Not all clouds are security threats. (flickr.com/kky)

Researchers at North Carolina State University and the University of Oregon have discovered a way to turn cloud computing into hacker heaven.

Disguising data transfers with URL-truncating services like TinyURL or Bit.ly, researchers found that cloud-based processing power intended to shift computing tasks from laptops, tablets and mobile devices could be converted to crack encoded passwords or used for a large scale denial-of-service attack.

WhiteHat Security's Jeremiah Grossman told Dark Reading that cloud browser providers need to "ensure adequate security controls are in place to prevent their end users from abusing the system."

N.C. State researcher William Enck said one key is awareness:

NC State's Enck says there are ways for cloud-based browsing providers to better monitor their traffic -- namely, by associating accounts with the users so they can detect possible abuse or rogue traffic. Just like blacklisting offending IP addresses in a DDoS attack, for example, he says, this would allow cloud browser providers to quash abuse. "It's similar: You can say, 'Here are the clients from where [the traffic] is coming from and the IP addresses.'"

Dark Reading notes that users of the Silk browser on Amazon's Kindle Fire have to register with the service, and each tablet has a unique key that identifies that user and device to the browsing service. The university researchers who discovered these vulnerabilities believe Amazon's strategy is a sound way to keep cloud users honest. They also recommend using CAPTCHAs so potentially malicious cloud users can't write scripts that will automatically create multiple accounts they could later use in large-scale hacks or cyber-attacks.

We're not really looking forward to the day we can say hackers have maliciously used the cloud to "make it rain."

There is an iPad buried in here somewhere

The last five months were supposed to be a period of investment for New York based AppSense, which raised a whopping $70 million from Goldman Sachs in June. "We thought with all the hiring and outlay, our financials would take a breather, but that wasn't the case," said Peter Rawlinson, the company's VP of Marketing. Despite growing the staff by 60% over the last year, the company saw its business jump 54% as well, to $71 million.

The company provides virtualization services that establishes a unique user log-in for different devices. So a staffer who works on a PC at the office can sign into their PC at home and  see the same applications, documents and level of corporate security. That same virtual desktop can travel with them on a Windows laptop and be accessed from any terminal around the world connected to the company's network.

The migration to Windows 7 drove a lot of AppSense business in the past year. But the company also used its Goldman investment to open a new research center in Santa Clara. "Right now the big trend is the consumerization of IT," says Mr. Rawlinson. "At first it was only major execs who wanted their smartphones and iPads to be added. But now, especially with the explosive growth of the iPad, a lot of companies are realizing the employees are demanding their own devices at work, and that it can be productive to incorporate them,"

AppSense next move will be to expand its platform to Android and iOS so that mobile devices beyond the Windows 7 spectrum can be part of it virtualization. An employee could have their office PC, their Mac at home, their Android phone and their iPad, all part of the same synched, secure cloud personality. If that proves to be a success, a slightly dumbed down version for the average consumer could be next.

"If the sound quality of a particular song on a user's hard drive isn't good enough, Apple will be able to replace it with a higher-quality version."

Because Apple is planning to charge a subscription fee for this service, it won't necessarily need to differentiate between music that was purchased legally and pirated tracks.

"Users will be able to store their entire music collections in the cloud—even if they obtained some songs illegally. That would finally give the labels a way to claw out some money on pirated music," writes Bloomberg.

The music labels are trying to leverage Apple against the unlicensed lockers launched by Amazon and Google, which is ironic, since they spent the last ten years watching in horror as Steve Jobs and iTunes became the gatekeeper for music in the digital age.

But local indy fave eMusic is set to announce a way for users to stream their music from the cloud and a partnership with EMI that would mean all four major labels are in the eMusic catalog, according to an article in Crain's.

What sets eMusic apart from rivals like Rhapsody or Rdio is that it offers downloads at a discount, as opposed to free streaming for a monthly fee. Currently eMusic has 400,000 subscribers paying $12 a month, although its not a profitable enterprise.

No doubt a killer streaming service will be big business as more folks buy smartphones and tablets with 4G capabilities. It's a sign that the thirteen year old firm is still eager to innovate, although it may be coming at the expense of eMusic's core cred, with Beggars Group, Merge and Domino recently leaving the service. Can you sell more without selling out?

Hefter boots up the computer and in a flash I'm logged into Microsoft's newest operating system, Windows 7. I open up a document and type a few paragraphs, then pop into MS Paint and create a quick image. I log on to the internet, check my email and stream a video. Microsoft recommends a machine with at least 1 gigahertz processor and 1 gigabyte of RAM in order to work in Windows 7, but this computer seems to handle it just fine.

"Most people are surprised when I show them how well an old machine can handle a new operating system," says Hefter, cracking a grin. "Especially when I tell them I also took out the hard drive."

Heftner has transformed this old Dell into a what's known as a virtual desktop. The processing power, the memory, even the operating system itself are being delivered from a small unit the size of a pizza box tucked into a closet down the hall. That single piece of equipment, dubbed the "juicebox" by Hefter, can power hundreds of terminals on a cloud based network.

"Most schools and city governments and non-profits in America are stuck on an expensive treadmill," Hefter explains. Every four to five years they have to upgrade their computer systems, a process known as the hardware refresh cycle. "If you could break that pattern of planned obsolescence, you would generate huge savings, not just on the economic level, but from an environmental standpoint as well."

It's an idea that excites cash strapped institutions looking for a new model, and terrifies the big PC manufacturers accustomed to annual paydays. Hefter has named his company Neverware, "Because with us, they will never have to buy a new computer again."

- - - Check Out Neverware's Swank New Digs - General Assembly >>

The Neverware project began in May of 2009, after Hefter, now 25, had graduated from Wharton with a degree in economics. He had several job offers on the table, but decided to move back in with his parents in Long Island and set up shop in the garage. "I noticed a lot of old computer s we had out there started to disappear," said his father, Harold Hefter. "Which was good, because I wasn't sure how to throw them out anyway."

At first Hefter's parents were concerned about his startup ambitions. "I wanted him to go get his PhD," said his mother, Eva. "But he just kept telling me he wanted to change the world. He can be quite the mensch."

Despite his lack of formal training, Hefter, a self-taught computer whiz, created a working prototype of the Neverware technology in under a year and in May of 2010 was invited to join Dogpatch Labs in New York. There he caught the eye of Diana Rhoten, co-founder of Startl, an organization that looks to identify and accelerate interesting projects in the realm of education technology. "Jonathan fit the profile of entrepreneurs we're looking for," says Rhoten. "Young, passionate and committed to a truly disruptive idea."

Before founding Startl, Rhoten was the program director at the National Science Foundation's Office of Cyberinfrastructure. "It was me and a bunch of supercomputing folks, and we spent a lot of time thinking about virtual desktops and cloud computing and how to make that work for schools," says Rhoten. "When I saw what Jonathan had done, I realized that this was the solution I kept picturing in my head but didn't know how to create myself."

The key difference between what was on the market and what Neverware was offering, says Rhoten, is that Hefter's project was built from the ground up to be lean and light. "The virtual desktop solutions that most of the big corporations offer are too expensive and complex for schools to deploy," says Rhoten. Hefter's technology, by comparison, was cheap, worked with whatever computer the school already had and reduced the amount of oversight needed on a daily basis.

Take this case study offered by HP about how they helped St. Peter's Anglican Primary School. In it they replaced 160 traditional PCs with 80 blade PCs and 90 thin clients. That costs approximately $100,000 and generates 2 tons of e-waste. Hefter solves the same problem with two "juiceboxes" powering the original 160 PCs. Cost = $20,000. E-waste = 0.

It seemed too good to be true, so Rhoten spent the next few months trying to poke holes in Hefter's project. "I brought in infrastructure guys to look at it, computing folks, people from school districts at both the local and federal level." The response was always the same: this looks very promising, but there are a lot of people trying to do virtual computing with more experience and resources than this kid.

Rhoten eventually showed Neverware to an ex-Google engineer, who like everyone else, dismissed it at first. "I'll never forget, about a week later this engineer emailed me up, it was on Thanksgiving day," says Rhoten. "He said,I might have been wrong. I can't stop thinking about Neverware. This might actually work."

- -

The changes powering Hefter's vision are all around us. "The history of personal computers until recently was bigger and faster," says the technology writer Nicholas Carr "But now, with more and more computing done out of the cloud the size of your hard drive doesn't matter anymore. From Facebook to mobile apps, cloud computing has become the dominant model for individual consumers, whether they know it or not."

The big PC companies, however, aren't going down without a fight. Early on in Neverware's history, Hefter contacted Dell and Intel, eager to share with them his approach. It was the equivalent of calling the major oil companies to show them a design for a solar powered car. "I also don't know that we'd be interested in "radically extending the life...of desktop PCs," was the reply Hefter got from a higher up at Intel.

"Sometimes I just feel like screaming," Hefter told me one afternoon, as we walked briskly down University towards Union Square. "It's like I'm Russel Crowe from The Insider, and I have this truth that I just want to get out there, but nobody wants to listen."

Slowly but surely, however, people are starting to listen. Hefter took a recent trip to Silicon Valley, where he met with several of the major players in the cloud computing and virtual desktop space. This week he will be speaking at the Aspen Institutes forum on innovation in education in D.C..

"There is a perfect storm brewing for adoption," said Peter Baynes, executive director of the New York State conference of mayors. "We see folks are becoming more comfortable with the cloud and, at the same time, budget concerns are forcing them to take a hard look at how they spend."

In fact, according to a city hall source, New York City is considering a pilot program that would deploy Neverware in local schools. "I think at a time like this, when cities are trying to squeeze every last drop from their budgets," says the source, "Neverware has the potential to be a real game changer."

The way Hefter sees it, schools are a beachhead from which to remake the whole PC market, and soon, the market for mobile computing devices. "Perhaps it was a little naive of me to think that these companies would want to hear about ideas that could hurt their businesses," says Hefter. "But to me, if you're just protecting the status quo, if you are no longer concerned about innovation, then you don't deserve to be setting tech policy for the rest of us."

Check Out Neverware's Swank New Digs - General Assembly >>

bpopper at observer dot com - @benpopper