Public clouds, owned and operated by third parties, offer greater scale and, as a result, greater cost savings. But they are immature, providing far less control over SLAs, increased security and compliance concerns, and complex back-end integration. Private clouds are attractive because they offer similar benefits to those of a public cloud, but add increased control and advanced customization. With many pros and cons to consider, the three operating models--traditional hosting, public clouds, and private clouds--will likely coexist for at least the next three to five years, especially for large and mature enterprises. In addition, each model will contribute infrastructure, middleware, and business applications to the enterprise technology portfolio.

I expect we will see companies travel in two directions. High-volume, high-performance firms that also must meet robust regulatory and security mandates (e.g., Wall Street firms and other large highly-regulated enterprises) are likely to shift from the current hosting model to a hybrid cloud model that combines hosting with elements of a private cloud. These companies may selectively adopt public cloud services from vendors such as Salesforce.com, but for the most part, public clouds will not be able to meet their needs for performance, security, and compliance. On the other hand, small to mid-size companies in less regulated industries, such as retail, may choose to augment their current hosting model with the public cloud--able to extract its benefits without the need to meet more stringent requirements.

Firms of all shapes and sizes are at least exploring the idea of sending infrastructure, applications, and information to the cloud -- and they would be taking a big risk if they weren't doing their due diligence. As I , our clients fall into one of six increasingly complex categories in their cloud exploration and adoption. At one end, clients are surveying the market or might be using an off-the-shelf cloud application or service (the stock Salesforce.com or Google's Docs and Mail services come to mind). Clients at the other end of the spectrum are already using multiple cloud applications that are neatly integrated with corresponding in-house applications.

As a first step in sorting through the hype, an organization must gain a clear view of its systems portfolio in the context of business needs and pain points. Without it, a company will feel the weight of mismatched cloud services and applications--in terms of both cost and flexibility. The results of a six-step readiness assessment will guide a company as it engages a few targeted cloud providers to discuss high-priority candidate systems for the cloud. In order to "clear the lens," an organization must:

* Understand the business demands for new functionality.