By ANDREW LAVALLEE

AT&T Inc. is unveiling a service that provides computer networking and storage services for business customers, making the telecommunications giant the latest company to invest in what is known as "cloud computing."

Cloud computing has become a crowded field in a short period of time, as technology companies such as Google Inc., International Business Machines Corp. and Amazon.com Inc. have announced initiatives. Verizon Communications Inc. said it plans to enter the market in the first half of 2009.

Cloud computing's appeal is that it can eliminate a company's need for its own data center. It also lets businesses pay for bandwidth on an on-demand basis.

One of AT&T's first customers is the U.S. Olympic Committee. The organization, which runs teamusa.org and other Olympics Web sites, knows traffic will leap this month as fans watch videos and look up event results and then drop sharply as soon as the games are over. It plans to use the AT&T service to increase its network bandwidth temporarily.

Jim Paterson, a vice president of product development at AT&T, said another type of business that could benefit from cloud computing would be an e-commerce retailer that sees a spike in activity on Black Friday, the day after Thanksgiving. Mr. Paterson said companies can cut networking and storage costs by as much as 30% with a cloud-based service.

Cloud computing carries risks. Amazon's storage service had an interruption last month, its second outage this year, disabling businesses that relied on it for their operations, and some companies may shy away from using a data center that they don't have physical access to in case of emergency.

Businesses are increasingly concerned with "elasticity" in their technology infrastructure, said Daryl Plummer, a cloud-computing analyst at Gartner Inc. Anticipating those needs isn't easy, he added, and both under- and overestimating them can cause problems ranging from crashes to being stuck with unnecessarily high hosting costs.

"A business has unknown capacity requirements, or maybe believes they know what the capacity requirements are, but is going to be surprised by something," he said. "Worse yet, after they respond to the enhanced need, they scale up to support it, and then it goes away."

Write to Andrew LaVallee at andrew.lavallee@wsj.com

Printed in The Wall Street Journal, page B9