At the time, O’Sullivan’s startup was negotiating a $5 million investment from Compaq, where Favaloro had recently been chosen to lead a new Internet services group. The group was a kind of internal “insurgency,” recalls Favaloro, that aimed to get Compaq into the business of selling servers to Internet service providers, or ISPs, like AOL. NetCentric was a young company developing software that could help make that happen.
In their plans, the duo predicted technology trends that would take more than a decade to unfold. Copies of NetCentric’s business plan contain an imaginary bill for “the total e-purchases” of one “George Favaloro,” including $18.50 for 37 minutes of video conferencing and $4.95 for 253 megabytes of Internet storage (as well as $3.95 to view a Mike Tyson fight). Today, file storage and video are among the most used cloud-based applications, according to consultancy CDW. Back then, such services didn’t exist. NetCentric’s software platform was meant to allow ISPs to implement and bill for dozens, and ultimately thousands, of “cloud computing-enabled applications,” according to the plan.
Exactly which of the men—Favaloro or O’Sullivan—came up with the term cloud computing remains uncertain. Neither recalls precisely when the phrase was conceived. Hard drives that would hold e-mails and other electronic clues from those precloud days are long gone.
Favaloro believes he coined the term. From a storage unit, he dug out a paper copy of a 50-page internal Compaq analysis titled “Internet Solutions Division Strategy for Cloud Computing” dated November 14, 1996. The document accurately predicts that enterprise software would give way to Web-enabled services, and that in the future, “application software is no longer a feature of the hardware—but of the Internet.”
O’Sullivan thinks it could have been his idea—after all, why else would he later try to trademark it? He was also a constant presence at Compaq’s Texas headquarters at the time. O’Sullivan located a daily planner, dated October 29, 1996, in which he had jotted down the phrase “Cloud Computing: The Cloud has no Borders” following a meeting with Favaloro that day. That handwritten note and the Compaq business plan, separated by two weeks, are the earliest documented references to the phrase “cloud computing” that Technology Review was able to locate.
“There are only two people who could have come up with the term: me, at NetCentric, or George Favaloro, at Compaq … or both of us together, brainstorming,” says O’Sullivan.
Both agree that “cloud computing” was born as a marketing term. At the time, telecom networks were already referred to as the cloud; in engineering drawings, a cloud represented the network. What they were hunting for was a slogan to link the fast-developing Internet opportunity to businesses Compaq knew about. “Computing was bedrock for Compaq, but now this messy cloud was happening,” says Favaloro. “And we needed a handle to bring those things together.”
Their new marketing term didn’t catch fire, however—and it’s possible others independently coined the term at a later date. Consider the draft version of a January 1997 Compaq press release, announcing its investment in NetCentric, which described the deal as part of “a strategic initiative to provide ‘Cloud Computing’ to businesses.” That phrase was destined to be ages ahead of its time, had not Compaq’s internal PR team objected and changed it to “Internet computing” in the final version of the release.
In fact, Compaq eventually dropped the term entirely, along with its plans for Internet software. That didn’t matter to Favaloro. He’d managed to point Compaq (which later merged with HP) toward what became a huge business selling servers to early Internet providers and Web-page hosters, like UUNet. “It’s ridiculous now, but the big realization we had was that there was going to be an explosion of people using servers not on their premises,” says Favaloro. “I went from being a heretic inside Compaq to being treated like a prophet.”
For NetCentric, the cloud-computing concept ended in disappointment. O’Sullivan gave up using the term as he struggled to market an Internet fax service—one app the spotty network “cloud” of the day could handle. Eventually, the company went belly up and closed its doors. “We got drawn down a rathole, and we didn’t end up launching a raft of cloud computing apps … that’s something that sticks with me,” says O’Sullivan, who later took a sabbatical from the tech world to attend film school and start a nonprofit to help with the reconstruction of Iraq.
Favaloro now heads an environmental consulting firm in Waltham, Massachussetts. What is remarkable, he says, is that the cloud he and O’Sullivan imagined 15 years ago has become a reality. “I now run a 15-person company and, in terms of making us productive, our systems are far better than those of any of big company. We bring up and roll out new apps in a matter of hours. If we like them, we keep them, if not, we abandon them. We self-administer, everything meshes, we have access everywhere, it’s safe, it’s got great uptime, it’s all backed up, and our costs are tiny,” says Favaloro. “The vision came true.”