Cloud 2010: Hype Or Value?

While an overabundance of breathless hype about cloud computing is certainly fouling the air these days, we're also seeing some very legitimate reasons to believe that a thoughtful cloud-computing strategy can offer great business value for CIOs in 2010. Here are five predictions from a venture capitalist on why this could well be the breakout year for the cloud.These five predictions come from VC Jeremy Liew, a managing director at Lightspeed Ventures who earlier in his career had been SVP of corporate development at AOL. He shared these ideas this morning in a SeekingAlpha.com article, and here's a quick overview-but to gain Liew's full perspective on this vital topic, be sure to read his full piece.

1) Enterprises move beyond experimentation with the cloud. Liew predicts that CIOs and IT managers will use "production cloud stacks" to "test the benefits of creating and managing internal, elastic virtual datacenters" built on commodity hardware.

2) Management software to deal with scaled cloud environments moves to the forefront. "Virtual datacenters" will become the new enterprise compute platform, Liew says, but a critical factor will be robust management software: "Without new management tools, enterprises will fall short in their ability to achieve true 'cloud economics' in their cloud environments."

3) Enterprise policy for dealing with public clouds starts to emerge. "CIOs and CFOs will start to craft their enterprises' public cloud policies and centralize purchasing and procurement," Liew says, but large enterprises will move very cautiously with public clouds due to security and compliance concerns.

4) Public clouds: It's not just about Amazon. While Amazon has clearly been the trailblazer in this space, the emergence of many, many competitors of various shapes and sizes will give CIOs multiple alternatives (and headaches?). "EC2 becomes the commodity service offering as higher-end providers seek to differentiate their cloud offerings with SLA-based premium services and better management capabilities," Lew predicts.

5) VMware has to rethink its business model. VMware will need to rethink its pricing and licensing models as many dozens of cloud vendors begin to offer CIOs new capabilities and value: "Value continues to move up the stack into integrated management features and scale-out application support," he predicts.

Through all the hype, we're beginning to see some tough questions being raised about how CIOs can transform the talk and potential of cloud computing into tangible business value-and Liew's list, while not intended to be a thorough treatise, underscores some of the key issues:

--Is the current slate of management software good enough?

--Is it reasonable to think that large enterprises will ever play in the public cloud?

--Where does virtualization and its business model end and the cloud begin? How will you manage those borders?

--How much credibility can you give to small but promising new vendors who appear to have breakthrough ideas but lack extensive lists of reference accounts?

Seems like the best approach for creating your 2010 cloud strategy is to stay aggressive, stay skeptical, and stay focused on the business outcomes versus the whiz-bang technology.

Disclosure: Liew says Lightspeed has invested "across multiple enterprise infrastructure areas including database virtualization (Delphix), datacenter and cloud infrastructure (AppDynamics, Mulesoft, Optier) and storage virtualization (Fusion I/O, Pliant, Nimble)."

For more on CIO perspectives on cloud computing at this critical juncture, please check out these columns:

Global CIO: The Top 10 CIO Issues For 2010

Global CIO: Riverbed Sees Cloud Computing Boom In 2010