Similarly, groups or departments within enterprises often have the need to prototype or handle a specific project, but don't have the budget or desire to buy the needed infrastructure. Indeed, IBM itself is using its internal cloud to supply the resources needed for prototyping new applications or services, says Quan. Not every project uses that internal cloud, but more than 100 have, he adds.

The New York Times, for example, used Amazon Web Services (EC2 and S3) to generate PDFs of 11 million articles in the paper's archives in less than 24 hours using 100 instances of EC2, instead of buying hardware for the project, Derek Gottfrid senior software architect for the Times, wrote in his blog.

Flexibility Up, Costs Down

For some enterprises, cloud computing can help a CIO tackle several problems at once, as was the case for Schumacher Group CIO Doug Menefee. Upon joining the Lafayette, Louisiana-based company three years ago, Menefee had to tackle a disaster-planning gap and find new ways for IT to keep up with rapid business growth.

Headquartered two hours west of New Orleans and 35 miles north of the Gulf of Mexico, Schumacher staffs emergency rooms for 150 hospitals across the U.S. It only takes a glance at the map to see how close it came to being hit by hurricanes Katrina and Rita. "It was an eye-opener," says Menefee. "We didn't have disaster recovery and business continuity capabilities. Had our headquarters gone down, it would have taken all of the regional offices down with it."

At the same time, Schumacher's IT group was struggling to keep with the demands of a company whose revenue was growing 20 percent to 30 percent a year—even faster when measured by the number of complex contracts it needed to manage. "We can go out and turn on five or six hospitals tomorrow. We need the flexibility to move data quickly," Menefee says. But setting up and provisioning new regional offices was taking months.

As Menefee settled into his new job, he realized that running at least some of his applications outside Schumacher's data center would solve a number of problems. Menefee decided to combine a custom application built by Apptus, an ISV, with a Salesforce.com CRM application to handle thousands of contracts among his company, the hospitals and the doctors. Those moves, which involved about half of the company's IT infrastructure, avoided the expense of his hiring an additional three to five full-time IT staffers, at a cost of $40,000 to $80,000 a year, plus a large outlay for additional hardware, he says.