One of the biggest issues with cloud computing is companies' concern about where their data will be hosted.

Microsoft office 2007 doesn't have a datacentre in Australia, which means that any data on Azure has to be hosted overseas. The Redmond giant realises that some companies may feel squeamish about where their data is located.

"The environment that you would have on-premises at a customer site is very similar to the environment that is offered on SQL Azure, which means that you can move applications from the cloud to on-premises or from on-premises to the cloud with very little, if any, changes, because underlying technology is the same. It's .NET, it's Windows Server, it's built using Visual Studio in both cases," Carraro says. "It's really a matter of building the app you need and then deciding if [it should] run on cloud or on-premises.

"This is very compelling for software vendors because some of their customers prefer an on-premises version of their application for various reasons and some customers prefer to have it in the cloud."

Despite this, preference for locally-hosted data leaves the door open for other providers that offer a cloud service hosted in datacentres around Australia. Lacking in scale that Microsoft Office Ultimate 2007 mate or Amazon offer, on-premise prices often run at a premium, but customers may be prepared to front extra for the feeling of security.

It isn't just non-critical systems that companies are considering moving. "We're seeing a lot of interest around not just development and testing environments but also around production IT moving into cloud."

McNaught says that when comparing unit prices, a local-based cloud will go for a light premium, but if bandwidth costs are taken into account along with other costs of having an offshore cloud, he thinks it will be on par.