Cloud computing is a method of distributed computing that can create a fundamental shift in the way computing is handled and, more importantly, where it is handled.

According to TechTarget, an online source of technology information (see www.techtarget.com), in cloud computing, processing capabilities are available via a combination of Internet connections, software and services that can be accessed over a network. This network is collectively known as "the cloud."

Up to now, the information technology folks working at insurance organizations just like yours have been very happy for technology infrastructures to be set up with personal computers and servers and networks purchased and maintained by individuals or corporations.

And even though many IT professionals would prefer you to think there is some magic behind it, the reality is the systems that were built were tangible objects executives could see, hear, touch and even understand (if they really wanted to).

Today, the future is upon us and a transition is already being made to applications which are hosted in cyberspace on a "cloud" of computers or servers, not owned by individuals or maintained by your IT department, but accessible by all.

Computing is no longer local in this scenario, and users of the cloud--your employees--will simply request the application or service they need and the cloud will provide it.

In simple terms, through cloud computing the capabilities of SOA and Web services are extended beyond internal systems modules and a few systems interfaces, out to a broad global computing environment where various services are provided by computing clouds around the world.

You are no longer utilizing your company's internal IT staff to build and maintain customized applications that may already exist elsewhere in the world. You are no longer paying for unlimited server space to host applications or additional memory for personal workstations that must have complex programs loaded to complete certain specialized tasks.

Individual service providers can enable specialized services on infinitely scalable clouds for subscriber uses. The services can be used in company applications just as if they were hosted inside the company on internal equipment.

Business services can be built by combining individual cloud services with proven functionality.

For instance, if you wanted to enable several different payment plan options in your company's billing system, you could build an interface for credit cards, another for automated clearinghouse electronic transactions, another for debit cards, and still more for paper.

But then you would still have to find a way to collaborate with all of your existing vendors to understand and test the interfaces and get everything working.

In a cloud-computing scenario, however, your company administrators would find services in the cloud that specifically handle what the company needs, then use them. Maybe they will find a service that can be called which handles the process of an automated clearinghouse or credit cards.

Better yet, the company may find an existing service that processes all types of payments by including the type in the service request. Alternately, perhaps a service would be found that handles the entire billing process from start to finish, thereby eliminating the need for a system.

Clouds being built today are capable of containing thousands of services doing everything from simple, single functions to complete systems. And the evidence that this trend is building is all around you.

Many popular software applications exist as a service on a cloud. This means anyone with the right password (purchased for a fee, of course) can access the applications.

Consider the potential impact this can have for business in general and insurance in particular. Computing clouds give vendors of all types and sizes a place to publish and sell their services in a secure, infinitely scalable manner. Vendors can then "allow" customers to use their services for fee or license.

If it makes things easier to understand, try thinking of the cloud-computing concept as similar to the timeshare mainframe concept of years gone by, except the clouds are all over, built for scalability and ease of management, and one can easily change from cloud to cloud.

The vision for cloud computing is that business processes will begin to be built that require nothing more than a subscription to required Web services located in the computing cloud, with links that help them perform the business functionality needed.

What can cloud computing do specifically for the insurance industry? Well, the benefits are plentiful for those insurance organizations that can overcome ingrained fears about giving up control, security of data and not being able to walk down to IT when there is a problem.

As you might imagine, cloud computing mandates computer resources be pooled and managed via software rather than by local IT staff. This fact alone may be enough to reinforce the natural resistance that exists on the part of insurance organizations to adopt new technologies.

As for insurance, industry-specific applications could include bureau-based rating services, or a service that would be sent new policy information and which would return a complete printed output in a PDF format.

For insurance organizations, cloud computing can enable greater flexibility and allow all companies, regardless of size and type, to have access to the same technology and functionality. It levels the technology playing field, forcing insurance organizations to compete, innovate and differentiate based on product and service.

In addition, cloud computing can simplify IT management and increase efficiencies of system resources, since IT staff will no longer need to install software and manually set up all the systems. Performance is therefore optimized since computing resources can be consolidated to provide greater power and speed.

Further, downtime is minimized and underutilized resources that once would have sat idle in a local company situation can be taken advantage of by another subscriber to the cloud.

That means the real question becomes: "Is the insurance industry ready for a level playing field where the 'mom and pop' mutual company has access to the same billing and policy administration system as the top-25 companies in the market?"

Better yet, are you ready? Can you afford not to be?