05/10/2010 03:45 pm ET Updated May 25, 2011

Cloud Computing Is Powering Innovation in the Silicon Valley

It used to be said that dreamers have their head in the clouds; today, clouds are actually making their dreams possible.

Various descriptions of "cloud computing" have been circulating for years, but it has reached a kind of celebrity status recently as the featured topic of cover stories in national publications, major tech conferences and web chatter.

I have found that this swirl of attention often celebrates the cloud as an amorphous, futuristic concept rather than as a practical technology solution that is driving innovation and making possible the web-based services all of us use everyday.

As a partner at Accel Partners, a Silicon Valley venture capital firm that invests in companies that are both enabling and leveraging the cloud, I am personally much more interested in cloud computing in action as opposed to cloud computing as some high-minded concept. Every day, I am witnessing firsthand how the cloud is transforming the entrepreneurial landscape and fueling a strong start-up culture. In fact, nearly ¾ of the companies we invest in are now launching on the cloud.

A recent Bloomberg BusinessWeek article predicting the future growth of Amazon's cloud computing services quoted an investor as saying that some venture capital firms are making it a "pre-condition" that start-ups use the cloud. From my experience, start-up companies need no encouragement from VC firms to use the cloud. The benefits themselves are strong enough drivers. In fact, their business models would not even be possible without cloud computing.

If you have ever used Google or Facebook, you have experienced the power and capabilities of the cloud. They were cloud computing pioneers out of necessity because they simply could not have become so agile, grown so large, managed so much data and become so successful without it. Perhaps the most notable cloud computing company is Amazon, which a few years ago launched Amazon Web Services and opened up its own massive data center to serve as the web infrastructure for other company's web products and services.

These web giants all have one thing in common: they are all working to harness big data with solutions to help solve and manage their data processing issues. Every search on Google and click on Facebook -- each Google document and Facebook photo uploaded -- is not only stored on the cloud, but needs to be managed and analyzed. These companies are dealing with vast amounts of data and it all needs to available at a moment's notice when called up in a search or other kind of query. Cloudera, through an open-sourced platform called Hadoop, powers that complex processing in many of the largest web and increasingly enterprise environments. And Cloudera is advancing the entire cloud computing industry in the process.

Thanks to the trailblazing efforts of these Big Data behemoths, new data-heavy web businesses can launch products and services without having to build their own software solutions or maintain their own expensive and complex data centers. This substantial cost savings enables them to focus on what is most important in new online ventures -- refining the user experience and growing a customer base.

One such company is Dropbox, which now has more than 4 million customers and growing. Dropbox's cloud storage service allows users to automatically sync their desktop files and digital content between multiple computers and platforms. What amazes me every time I visit their corporate offices is that you do not see stacks of servers or hear the steady hum of a data center. Drobox is a data-solution company but you would never know it. Instead, you see rows of desks and chairs filled with people who are devoting all their time to improving the front-end user experience service, not maintaining the back-end data infrastructure. The data piece is handled by Amazon Web Services and now Dropbox is one of Amazon's biggest customers. This whole scenario would be impossible only a few years ago.

It is fascinating to watch young upstarts innovating on cloud technologies and platforms that were created by the big guys and using them in creative and clever ways that will be relevant to these larger companies in the future.

Lookout is a company that has leveraged the cloud to create a mobile security product that has larger companies taking note. As mobile phones become more like handheld computing platforms and media devices containing sensitive information, they are more likely to become the target of hackers. Lookout's software can protect phones from mobile viruses and malware, back up important data and can even locate a lost or stolen phone. Anyone who has ever used anti-virus software on their personal computers knows that it can monopolize system resources (computing power and battery life) as it runs in the background. For Lookout, the cloud was the solution to this. They created an application that is able to run lightly in the background because much of the processing is taking place on -- and is offloaded to -- the cloud. The cloud has enabled them to build a robust mobile security solution without compromising the user experience and a phone's battery life.

These innovative products and services would not exist without the power of cloud computing. More importantly, these successful use cases are reinforcing the value of cloud computing, giving it definitional shape and making it possible for Chief Information Officers of Fortune 500 companies to chart their own company's direction to the cloud.

Whether the example is from Google, Amazon and Facebook or emerging leaders like Cloudera, Dropbox and Lookout, one thing is crystal clear -- cloud computing is here to stay.

And eventually, it's going to be virtually everywhere we look.

*Disclosure: Cloudera, Dropbox and Facebook are Accel Partners investments.