"If you're connecting over a wide-area network and sharing the resources with other customers, it's a public cloud. This makes sense if you're a highly distributed company and creating applications but don't have a shared infrastructure," Maxey explains. "It's also good if you're putting out transient data, like movie trailers, that might run for five months. Temporary storage in the [public] cloud makes sense."

No. Cloud storage best handles large volumes of unstructured data and archival material, such as credit card and mortgage applications or medical records. For now, public clouds can't reliably handle highly transactional files or databases that require consistently fast network connections. Any kind of online transaction processing is a no-go.

Cloud storage also isn't an appropriate choice for Tier 1, Tier 2 or block-based data storage, says Jim Ziernick, president and CEO of San Diego-based Nirvanix Inc. "If someone is trying to replace a SAN in supporting a transaction-processing system like CRM, we're not appropriate. Even if we did do block-level storage, the latency of the Internet would cause a noticeable delay," he says.

"What we can do with cloud storage is give users nearly the access that they have with [network-attached storage]," he adds.