Cloud technology is emerging as a viable option for companies that want to cut costs, increase agility or augment their own IT resources without building out new infrastructure \u2014 or all of the above. But deciding which type of service is the best fit for your specific needs and ensuring the new cloud offerings play nice with your existing application mix is a challenge, to say the least. \n\nMore companies are running head-on into these challenges nonetheless. A study published last year by PricewaterhouseCoopers found that 41 percent of security and IT respondents said their organizations have already implemented cloud computing, most going with SaaS offerings. \nTo plot your cloud strategy, analysts and other experts say you should start by looking at your own needs, then work outward to see how cloud platforms, products and vendors can help. Pay heed to fundamentals \u2014 the why, what, and how of your own situation \u2014 by following a 3-step process: \n Assess your needs and goals \n Set your application strategy\n Identify challenges\n\nThen you'll be better prepared to see how well today's industry offerings match up.Assess Needs and Goals\nWhy do you want to make a move? Cutting or conserving costs is an obvious starting point. \n"Probably the biggest challenge for CIOs is the facilities side of our business, all the switches and servers and routers and storage for the data centers; the thickness of all that within our own facilities, and the cascading costs that go along," says Mike Lucas, CIO for Hogan Lovells law firm. "There are opportunities to do this differently and benefit, especially now that we have greater market penetration by providers and the economies of scale start taking effect."\nThe Betty Mills Company, an online retailer of office supplies and janitorial products, decided to move to the cloud rather than spend more than $100,000 for a data center upgrade. IT director Vlad Shalit said the fully redundant, 20-plus server configuration was designed to run at about 60 percent capacity, leaving headroom for unexpected spikes, such as when the swine flu epidemic hit.\nThe company's Linux-based applications were all developed in-house, so the transition, which will require some re-writing of code, will be gradual.\n"We're not in a hurry because everything is working well today, and we're well ahead of the curve," says Shalit. "We expect to have some cloud apps operational in the next three to four months, and we'll run those side-by-side with our in-house apps, and move our users over a few at a time."\nThe cloud's pay-as-you-go model is attractive because, if you're vigilant in tracking usage and users, you don't have to pay for infrastructure or personnel that you don't need.\nMaybe you need to become more agile, to meet business demands in a more timely fashion. The cloud's ability to scale fast and wide \u2014 and at reasonable cost \u2014 opens a world of possibilities for transforming your company's more dynamic and strategic applications. Cloud services can help encourage innovation by quickly making resources available for what-if simulations and proof-of-concept tests. That fast ramp-up can also provide strategic advantages in everything from streaming applications to server-free ERP implementations. Hot to Mitigate Risk\nCloud computing can help level the competitive playing field for small and medium organizations by giving them access to risk mitigation, availability and reliability services they might not otherwise be able to afford, or be willing to support.\n"Managed security services providers can analyze your security logs, and prevent inappropriate penetration or data leakage," Lucas says. "Those are valuable services that a company might not be able to do internally. At Hogan Lovells we have managed services for security in the cloud. For example, we filter all our email in the cloud \u2014 we don't have appliances on-site to do that \u2014 so we have spam filtering and virus filtering done by a provider globally for us."Set Your Application Strategy\nFor an application strategy you should consider the type of application or applications, as well as the platform and the service model. \nFor instance, the choice of SaaS, PaaS, or IaaS comes down to the difference between whether you want off-the-shelf applications \u2014 SaaS \u2014 or development resources, which can be either PaaS or IaaS, depending on the underlying infrastructure. As for the model, application type along with company privacy or compliance needs will point to public, private or hybrid clouds. Private clouds typically cost more than public, but are better for development or other applications involving intellectual property.The Case for SaaS\nFor most organizations, SaaS is the likely place to start. Applications are plentiful and investments in start-up time and CaPex\/OpEx costs are minimal, says Paul Burns, an analyst at Neovise LLC, a Fort Collins, Colo.-based research firm specializing in cloud computing.\n"With SaaS, the entire cloud stack is all bundled into one: infrastructure, management, installation, and the product usage," he says. "And SaaS offers variety. It mirrors just about everything you can find in the application world today."\nFor cost-cutting, organizations typically select so-called commodity apps, such as email or document management, says James Staten, vice president and principal analyst for Forrester Research.Commodity Cloud Apps\n"Commodity apps are those that the enterprise doesn't run any differently from anyone else," he says. "Email, SharePoint fall there. Document management in some organizations, although in many it does not. Some organizations will view accounting as a commodity, or human resources applications. And many security applications, especially at the edge of the enterprise, go there."\nCRM and ERP are also good candidates for moving to the cloud. For larger companies, they can improve agility by taking over for or supplementing their older data center versions; for smaller companies, they can help level the playing field against larger competitors.\nBandwidth-intensive apps, including strategic apps, can be well suited to the cloud model, too. An organization with periodic needs for high-bandwidth analysis - such as a retailer that needs fast analysis of seasonal sales spikes - might put their Business Intelligence applications into the cloud. They could use SaaS or their own applications, built via an IaaS or PaaS platform.\nAn example is NetFlix. A 2011 Forrester report (link: http:\/\/www.forrester.com\/rb\/Research\/three_stages_of_cloud_economics\/q\/id\/59165\/t\/2- subscription required), describes how NetFlix uses IaaS to support three demanding services: a BI service for real-time customer intelligence; video streaming for titles that may experience sudden, localized, demand; and a "bursty" application for encoding movies into multiple formats for different devices.Developing in the Cloud\nFor developers using IaaS or PaaS, the cloud offers resources that can mirror their in-house servers, but may be more available and accessible than those of the corporate data center.\nFor instance, The Betty mills Company is using the Amazon Web Services IaaS platform because it lets them keep migration development on Linux. Also, the elasticity of the cloud brings better system availability, something that IT director Shalit used to worry about, even with fully redundant data center servers.\n"We strive for 100 percent availability," he says. "I might be on vacation in Mexico, but I'd always be worrying about the data center."\nOn the other hand, Sony Computer Entertainment America is using IaaS for fast spin-up of video game demos. The group specializes in development of video games that run exclusively on PlayStation consoles, and that can support several hundred players at a time. With the help of OpenStack and Rackspace the Sony developers are in the process of moving to a private cloud in order to avoid resource bottlenecks when they spin up demos of new features. \nThe group's manager, Monique Fraser, director of global hosting services, WWS Global Platform, notes that costs for the private cloud will be about equal to the data center. The team will benefit mainly through resource elasticity, but also through accessibility, since developers would otherwise have to go to IT to procure their resources. The IT group likewise benefits from reducing the stress that sudden demand presents, and gains a more strategic role: overseeing procedures and governance of the private cloud resources.Identify Cloud Challenges\nAside from selecting the best cloud technology for the task, the greatest challenge to cloud adoption is integrating data, workflows, business processes, and even the clouds themselves. \nFor instance, SaaS services may be compared to off-the-shelf apps, but they still need to work with your other software.\n"The degree of difficulty depends on the application, of course," says Burns. "Moving to cloud email is usually pretty easy. I'm using Microsoft Office 365, with hosted email, and most people in large enterprises are already plugged into an Exchange server somewhere, so we have the same behaviors.\n"But if you consider a SaaS CRM application, now it starts to get tricky because you've got all kinds of customer data in the system, and at some point you've got to synchronize and share that data with your accounting system. So you should look for a SaaS vendor that has at least basic hooks in place."\nSystem integrators can help, as can the growing numbers of integration tools, both on-premise and cloud-based.\nBut things get more complicated when you combine two or more clouds because data exchanges can quickly become exponential, according to Gaurav Dhillon, CEO of integration specialist SnapLogic and former head of Informatica.Can You Hear Me Now?\n"It's like telephones. With two people, you've got one connection to worry about, but with five you've got 25 connections," he says. "The more intelligence you can apply to the interconnections, the better the result. That means integrating not just through APIs, but including business rules, too."\nAlso critical to success is educating and preparing the people who will be asked to use the new applications. \n"User education is often where IT spends the least amount of time, and where they get in the most trouble," says Forrester's Staten. "IT needs to be literal about setting expectations with the business users about the change that's taking place.\n"Take a simple thing like moving a document management system from in house to the cloud -- not changing the app or anything. You should set user expectations in detail. What's going to be different now? Will the Help Desk be a different phone number? Different people? Should they expect some performance latency because of the cloud? That sort of thing."\nKen Male, managing director and founder of TheInfoPro, agrees. In a recent study of large-enterprise decision makers in North America, TheInfoPro (link: http:\/\/www.theinfopro.com\/2011\/08\/whats-tripping-up-cloud-projects\/) noted that their greatest inhibitor to taking on cloud projects was the challenge of change and learning, at 52%. Next on the list was complexity, at 32%.\nStill, the cloud is becoming friendlier and more enticing by the day, thanks to maturing features and growing user confidence.\n"We feel more confident doing it now than we did three years ago," says Betty Mills' Shalit. "Right now, everybody's talking about the cloud, and for a reason. I would compare it to something basic, like TVs. Three years ago a plasma TV cost $2,000. Now it's dropped in price and it works three times better. That's technology - keeps getting better and more affordable at the same time." \nJim Buchanan is an independent technology writer based in Mass. Reach him at Jim@jimbuchanan.org.