Practical Cloud computing
1) Your application is smart enough to call for more or less computing resource depending on the user load its sees. Cloud lets you "spin" up servers on demand but you have to manage the spin up and down. No software applications I know have this feature yet. Here cloud theory is leading software development by a good margin.
2) You have had to size your computer equipment to deal with a few very high peaks in data and computing activity and these only occur 5%-10% or less of the time. Cloud vendors will let you buy computer resources at average consumption rates. Their disk drive systems can absorb peaks as they are shared across many businesses who don't have peaks at the same time. These rates must be negotiated up front, the cloud vendor is not going to tell you if you are under utilising resources.
3) Cloud lets you focus on the application and not the equipment. It can be good to get the Operating system and the databases managed but with all the great monitoring and remote access tools these days its also easy to outsource management of equipment to third parties. Our view is once you get to around 12 physical servers you need to think about cloud as the effort to patch and version manage the operating systems and databases in-house becomes cost prohibitive
4) Cloud can provide fast disaster recovery, They can move your workload to another datacenter in minutes. The question is do you need recovery in minutes. Or can you survive a day without your computer systems via a business continuity plan (BCP )
5) Your application will run well on a virtual servers and you can run separate database and application servers. Its really only the application servers that can be dialed up and down, database servers are normally static in configuration as backup and replication are not easily automatically turned on and off
6) Your computing needs are very modest, maybe only part of a server is needed to host a small website or portal. Here the cost of renting are much less than setting up your own data room.
So the cloud is good at really big, really small and really lumpy computing.