"'Cloud' based technology firms are being touted as the future of computing"
From the point of view of the Software firms the big advantage of Cloud is that it allows for Software as a Service and with that comes interesting forms of billing for their software. If they can shift to what is basically a form of rental then they get a permanent and predictable revenue stream rather than the occasional large purchases of "physical" product or licenses.
"Frankly it ddoes sound like going back to old mainframes as BadgersPaws says"
Well a bit, but the scalability is a big plus. If you've got a process that has a massive peak once a month and you run that process on hardware in house then you have to buy hardware capable of dealing with that peak. So 95% of your time you might be using 5% of your power.
If you "rent" your processing power then when you need that huge leap in capabilities you just get it and pay for it for only that period of time when it's required.
And that flexibility isn't possible if you've got a mainframe of your own.
"If I were running a firm the biggest worry I would have is that if my internet connection went down I would have no computing power at all in the building as every bit of data or processing power has to come into the building via the internet."
For bigger firms this is again probably less of a worry than for smaller firms.
If my company lost it's net connection we would have all sorts of problems regardless of where our software runs. To avoid that we have multiple ways of getting out to the Internet. So given as how we have to do that anyway that, for us, is not a new dependency that Cloud introduces.
For a smaller company with a reliance on perhaps a single ISP and broadband line then there might well be some additional worries.
"It also makes you entirely dependent on one firm for all your software and hardware needs and switching to a new supplier will be very difficult as many firms find out when they outsorce essential services."
Again that's probably a difference for bigger and smaller companies.
For bigger companies the work involved in moving from one supplier to another can be immense and complex and it's not substantially different if those suppliers are using physical boxes somewhere on your site or virtual machines out in the Cloud.
For smaller companies who are used to the agility of having, for example, their DOC files somewhere local to them and who can change software providers as easily as nipping down to PC World then it's going to be trickier.