Cloud computing is a way to operate information technology, not technology itself.

Operating infrastructure (servers, routers, threat management, disk storage arrays, load balancers, etc...) is completely abstracted from the user. Management, maintenance, upgrades and risk is all held by the service provider.

Cloud computing matches cash flow to business systems better.

Suppose the CFO was given an outline of a new project implementation plan. In the old model, that plan would usually include making capital purchases in items like Ethernet switches, servers, Microsoft server operating system licenses, Microsoft SQL server licenses, maybe some cabling and power and certainly a labor burden analysis. It would be required to make these capital expenses (or hopefully investments) before the business was at a point where benefit was realized from the implementation.

In the new model, that new project implementation plan would still include procurement requirements, but the cloud is almost completely operational expense. Cloud servers and all the dependent provisioning, Microsoft licensing and supporting infrastructure is paid for in direct response to the scale of the project. In other words, the cloud can provide rapidly provisioned server resource on demand as demand for the service goes up or down.

Cloud computing delivers I.T. as a service

It is popular and easy to justify outsourcing your payroll services to a qualified service provider because they are experts at payroll and can operate payroll processing more efficiently, taking fewer labor hours to accomplish very important tasks than an internal staff.

Business with fleets of vehicles for repair technicians or product delivery often outsource the maintenace of those vehicles because it's less expensive to allow highly trained mechanics with the necessary tools to perform needed maintenance than carrying the burden of a maintenance staff and equiping them properly with the right tools and facilities.

The same applies to a business with internal information technology (what successful business doesn't have I.T.?) Instead of carrying the burden of a two or three person I.T. staff and the risk of owning all the core infrastructure to deliver information systems to operational staff, a business can not only outsource the maintenance and management of the infrastucture but outsource the infrastructure itself.

Think about what you pay an I.T. wrench turner to do. Maintain desktop computers by doing security patching, installing software, applying security fixes on servers, checking and maintaining hardware, procuring and provisioning new and replacement hardware, etc... What if you could take away the burden of one or two of those staff members? How much annual cost would that reduce? $50,000? $150,000? Now add the elimination of the risk of owning the infrastructure. If a switch goes bad, not only is that disruptive to the business operation, but costs valuable efficiency and hard capital to replace. When you buy a new server, you own the risk of it's failure and the risk of the Microsoft software purchased for the scale it is meant to serve. Cloud servers can be provisioned and made quickly available without incurring any of the risk of management and maintenance of the hardware or software and their future upgrades, while your operational expense only goes up incrementally with the level of scale ordered. "Pay as you go."

Cloud computing is a pay-as-you-go service.

In uncertain economies, cash is held as long as possible and large capital investments are difficult or sometimes impossible to do. CFOs are familiar with buying services (as explained above) from qualified providers. Within the scope of information technology, the CFO is already used to seeing expenses for hosted email services, teleconferencing services, customer relationship management systems (like SalesForce or SugarCRM for example) and the expanding menu of services of collaboration and management services becoming available everyday.

When purse strings are tight capital expenses are kept to an absolute minimum. Cloud computing allows you to purchase I.T. applications and capacity on demand from a utility service provider. It's only natural for a CFO to want to pay for services as needed instead of making large up-front purchases. Cloud computing is a real alternative to the old way to delivery I.T. resources to production staff.