly tablet computers. CEO David Yarnold sees tablets as ideal for its customers--technicians who work on anything from a hospital's ultrasound device to a supermarket's refrigeration systems.

The venture-backed company's SaaS manages tasks such as scheduling appointments, documenting work orders, building the parts lists needed for a job, and recording time spent on a visit. Its first iteration runs on Force.com (and integrates with Salesforce CRM) and is geared for laptops and smartphones, mostly the BlackBerry.

But laptops are bulky and slow to boot up, while smartphone screens are too small for documents. With the iPad, Yarnold sees field staff instantly booting up to get easy-to-read documentation with detailed steps on a repair, perhaps even with video illustrating it.

An iPad app is a front end that lets a user access ServiceMax's cloud-based functionality. ServiceMax customers are just beginning to consider tablets; the company cites a food processing company and security systems provider as two early adopters. The iPad offers a controlled mechanism to distribute and update software through the Apple App Store, but emerging tablet computers are likely to run Android or some other operating system. That means ServiceMax IT may need to offer its own remote distribution and management mechanisms if the company's users adopt such devices. If Android keeps surging in popularity, Salesforce may add support for it to Force.com.

Field service is a profession waiting for better mobile support, and the iPad, while not designed as a field service tool, shows promise (though durability could prove a problem). For ServiceMax, Yarnold's betting that tablets will bring wider acceptance of his firm's services. "We're excited by how quickly it's moving to the business audience," he says.

Today's early cloud adopters are finding an always-on utility that lets them concentrate on core business development, while the cloud's scale-out capabilities let them reach more customers over the Web. Having established a host in the cloud, companies are sometimes finding it easier to integrate partners into that cloud rather than their own on-premises systems.

At the same time, major problems remain unresolved. How do you coordinate database services that are on premises and in the cloud? Nearly all cloud users find they still need on-premises systems, particularly for sensitive information. Also, given the rapid evolution of consumer devices, how do you know which one, and which operating system, to adopt as part of your long-term platform? The cloud hasn't made us device agnostic, and making the wrong choice could prove expensive.

Will the cloud really be a secure computing environment, as Amazon and others predict? The trust boundary between a customer and the cloud supplier is certainly in motion, but where, exactly, has it landed? This year will bring PCI-compliant credit card transactions to the cloud, providing a symbol, at least, of the cloud's improved security. Yet providers such as Amazon, Microsoft, and Salesforce still haven't satisfied would-be enterprise customers when it comes to running bet-the-business production systems and data in the cloud.

Cloud computing is being driven on many fronts simultaneously. There's the power of the hosts in the Internet data center, and the power of the device in the end user's hands, which is begging to be filled with online content. Creative businesses will find ways to harness that power for competitive advantage. IT leaders may offer the cloud their benign neglect, if they choose, but they'll wake up one day to a changed world.