Oh, the temptation to put all your data in the cloud. Think of the savings on server and administrative costs. Think of how it will free up your IT staff to work on more business critical projects.In research firm Forrester's Enterprise and SMB Software Survey for Q4 2009, 24 percent of respondents from North America and Europe revealed a fondness for SaaS (software as a service) compared to on-premise deployments.A service such as e-mail, which has become commoditized, lends itself well to a cloud environment. But a behemoth like SharePoint is more complicated, mainly because it does so much: collaboration, document management, application development, the creation of corporate intranets.[ For complete coverage on Microsoft's new Windows 7 operating system -- including hands-on reviews, video tutorials and advice on enterprise rollouts -- see CIO.com's Windows 7 Bible. ]To date, deploying SharePoint in the cloud, either as a standalone or as part of Microsoft's BPOS (Business Productivity Online Suite), has not provided the level security, compliance, privacy and app compatibility that comes with on-premise deployments, writes Forrester analyst Rob Koplowitz in a new report titled "SharePoint 2010: A More Viable Cloud Option.""With an on-premise deployment, you own the environment and you can take customization and integration in any direction you see fit," he writes.However, the release this year of SharePoint 2010 will make the cloud option more enticing, predicts Koplowitz. Though it won't wipe out the need for on-premise SharePoint, particularly among large enterprises, SharePoint 2010 does "close the gap in functionality between the deployment options and opens up SharePoint Online to a wider range of applications," he writes.At the SharePoint Conference in October 2009, Microsoft pledged that its 2010 updates to SharePoint Online will at least put it on par with the features of an on-premise SharePoint deployment.\n\nSharePoint 2010: Five New and Improved Features\nMicrosoft SharePoint: Three Sleek Social Networking Alternatives\nSlideshow: Fighting the Dark Side: Tech's Heroes and Villains\n\n\n\nWhile it's unlikely that SharePoint 2010 Online will reach parity with its on-premise brethren, Koplowitz writes, three key improvements to SharePoint 2010 will make the cloud option more viable for businesses.SharePoint Online Dedicated will Ease the Introduction of Custom CodeMicrosoft's dedicated hosted version of SharePoint 2010 (known as SharePoint Online Dedicated) is single-tenant, meaning it is limited to only your organization on dedicated hardware and software as opposed to the more shared infrastructure of multitenant hosted SharePoint 2010.To improve security and customization of apps, SharePoint Online Dedicated introduces a formal review process that simplifies how customers can introduce custom code. Each package will be reviewed for documentation, security, best practices and compatibility before being uploaded to the production environment. The new process will make customization more straightforward and accessible, writes Koplowitz.SharePoint Online Standard will Better Align with the Server OfferingCurrently, the SharePoint Online standard edition is based on a more limited version of MOSS (Microsoft Office SharePoint Server) 2007 and is missing a number of key features. In SharePoint 2010, writes Koplowitz, the standard edition will be based on the\nserver edition, and companies will have new features such as: My\nSites, tagging, tag clouds, activity feeds, Office Web Apps, business intelligence, people search, records management, forms, workflows, and more advanced customization through SharePoint Designer.SharePoint 2010 Online Will Augment Existing On-Premise DeploymentsWhile the online environment with SharePoint 2010 takes a big step forward, certain pieces of functionality will continue to require an on-premise implementation. Nevertheless, Koplowitz recommends a hybrid environment that utilizes the best of both worlds. A common scenario would be storing sensitive data on-premise to take advantage of tighter security features while storing less sensitive, more commoditized functions like basic workspaces and e-mail in the cloud. Koplowitz acknowledges that moving to a complete online environment is a possibility in the near future as SharePoint 2010 Online becomes more viable and organizations are faced with major upgrades of existing systems.Shane O'Neill is a senior writer at CIO.com. Follow him on Twitter at twitter.com\/smoneill. Follow everything from CIO.com on Twitter at twitter.com\/CIOonline.