Here is an interesting blog post by Webex/Cisco's director of product strategy, David Knight, asking the question "Why Cloud vs Premise?" that might be helpful as you plan your 2010 IT budget and projects. I agree with his conclusion that the security/compliance and performance advantages of on-premise computing often trump the "pay-as-you-go" and bundled cost advantage of cloud-based software-as-a-service (SaaS). In fact that's really the only tradeoff you have to make today in analyzing how you will deploy your enterprise software.
His conclusion has merit: You want and need choice.
But in addition to cringing at his conflation of SaaS and cloud, I don't agree with what Knight claims are also advantages of cloud-based SaaS: more rapid deployment and lower costs to you. You may be able to develop software more rapidly in the cloud, but the rollout is no faster for production software, and I see no independent research that it costs less from a total cost of ownership point of view. So you drop back to the advantages of "pay as you go" and bundled cost.
In addition, his post got me thinking that the actual words used to describe the choice may cause the conflation and mixed-up analysis of benefits. Increasingly "premise" is the wrong word when it comes to trading off security and performance of one type of computing vs. the ease of budgeting for computing -- or any other perceived advantage -- in the other type. The real question eventually will be: What do you want to keep inside the firewall (possibly even using a public cloud as infrastructure) and what do you want to share with customers/clients/voters and/or suppliers/partners? Whether the computing happens in your building or campus (or even on your corporate network), which is the implication of "premise," doesn't matter. I'm not a communications software guy, but from a security/compliance point of view, I am sure there are already all kinds of third-party service providers involved in so-called secure nets.
Finally, I don't believe the cloud/SaaS problem of performance will last forever and the security/compliance issues are simply a matter of changing laws -- of both human nature as well as governments. So if you need to make these on-premise vs. cloud tradeoffs next year as part of your annual IT planning process, check back.