"The cloud," is a phrase describing a system that allows content or services to be accessed from the Internet using a device located anywhere in the world. Cloud storage allows user data or content to be cached online and accessed via a network.

"Cloud storage provides a multitude of benefits for businesses," said Fang Zhang, storage analyst for iSuppli. "With cloud storage, IT resource requirements can be trimmed, scalability and flexibility promoted, more agile provisioning achieved, resource utilization augmented, management efficiency improved and maintenance costs lowered."

Cloud storage eliminates the need for customers to purchase their own storage equipment. This can result in cost savings for businesses because they can pay only for the actual amount of data that is stored.

The advantages of cloud storage will be offset to a degree by its shortcomings, which will make it suitable only for certain uses.

"Cloud storage can serve a wide swath of applications and enterprises, including manufacturing firms, IT services, websites, retail/wholesale outlets, educational centers, and entertainment outfits," Zhang said. "However, a few areas—such as government, finance and health care—may never move to cloud storage in the face of difficult issues related to privacy regulation, lack of adequate standards, potential power outages, and safeguards on physical security, access control, and speed."

Although cloud storage faces a number of challenges, the overall prognosis for the technology in the next few years appears to be optimistic.

With an increasing number of mature service providers offering customized cloud storage solutions for enterprise customers of all sizes, the adoption of cloud storage solutions will continue to grow. The growth rate will depend to some degree on the satisfaction in the customer experience with the technology, as well as the profits generated from both cloud storage service providers and end users.