Joe Mildenhall, CIO at Apollo Group Inc., is taking baby steps into cloud storage. "We have a lot to lose. If we're playing, we're only going to play with the big guys," he says. The Phoenix-based for-profit educational institution is using Amazon's S3 to temporarily store papers that some of its 400,000 college students submit through the Apollo Web site.

But even with Amazon, Mildenhall will entrust only low-risk data to the cloud. For example, students can submit Word documents to the Apollo Web site, which runs the documents through a grammar-checking engine and then parks them in Amazon's S3 storage. When a student retrieves his document, the data is purged. "The major characteristic is that it's not very important storage to us," Mildenhall says.

So far, the integration with S3 has worked well. But Mildenhall is still wary. "If for two days, my opinion would change," he says.

The most common storage-as-a-service offerings are online backup and archiving applications. Things have changed since the days of StorageNetworks, a company that couldn't make a go of hosted backup and closed its doors in 2003. The original idea behind StorageNetworks was outsourcing -- providing a service that used the same storage frames that were in the data center, says Damoulakis. Now, many cloud storage services use low-cost, commodity storage in a distributed architecture. "We've advanced very far in virtualization, the Internet, distributed computing and the grid concept," he says.