“It helps companies directly align business needs to IT consumption, tie revenues to expenses, and control costs,” he adds. “Using the cloud, businesses can scale their infrastructure at will and create opportunities to [take advantage] of services previously unavailable or unthinkable.

“Based on our work with thousands of businesses, we estimate that approximately 70 per cent of corporate information technology infrastructure runs on customer premises with less than 20 per cent utilisation. The cloud helps companies avoid wasted investment on idle resources.”

Two AT&T customers illustrate the point. One an engineering group, the other a regional energy company. The engineering group uses AT&T’s network-based cloud to increase or decrease its computing capability in line with its business cycles and project execution, both of which tend to be “spiky”. This allows it to avoid investing in infrastructure that would sit idle between projects.

The regional energy company had to cope with millions of web requests for information about energy outages and repairs during a big storm. This threatened the site’s ability to work.

“It moved the site’s infrastructure to our cloud in four hours, enabling it continuously to communicate real-time outage information to residents and media throughout the service area, greatly improving customer service,” Mr Caniano says.

Mark Brown, IT risk and assurance director at Ernst & Young, a consultancy, agrees that cloud computing will change the operating landscape, but believes it is likely to complement, rather than replace, client server computing.

He believes that traditional large-scale IT programmes will retain their place in the chief information officer’s arsenal, but will be supplemented with cloud computing.

While some companies are comfortable with a public cloud computing model using on-demand resources such as Amazon’s Web Services, others are building private clouds using their own virtualised servers, or adopting hybrid public-private models.

But the basic drivers are often the same and, perhaps surprisingly, cost savings are not at the top of the list.

As a recent report by Gartner, the IT research company, noted: “The cloud promises to deliver a range of benefits, including a shift from capital-intensive to operational cost models, lower overall cost, greater agility and reduced complexity. It can also be used to shift the focus of IT resources to higher-value-added activities for the business, or to support innovation and, potentially, lower risks.”

When asked about the main customer benefits of cloud computing, 67 per cent of Europe-based respondents to a survey published this month by CA Technologies, a software company, pinpointed scalability. Businesses using the cloud have more flexibility to expand or contract IT services as required.

A further 54 per cent highlighted the significance of “agility”, again emphasising the importance of being able to deliver services in a shorter time.

The survey investigated the cost benefits from cloud services and found users making savings of about 11.5 per cent on their annual IT budgets, up from 9.7 per cent reported in last year’s study.

The research also highlighted the maturation of the market. Although private clouds dominate the industry, with 55 per cent of CA’s partners saying their customers use them, compared with 33 per cent for public and 22 per cent for hybrid clouds, it is the hybrid model that is expected to take off.

When asked what type of cloud will be predominantly used in five years’ time, almost half (47 per cent) answered hybrid, compared with 37 per cent for private and just 16 per cent for public.

“The hybrid cloud model combines the best of both worlds by allowing customers to maximise their existing infrastructure and keep it under internal control, but with the ability to use public cloud resources as needed,” the report’s authors noted.

The reality is that, while most companies are looking at moving to the cloud, many are cautious about the public model, perhaps because of concerns about security and reliability.

For example, at Wells Fargo, the banking group, Scott Dillon, executive vice-president and head of technology infrastructure services, has used what he calls “cloud like” technologies to help steer the company through a three-year integration project following the $15bn acquisition of Wachovia.

“We think the cloud is here to stay, but not a public cloud The attributes of the cloud or what we refer to as ‘cloudlike computing’ are something we have been embracing for about three years. We have been working on a road map to move towards that and evolve,” he says.

“We started by commoditising the hardware itself, moving into virtualisation and standardising software,” he explains.

In the process, Wells Fargo reduced its number of top ‘tier 4’ data centres from seven to three, cut its regional data centres from 13 to 10, reduced the number of applications by 25 per cent to 3,000 and accelerated server provisioning (starting up a new application server) from months to 10 days.

By the end of last year, almost two-thirds of the bank’s servers were virtualised and 80 per cent were standardised. As a result, Wells Fargo achieved $1bn in savings with a significant portion attributed to its infrastructure efficiency efforts.

But like other IT professionals, Mr Dillon notes that making this type of change is not just about the technology. “You really have to start [focusing on] your operational readiness and capabilities,” he says.

“Moving to the cloud is not just another IT project, it represents a transformation of the business,” says Mr Brown.

Daryl Plummer, a Gartner fellow and expert on web services and the cloud, strongly agrees. “There is a stronger recognition today that this is more than just a shift of technology,” he says.

Unlike the move from mainframe to client-server, which was a switch from one technology architecture to another, “this shift moves out of the realm of technology architecture change and into the realm of behavioural relationship and business change, so it’s more akin to the change from on-premises systems with client-server mainframe to the web and e-business.”

Mr Plummer adds: “I use Amazon as a great example of the shift that happened then, the kind of dynamic change that can happen to markets, and now we’re seeing the same thing happening because of the cloud phenomenon.”

But he cautions that, although most companies recognise they need a cloud strategy, “the problem is that a lot of them are deluding themselves. Some of them are being fooled by marketing strategy, and others are just not educated enough about what cloud computing is to be able to come up with a credible strategy”.

He adds: “The gulf between knowing you need a strategy, and having a credible one, is a big one. We have to point out that, because companies are still just educating themselves about what it means to be doing cloud computing”