Gartner predicts that by 2012, 80% of Fortune 1000 companies will be purchasing cloud services, and 30% will be purchasing cloud infrastructure.

Traditional IT systems may soon go the way of the dinosaur as cloud computing becomes more common. A traditional IT system is designed, implemented and supported in-house. Almost all medium-to-large companies have employed this in-house business model for building their information systems infrastructure: from data warehousing to marketing systems and from decision support to operational systems.

These internal IT systems have three main components. First, the hardware is brought in-house. This includes personal computers, networks, servers and mainframes. Second, software to run the computers is bought and installed inside the organization. This includes software for operational systems such as POS, and for systems that support website, finance, and marketing, among others. Often, developing new systems or replacing older legacy systems means that large, multi-year capital projects need to be undertaken to install the new computers and software.

This brings us to the third main component of internal IT systems, which is an army of employees known as the company IT department. These are the people who design, develop, implement and maintain the company’s internal systems. At corporate headquarters, the IT department is often one of the largest in the company, employing hundreds of people. Many of these employees are technically savvy, forward-looking and hard-working. But as is the case in many large departments, duplication and waste may become problems.

Often, line-oriented business functions like marketing, finance and product development find themselves battling for resources from IT, and are frustrated when their projects are turned away. For them, IT is that black hole into which their requests for technical support disappear.

But there is a cloud gathering on the horizon. Fortunately, for businesses today it is not a dark cloud, but rather it is the computing cloud.

Cloud computing is an external business model for IT, not an in-house model. The servers are leased through cloud providers like Amazon or Google. The software that resides on them can be developed by giants like Microsoft, or small companies like clario Analytics. These applications are called Software as a Service (SaaS). For the client company, there is no need to buy and install internal computers and software, no need for a capital project and no need for IT staff to install and support the systems. It is all done through the cloud and cloud software providers. The client exports data to the cloud server, signs on to a website, and starts using the application.

As mentioned above, the client does not need to go through an expensive internal capital project to build its internal systems. The cloud systems are paid for through monthly operating fees for service, which are often quite inexpensive because of the commodity structure of cloud computing. Also, cloud software vendors can provide additional support services as needed. In that way, the implemented cloud application can be managed by the company, or vendors can provide some hands-on work.

Cloud applications are a great way to augment internal company systems. For example, a company that uses a customer database of millions of customers may have developed good internal systems for operations and for a data warehouse. But the company may be unsure of what direction to go for an analytical platform to support marketing and business intelligence. It wants this capability, but is not sure about the affordability of IT resources or the resources needed to run the analytical function in the marketing department.

Cloud computing can provide a solution. The company would export customer information from its data warehouse to the cloud server and immediately be able to perform analytical functions like customer queries, reporting, predictive modeling and customer segmentation. The company can elect to use the cloud software and systems much like an internal system or the company can rely on SaaS providers to do the work. Additionally, the company can choose to use a combination of both internal and outside resources to get its work done.

The support work from the SaaS vendor could be IT-based, such as building modeling systems on the analytical cloud platform. Or it could be work done by the marketing department, such as developing new customer profiles, developing reports that examine customer value, or developing a new type of segmentation model for email contacts. SaaS vendors are now offering support services for both the IT side and the business side.

Additionally, these cloud applications are easily scalable by adding more cloud servers to increase data storage and processing.

Whatever the business need, the “cloud” provides a great opportunity for businesses large and small to leverage cloud computing and SaaS to augment, and sometimes replace, traditional IT systems with quicker, lower-cost IT solutions.

About Doug Faherty

Doug Faherty serves as VP, Marketing Strategy Solutions at Clario Analytics. He has worked in marketing and analytics both on the inside and as a consultant. He thinks cloud technology and software-as-a-service will dramatically change the use of information technology in the next few years and expand best practices in business analytics.