This is where Internet Service Providers (ISPs) are heading to as well. As some ISP services are being increasingly commoditized, ISPs are finding it hard to improve margins. So, they are chasing higher levels of enterprise functions. ISPs are moving in two probable directions: software-as-a-Service (SaaS) and managed services provider (MSP).

However, there's a twist. "Being a SaaS provider requires ISPs to have expertise in delivery of apps over the Internet as a pay-per-use service. Most ISPs don't have that. That's why there are a greater number of software companies emerging as SaaS providers, compared to ISPs. ISPs are evolving more as MSPs," points out Staten.

The third evolution is around the data center itself. As Vogels substantiated, managing massive data centers in-house is increasingly becoming unwieldy. The result: more enterprises are looking to outsource a majority of their datacenter functions.

All the three streams seem to be converging. HPC is gaining ground, ISPs are up-scaling their service models and leveraging HPCs to offer value-added services and finally enterprises are increasingly looking to outsource their more commoditized IT functions. Overlap the three and you get a new market opportunity: cloud computing.

"Due to their singular focus on maximizing the efficiency of their Internet services hosting practices, a select few Web services and hosting companies have realized they can deliver the benefits of their unique infrastructure practices to their customers as a new type of hosting service. Enter cloud computing," says Staten.

Welcome Cloud Computing

Staten describes the concept as "a pool of abstracted, highly-scalable, and managed compute infrastructure capable of hosting end-customer applications and billed by consumption."

Simply put, cloud computing is the next generation model of computing services. It combines the concepts of software being provided as a service, working on the utility computing business model, and running on grid or cluster computing technologies. Cloud computing aims to leverage supercomputing power, which can be measured in tens of trillions of computations per second, to deliver various IT services to users through the Web.

In his report, Staten refers to cloud computing as a service delivery platform, which is built on the same basic fundamentals of traditional hosting or SaaS. The building blocks of cloud computing, he says, that take the concept beyond conventional forms of IT service delivery models are:

-- A prescripted and abstracted infrastructure. Fundamental to the cloud computing model is standardization of infrastructure and abstraction layers that allow the fluid placement and movement of services. It starts with a flat implementation of scale-out server hardware that, for some clouds, serves as both compute and storage infrastructure (others are leveraging SAN storage). Their infrastructure enables the cloud and is decided upon solely by the cloud vendor; customers don't get to specify the infrastructure they want -- a major shift from traditional hosting.