You’ve no doubt heard a lot about cloud computing (or the cloud). What you may not have learned is how this misty concept can help with the real problems of operating your business, especially in hard times.

In short, cloud computing offers attractive options for small and midsize businesses that need critical IT upgrades, but may lack the cash for a large capital investment.

Through the cloud, you can add new, vital applications or you can supplement the capacity of an existing infrastructure. Because cloud services are delivered via the Internet (often the Web) you only pay for the features and functionality you use and don’t pay for extra hardware, software, staff and maintenance. As a result, your business can grow its IT capabilities, often at a lower cost than doing everything itself. And you can pull the cost from your operating budget rather than your capital budget.

So what is cloud computing exactly, and why is it significant to small and midsize businesses?

Understanding the Cloud
The cloud can deliver software-as-a-service (SaaS) or supplemental infrastructure capacity, such as data storage space or processing power, all on-demand via the Internet, usually the Web. Cloud services don’t require that you purchase dedicated hardware and software or manage those particular applications. You simply pay for the functionality, sometimes as a flat monthly fee and sometimes by metered use.

For example, a small greeting card company might sign up for a cloud order-fulfillment system. The application would be hosted and managed by the provider, and it would be accessible to users through a Web browser. The company could sign up for the service instantly, without having to undergo a complicated implementation to house the application on its own servers.

Salespeople across the country could then access the fulfillment system from any Internet connection, no need to go through their employer’s network or install software on their own computers. Multiple users can be quickly added or removed, as well.

It’s clear how attractive SaaS is to smaller businesses when you look at its growth in the last few years. Forty percent of midsize businesses worldwide use SaaS in some form, according to a study from industry analyst firm AMI-Partners. The firm projects that number will reach 57 percent by the end of November 2009.

Now let’s say that the greeting card company allows customers to create and print their own cards and needs extra server capacity during peak workloads around the holidays. The company could add processing power to its existing servers or it could increase its network bandwidth by purchasing a new server. But the cloud adds another option. Renting server space or processing power from a service provider would allow the company to augment its in-house servers, without having to purchase and maintain new hardware that might sit idle the rest of the year.

Considering the Benefits
If you’re looking for alternatives to traditional IT, cloud computing offers some advantages to consider.

Lower costs
Cloud services don’t require in‐house IT expertise or capital investment in new hardware. The pay-to-play pricing model requires that companies only pay for what they use.

Flexibility
The extreme scalability of cloud services allows small and midsize businesses to stay agile, either expanding or retracting their IT infrastructure based on their business needs.

Faster deployments
Because cloud services can add lots of users very quickly, customers can deploy and get value from them faster. There is no lengthy, expensive or complicated installation or roll-out processes. In turn, businesses can add IT capabilities or introduce new services to their own customers much faster.

Integration
Cloud services are designed to be open and flexible, so they can integrate with other services and on-premise applications. This is critical because most small and midsize businesses will use a combination of cloud services and on-premise applications. And because cloud offerings can be integrated, businesses don’t have to redesign their infrastructures or commit to large-scale adoption of new applications or services.

The Cloud is Already Here
The cloud is no longer a futuristic concept. It provides services that small and midsize businesses are adopting today, with tangible benefits. In a tough economy, the cloud offers some attractive options for saving money, while staying ahead of the innovation curve