The hottest new term in the tech world is “the cloud.” But, to many of us, “the cloud” is bit of a mystery. What does the term actually mean?

Application services that are accessible online from anywhere in the world—e.g. Google’s search engine or webmail client (gmail)—are said to reside “in the cloud,” meaning that the processing work that enables these services to exist is carried out by distant server farms, rather than on local computers.

With cloud-based application services expected to change the face of industrial technology, ITRI has thrown itself into the creation of the Cloud Computing Center for Mobile Applications (CCMA), a software development center that seeks to leverage the calculating power of the cloud.

In the past, companies that wanted to manipulate large amounts of data had to spend enormous amounts of money to build their own data centers (known colloquially as “machine rooms”). But as network speeds have increased and hardware has matured, it has become possible to send data across a network to a virtual data center that executes the necessary calculations, however large and complex they may be, and returns the results to the client.

Dr. Tsay Ching-yen, the atmospheric scientist who has chaired the Industrial Technology Research Institute since 2010, is intently focused on issues relating to the recruitment and retention of high-tech talent.

In an effort to strengthen the Taiwan tech industry’s software capabilities, in 2009 ITRI hired Chiueh Tzi-Cker away from his position in the US to run the CCMA. Chiueh’s previous work included stints as the director of core research for Symantec Research Labs, as chief scientist at Rether Networks, and as a consultant to the US’s Defense Advanced Research Projects Agency.

Though ITRI pays him far less than he earned in the US, Chiueh was happy to take up the position because it involved taking on a new challenge for Taiwan.

He explains that Taiwan’s tech industry has long excelled at manufacturing hardware, but that its software development was usually limited to the small programs that manufacturers felt obliged to package with their hardware, such as cellphone games or optical character recognition systems. Very few people were interested in developing large programs like operating systems or search engines like Google.

But the emergence of the “age of the cloud” has caused corporate demand for IT hardware and servers to decline. The money that companies used to spend on building data centers has instead begun flowing into upgrading software and services. That spells trouble for Taiwan’s hardware-oriented industry.

In addition, machine crashes and software bugs are simply a fact of life when running IT systems. “In the past, Taiwan’s thinking was to improve hardware and equipment, to use physical means to solve problems,” says Chiueh. “That wasted time and cost money.” He argues that many problems are more amenable to software solutions.

For example, Google’s cloud has been successful in part because the company “treats failures as the normal state of things.” Having developed a variety of software to manage equipment failures, they don’t worry about crashes.

With such systems in place, Google can buy inexpensive servers and drivers. When one fails, they simply throw it away and the software immediately compensates. “We think Taiwan’s lack of an operating system like this is an important part of our technology gap, so we want to build one,” he says.

ITRI excels at developing technology that promotes the growth of industry. The photo shows a “robot guide” developed by ITRI’s Mechanical and Systems Research Lab.

The US has the most mature systems software technology, so Chuieh used both his academic and business networks to scour the nation from coast to coast.

“I discovered that people in their 40s and 50s were more readily persuaded by high ideals. They had already established stable economic foundations for themselves, weren’t feeling mortgage pressures, and had kids who were either still young, or old enough to be independent.”

Patrick Fu, a former vice president of programming with Interwoven, sports a CCMA T-shirt with a number three (he was the center’s third hire). Now director of the center’s infrastructure software division, he says that even though ITRI pays only half what he earned in the US, he was glad to have the opportunity to come back and work on software development for Taiwan.

Chiueh recruited nearly 30 people from abroad, each of whom had 10–20 years experience in systems software. Putting their heads together, they got aboard the “cloud train” and began pouring their efforts into developing systems for the cloud era.

Chiueh explains that a cloud-based operating system would help firms like Chunghwa Telecom that lease virtual data centers to other firms to systematically manage very complex data.

Such an operating system would need to concurrently manage 5,000 servers, tens of thousands of drives, and hundreds of network switches, while also making every client feel that using the virtual data center is just as efficient as building their own data center.

The center’s strategy for developing an operating system has been to work on software and hardware in concert, integrating Taiwanese hardware with new software. The strategy pairs a “cargo container computer” (a mobile data center the size of a cargo container comprised of more than 1,000 servers) with Taiwan’s first domestically developed cloud OS to provide an all-in-one virtual data center package.

After more than a year of daily overtime work by the staff of CCMA, this practically unprecedented concept now exists in a tangible form. The center’s Cloud OS is currently undergoing testing at Chunghwa Telecom Laboratories and is expected to hit the market in the third quarter of 2012.

“I’ve been very fortunate to be a part of this developing trend,” says Frank Lai, a former engineering manager with WebEx Communications who now serves as deputy director of CCMA’s cloud applications division. He says that Taiwan, a hardware powerhouse, is facing a difficult industrial transformation and has no choice but to stiffen its spine.

To recruit talent, you need to win people’s hearts. Dr. Tsay Ching-yen, ITRI’s chairman, argues that the sine qua non for attracting talent is providing opportunity and a vision. Many outstanding professionals living abroad would love to give something back to their country. At ITRI, they can realize their dream by helping upgrade Taiwanese industry and technology.