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Cloud_webAny company that’s not sold on “the Cloud” yet will be when they hear this: According to Eddie Resnick, CEO of Israeli startup Clouds ‘R Us, 85% of computing power in many companies goes unused – ie, companies are buying seven times the average computing power they need, whether in processor speed, memory, or other expensive hardware. “It’s because companies buy for peak needs,” says Resnick, but although that peak may come just once every few weeks, organizations have, until very recently, had no choice but to be prepared.

Thanks to the Cloud, though, companies can now “outsource” their computer usage, using – and paying for – expanded capacity only when they need it. “Now that the Cloud is technologically feasible, scalable infrastructure – the ability to take advantage of computing power when needed – is attracting many organizations,” Resnick says. With smaller – and even larger – businesses taking their computing work online, doing their computing on servers provided by a large IT infrastructure company, companies hope to save big on deployment, upgrade, and security costs.

85% unused capacity? Well, I’m sold! But there’s more; Resnick, who helps companies navigate the Cloud and get the services they need without hassles, believes that the Cloud is the next big growth area for Israeli hi-tech. Although the Cloud is going to be “owned” by large organizations that can provide wide-ranging IT services – already many companies are using Amazon’s infrastructure services, for example – there are still plenty of opportunities for small companies with niche products and services to establish a presence in what promises to be a major industry in Israel.

Why Israel? Because Israel’s got two of the most important components that will be necessary for successful wide-scale deployment of the Cloud – IT infrastructure technology, and security technology. In fact, Israeli technology is so important to the future of the Cloud, that the premiere technology forum for Cloud computing – the “World Summit of Cloud Computing,” attended by Cloud experts from around the world – was held in Israel in December.

By 2012, 80 percent of Fortune 1000 companies will be paying some sort of  Cloud computing service by 2012, and 30 percent of them will pay for Cloud computing infrastructure – far more than are currently using the Cloud at all, according to the Gartner Group. And a similar explosion in Cloud use is expected among mid-size and even small businesses as well; it makes sense, given the amount of money companies will be able to save on infrastructure. But adoption of this new form of computing will not be without its growing pains, says Daniel Catteddu, a security expert for ENISA, the European Network and Information Security Agency. Like with everything else, he says, there are risks and benefits for companies that will be using the Cloud – and each organization is going to have to have to invest time and effort in order to ensure that there is more of the latter and less of the former.

Among the issues Catteddu, who will be speaking at this week’s Summit, sees as a potential problem for Cloud customers, is vendor lock-in, where a company tailors its applications and technology to work on a specific cloud platform – meaning that if they want to switch service providers later, they will be rewriting a lot of code. Loss of governance – signing over control of security and other major factors to cloud infrastructure providers – is another major issue for cloud customers, especially if your service provider has “more important” priorities than making sure you’re taken care of. Another major security risk is isolation failure – where you become the innocent victim of a hacker attack against someone else using the same infrastructure, or even the same database.

In fact, ENISA lists no fewer than 35 risks for companies using Cloud computing. On the other hand, Catteddu says, there are ways the Cloud actually reduces risk – such as letting companies take advantage of better security applications and personnel for less money, thanks to the economies of scale the Cloud permits a service provider dividing the cost up among many clients using the infrastructure. Still, security is going to be a major issue for potential Cloud customers. “The large providers, like Amazon and Google, will offer solutions, but many companies are going to want more specific solutions. The competition in the security sphere has a way to go, but eventually it is likely to be a market differentiator for providers,” says Catteddu, with customers more likely to join a Cloud infrastructure if they can easily deploy a security solution.

Security is where Israel shines, and with security so important to the Cloud, providing security solutions for Cloud clients – and for service providers – is likely to be a growth area for local companies, says Gilad Parann-Nissany, CEO of Israeli startup Porticor, which is developing software to protect Cloud users, monitoring their traffic, applications and data, and alerting them when their application is under attack.

Although Cloud use – ie, the number of companies that have moved their systems online – is still limited,  Parann-Nissany agrees with Resnick and Catteddu that it will grow exponentially in the coming years, regardless of the security risks. “There are risks with staying off the Cloud as well; for example, vendor lock-in is always an issue, because if you marry your application to one platform, you will find it more difficult and costly to move to another platform.”

The economics of Cloud use are just too attractive for companies to overlook, Parann-Nissany says, and just like they are prepared to take risks off-line, they will be prepared to take risks on-line. “It’s not a matter of risk, but risk analysis – looking at the problems and the solutions. And that is where we in the security industry come in,” he says, with customers looking to solutions from vendors like him – and getting advice from companies like Resnick’s – to deal with the security issues Catteddu warns about. “It’s clear that security is one of the biggest open questions in the Cloud, and companies like ours will be there to provide them with solutions,” Parann-Nissany says. And you can be sure his won’t be the only Israeli company working to make the Cloud safer, faster, and better.

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