Recently, I've been blogging about the differences (and similarities) between cloud computing and traditional outsourcing. This generated some thought-provoking comments from Kate Craig-Wood, the managing director of IT hosting company Memset.

Cutting straight to the chase, Craig-Wood believes there are only three real differences - at least between cloud computing and IT infrastructure outsourcing. They are:

1) Shorter contracts: Hours, days or weeks ("at most, one month"), rather than months or years ("usually at least six months for traditional outsourcing").

2) On-demand capabilities: near-instant scaling up and down of available resources.

3) No up-front costs: Capital expenditure (cap ex) and installation fees, she explains, are absorbed into the rental charges. In effect that transforms the cap ex usually associated with IT infrastructure into operational expenditure (op ex).

"Modern 'managed hosting' providers like my company are largely synonymous with 'cloud computing' or 'utility Computing' providers," Craig-Wood argues. After all, she continues, a company such as Memset can provide a customer with anything from a single virtual machine to a large dedicated cluster, with a contract of one month and no set-up fees.

"We are blurring the line between traditional IT infrastructure outsourcing (for example, HP/EDS at the high end and Rackspace at the low end) and 'pure' cloud providers, such as Amazon EC2."

The impact for IT outsourcing providers is clear, she believes: cloud computing is exposing the true costs of computer resources - which, thanks to Moore's Law, are "really, really cheap".

According to Craig-Wood, "Cloud/utility providers are driving the commoditisation of compute and storage resources, thus eviscarating the outrageous profit margins enjoyed by the old guard of IT outsourcing providers."

It's a controversial viewpoint - and I have to admit that I'm still mulling it over. I guess it all depends on what services are provided around these resources, the level at which they are delivered, as well as the level of assurance required by many corporate customers. Kate claims that cloud computing "threatens the livelihoods of the big IT firms who have become better at selling peoples' time than actual IT services"; I, on the other hand, wonder if peoples' time is something many companies are still happy to pay for - if it frees up time for their own employees, or indeed, enables them to run a leaner workforce? What do you think?