True enough, but it's easier to get analysts and IT insiders to talk about the features and goals of a cloud than it is to pin down an exact definition. Keep in mind, too, that different vendors will spin cloud computing differently. Salesforce.com's vision of the cloud looks much like the SaaS you know today; IBM's vision includes mashups of massive customer data sets on the fly.

"The cloud is basically a combination of grid computing, which was mostly about raw processing power, and software as a service," says analyst Dennis Byron of Research 2.0. "In effect the cloud is network virtualization."

Dennis Quan, CTO of IBM's High Performance On Demand Solutions, says "We've designed the cloud around virtualization. You have a data center with many servers and they are all turned into virtual machines."

One difference from the now familiar, multi-tenant SaaS model, in which numerous clients access a provider's application: Cloud computing environments also allow the customer to run his own applications on the provider's infrastructure.

At the provider level, the goal is to dynamically assign computing workloads as customer jobs come in, notes William Fellows, an analyst with The 451 Group. That approach helps the vendor maximize its resources and lets the customer ask for more computing power on the fly. That's a key point. A big goal of cloud computing, whether IBM's Blue Cloud or Amazon's EC2 (Elastic Cloud Computing), is rapid scalability.

But elasticity is probably a better term, says Barney Pell, founder and CTO of Powerset, a San Francisco-based startup company building a natural language search engine. By elastic, Pell means the ability to stretch out when needed—and then snap back. His company is attempting to index an enormous chunk of the Web, and that compute-intensive task goes on most of the time. The work involves major spikes by users that would exceed the company's normal computing capacity.

Rather than buy enough servers and other infrastructure to meet peak needs, Powerset became an early customer of Amazon's EC2 and S3, Amazon's related storage service. Powerset pays for the resources as it uses them, freeing up significant amounts of cash, Pell says.

Pell suggests that IT executives considering cloud services start by closely examining which resources their data center uses all the time—and which are only needed during periods of peak demand. What's more, the use of an elastic service gives IT time to establish a baseline, that is, the minimum level of resources needed to run the business at all times.