Cloud Computing: CNBC Explains

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Cloud computing may be the most innovative technology development in decades—or regarded as just a mass marketing tool for know-how that's as old as computers themselves.

The issue may never be settled, but there are some areas of agreement—mainly, how it works and who uses it.

What Is Cloud Computing?

The official definition from the National Institute of Standards and Technology reads: "Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction."

Translation? Accessing the Internet anywhere, anytime and being able to use any or all of the data and applications that you want.

So when the technical jargon is stripped away, cloud computing can be grasped on its basic leve—anytime, anywhere computing on your Mac or PC—without the user's ever having to know much about the technology.

Who Provides Cloud Computing Services?

Dozens of firms are providing "clouds" in the U.S. and other countries. They generally fall into three categories of service: software, storage and computing power, or platform providers that give site developers tools to build and host applications. Some do all three. Big or small, all see this as a natural way to make money in a competitive field.

Some names might be surprising, as they may be better known as content providers or consumer sites. Here are just a few of the major players:

Dropbox: A file-hosting service offering storage, file synchronization and client software, the company started in 2007. It allows users to create a special folder on each of their computers, which the company then synchronizes so that it appears to be the same folder (with the same contents) regardless of which computer is used to view it. Files placed in this folder also are accessible through a website and mobile phone applications.

Amazon: Considered one of the innovators in cloud computing since it began offering services in 2006, Amazon has thousands of small business and individual users, as well as customers such as The New York Times and Eli Lilly.

Google: In what might have been a strike again Microsoft, the Internet search giant launched Google Apps in 2007. Customers include small businesses and colleges such as Northwestern University.

Microsoft: The tech giant has made its Windows operating system available with cloud computing through the Azure program. Microsoft also offers various business services. Customers using the program include Epicor and Micro Focus.

NetSuite: Founded by Oracle CEO Larry Ellison, NetSuite offers Web-based applications for small businesses that include Wolfgang Puck Coffee. Started in 1999, Salesforce is considered a pioneer in cloud computing, with its software as a service product. Customers include financial services, media and health firms as well as retail companies.

GoGrid: The Canadian-based firm is privately held and said to be one of Amazon's chief competitors in cloud storage. Customers are mostly start-ups, though it has a few bigger clients, including Novell.

How Does It Work?

In simplest terms, cloud computing involves delivering hosted services over the Internet. The service end is where the data or software is stored, and the user end is a single person or company network.

"Cloud computing minimizes the hardware, like memory, and application requirements, like word processing, for the users and pools those resources in the cloud," said Danny McPherson, Verisign's chief security officer.

So: a company in the business of hosting has specified data stored on its servers; users fire up a computer, connect to the Web (and to the servers holding their data), click on their application software and away they go.

"The economics are compelling, and as Internet speeds increase, cloud services will continue to grow." -Juniper Networks, Mike Marcellin

What is somewhat mind-numbing are the kinds of storage system services used in cloud computing. There are three basic "alphabet soup" levels of storage capabilities, but there's no real need to go into those here. All three can be offered by the same provider—for a price.

And there are so-called public, private or hybrid clouds. Public means the data are accessible to anyone, private means subject to a company's firewall or security system, and hybrid combines both public and private.

But it's safe to say that most users are more content knowing their data are stored somewhere other than their computer and that they can access it whenever and wherever they go online.

Firms that use cloud computing do so because it cuts costs and often upgrades their technology infrastructure at the same time.

Who Uses Cloud Computing?

Cloud computing has certainly gone mainstream. If you use email, post photos on a social network, make an airline reservation online, access online document software, or use your company's hardware or software, you're probably using the cloud. You also can use it to store online tax or financial records.

And you can use cloud computing to back up files for storage off your PC or Mac. Sending a picture to a Facebook friend or tweeting your latest thoughts? You are headed for the clouds.

Where Did Term 'Cloud Computing' Come From?

The concept of cloud computing dates to the 1960s. The phrase originates from the cloud symbol used by flow charts and diagrams to symbolize the Internet. The diagram to the left underscores the idea that any Web-connected computer has access to a pool of computing power, applications and files.


The first reported public use of the phrase was in August of 2006 at a search engine conference in San Jose, Calif., when Eric Schmidt (then Google's CEO), described one approach to data storage as "cloud computing."

But in a sign of the ever-competitive Internet wars, research shows that Schmidt may have been trying to pre-empt Amazon, which was to release its Elastic Compute Cloud system later that month.

This CNBC Explains was updated June 11, 2013.