is one of the technology industry’s more recent Cinderella stories. Less than a decade ago, it was just another Silicon Valley startup operating out of the home of its founder, Mark Benioff, with three employees, $6 million of his own seed money and an idea that was the laughing stock of the business section.

Some implied he had his head in the clouds and in a way, he did.

Benioff, a former Oracle executive, had a vision to develop software, but not sell it. Instead his customer relationship management (CRM) applications would be offered on a subscription basis while empowered and housed on his company’s maze of servers and computers (euphemistically referred to as a “cloud”), not to mention storing and securing the entire body of client data created in its wake.

CRM applications, formerly cost prohibitive for small to mid-sized businesses, would now be affordable, scalable and turnkey living on’s more robust data grid than the more limited networks of its clients.

Back in 1999, that idea was considered voodoo. Critics at the time predicted companies would never be willing to offload control of such core business applications.

Pioneer in cloud computing

In 2008, the now publicly traded company has more than one million subscribers from its 41,000 subscribing companies and works in partnership with some of the biggest names in technology and on Wall Street. As for the power of the company’s data grid or “cloud,” there are now days it accommodates more than 100 million user requests.

“ is a really a pioneer in cloud computing. It identified a specific need; that it’s hard for a small to midsize business to manage a CRM system. With, now those same companies only need a web browser. It’s effective and it addresses a clear pain point,” says Andrew Reichman, a senior analyst from Forrester Research.

Software-as-a-Service (SaaS), data centers, Web-based applications and virtualization, along with cloud computing, are some of the most over used and misunderstood buzz words floating around in business technology circles these days. They all have one thing in common: they are often confused in various combinations as the same thing. Though similar, they are not interchangeable terms. “It’s easy to confuse. From the standpoint of the user, there isn’t a difference between cloud computing or SaaS or Web-based applications,” says Frank Scavo, president of Computer Economics, based in Irvine, Calif.

Historically, jobs requiring serious computing power have been performed by powerful mainframes, supercomputers, and over the past two decades increasingly by the ever more capable desktop or laptop PC souped up with the latest and most powerful microchips, RAM and sophisticated operating system that can run multiple applications simultaneously.

Cloud computing is the alternative to all that high powered computing generating from one place. Cloud computing, instead, takes place within a integrated ballet of algorithms and code among cheaper, low powered computers and servers and third party networks “out there.” What IT types eventually started referring to as “the cloud” and what is increasingly becoming the platform of choice for many companies who no longer want the headache or expense of housing and maintaining all that cumbersome computing.

Coming to terms

So how is this different from all those other terms mentioned? Here’s a quick primer:

  • Software-as-a-service: This is the business model, an alternative to the generations old business model of marketing software by selling usage rights with an “end user license agreement” (EULA).
  • Web-based application: This tells you where the software lives. Traditionally, software applications have lived on a centralized mainframe or server or on the individual user’s PC. Web-based applications live on the Internet and are accessed with a Web browser through a password protected website.
  • Data centers: A data center is the physical location of a farm of servers and computers. Data clouds are typically much bigger, involving perhaps thousands of computers across data centers around the globe. Clouds are automated. Data Centers involve human management.
  • Virtualization: This is the programming mechanics of optimizing and integrating servers to act in concert as one external interface for the end user. It’s a great way to create redundancies, maximize the equipment’s efficiency and conserve energy.

The benefits of cloud computing

While has proven itself a success serving small to mid-sized businesses by delivering CRM from the cloud, the cloud computing trend has hardly hit its tipping point.

Here are some of the reasons many industry watchers say it’s only a matter of time:

  • Save money. Through the business model of SaaS, applications living on the cloud are much cheaper for companies. Organizations save on the expense of implementation, maintenance, and security while benefiting from the economy of scale a massive “cloud” can offer compared to even a large company network.
  • Access to more sophisticated applications. is a great example of this with its offering of CRM tools to smaller businesses, whereas before CRM was completely out of reach for most modest budgets.
  • Downsize the IT department. The more applications that are farmed out to a cloud, the fewer that have to live on the company network. That translates to fewer bodies for deployment, upkeep and updates, as well as less hardware in the building and less square footage taken up in the office.
  • Saving energy. This is a factor on everyone’s mind given the economy, concerns for the environment and the growing energy crisis. “No one really thought about it up until now. But there’s a real focus on power, cooling and space because there’s a general mood of concern over energy costs,” says Reichman.
  • Saving data. “Cloud computing relieves the smaller business from things like backup and recovery, which most don’t do a good job of doing anyway,” says Scavo. Any company big enough to provide data cloud services is likely to have more infrastructure to handle data security than the average small to midsize business.

SIDEBAR: Cloud Computing Vendors

Amazon EC2 -- A funny thing happened on the way to becoming the biggest bookstore on the Internet. First, Amazon expanded to selling just about everything else available in retail making it the virtual Sears and Roebuck of the new millennium. More recently, with the launch of EC2 (Elastic Compute Cloud), which is still in beta, Amazon has revealed what is likely its long term business plan; to become the cloud service provider of choice for small businesses at affordable rates.

Google -- was perhaps the first company to build itself from the ground up as a data cloud, spending billions of dollars each year on additional servers and PC’s. There is no mother data center at Google headquarters running all those algorithims to conduct lightening fast searches while hosting email, dynamic calendaring and collaborative office applications. Google’s cloud is estimated to involve over one million PC’s and servers parceled out around the world. It’s only natural that they would monetize access to their subscribers.

EMC Cloud -- EMC is another one of the clouds gathering as this emerging market creates more buzz. The first tip off was the acquisition of online storage provider Mozy and more recently the startup cloud company, Pi Corporation. Pi stands for personal information. Cloud computing would be a natural progression for EMC, as it is one of the most popular vendors when it comes to virtual machine software (VMWare).

Windows Live -- Nothing could be more counter to Microsoft’s core mission than embracing and enhancing cloud computing. After all, Microsoft made its bones (and billions) selling software licenses by the seat and pushing its increasingly powerful Windows browser version after version. But clearly the folks in Redmond have seen the writing on the wall from the strong interest of web-based services like Google Docs & Spreadsheets and Windows Live is in the early stages of what industry watchers refer to tongue in cheek as the Windows Cloud O/S

3Tera -- It’s a small company, but based on open source solutions and with its own patented Applogic technology is now in the process of rolling out its CloudWare services in stages.

IBM’s Blue Cloud -- It’s also still in the process of rolling out and is based on open source code. It could prove too pricey for smaller businesses, appealing more to the budgets of mid-sized and enterprise level companies.