If you still think that clouds can be defined as Cumulus, Cirrus and Stratus (or storm clouds and white, fluffy clouds), then it’s time to get a little education.

Like when “FRIEND” and “FRIENDING” became verbs, thanks to Facebook, the “cloud” is now a metaphor for the greater Internet. It is the amorphous area somewhere in the ether that allows the delivery of computing as a service instead of a series of products. The cloud is a perceived area away from your home or place of business that can handle some or all of your data needs, storage, computing and specialized software without you having to buy a software or hardware product, plug it in, install it, learn to use it and maintain it (sometimes with outside vendors or additional inside staff).

So if you want an agency management system, a word processing system, a rating system, or any form of software that you need and purchase a cloud version of it, you are trained on the system and have the setup to use the system but the hardware and software that houses the system is somewhere else, supported by the folks who know more about its maintenance and upkeep that an insurance agent. Every time a new version is ready, it ‘magically’ appears the next time you use it.

Cloud computing for us as insurance agents is similar to trusting the power company to keep you supplied with electricity and gas from their central sources or the telephone company to manage your phones through their Central Offices.

There are lots of agents who swear they will never move their computer systems off site. They simply don’t trust someone else to manage their computers. After all, what happens if your clients become made available to someone else and they try to steal your customers?

Of course, they play a different tune after the flood, tornado, hurricane or fire when their in-house computing is destroyed and the ‘tapes’ they were still using as back-up were stored in the same office that was just destroyed. When the more advanced agencies who store their back-ups off-site through data exchanges every evening find that their security was breached by a hacker who has replaced the contents of their customer files with slogans about their favorite rock group, they may alter their opinions about the advances of technology.

The fact is that the CLOUD IS HERE. Of course it will have its drawbacks, but the sheer efficiency and expense savings of not buying new computers every few years and new systems every so often and eliminating the full time IT staff (or expensive contract vendors) will give you much more control over your client data. Also, the cloud companies are much more likely to afford to adhere to the new national privacy laws than a simple agent trying to maintain his own client files.

You don’t need to know a lot about how the “cloud” works any more than you know about how the telephone company routes your calls or how the power company generates and transmits your electricity. But you should become acquainted with a few terms:

There are three categories of cloud computing: raw computing capacity, computers that are ready for software and the software itself.

INFRASTRUCTURE-AS-A-SERVICE (IaaS) is the most basic; it’s one or more servers out in the cloud (or a bunch of storage capacity or bandwidth). IaaS customers are the tech companies with a lot of IT expertise who want access to a lot of computing power but don’t want to buy it or maintain it.

PLATFORM-AS-A-SERVICE (PaaS) is a cloud-based platform that companies can use to develop their custom software. This software can be custom applications or can be software that integrates and/or changes existing applications. When you hear about the technologies like JAVA, .NET, Ruby on Rails, etc. these are the systems that allow techies to start writing code quickly – also highly technical.

SOFWARE-AS-A-SERVICE (SaaS) is what you and I will typically be using. It’s an application or a suite of applications that reside in the cloud instead of on a user’s hard drive or in a data center. A prime example of SaaS is, the customer relationship management software (CRM) that’s been in the cloud since 2000. More recently, Google Apps, Microsoft Office 365, and, of course, the AMS and Applied Systems cloud applications have become available to us and are being used by ever-increasing clients bases in our business (and in most other industries).

The common traits of the cloud is that customers RENT the space and these applications instead of buying them, shifting the cost from a capital expense to an operating expense – which is immediately deductible. The vendors are responsible for everything “under the hood” (i.e. maintenance, administration, capacity planning, troubleshooting and backups). Finally, it’s usually faster and easier to get service over the cloud than internally.