Here is an un-biased view of how the cloud could or couldnt achieve what MS has been talking about. I personally think this is why the Xbox team chose to use the move engines and the DDR3 when paired with the ESRAM for super low latency and more efficient over the GDDR5
http://www.eurogamer.net/articles/digitalfoundry-in-theory-can-xbox-one-cloud-transform-gaming
In Theory: Can the Xbox One cloud transform next-gen gaming?
Let's start with a quick look at what they mean by 'cloud computing'. Before PR and marketing people brought their fancy buzzwords into the equation, 'cloud computing' was known as 'distributed computing'. This means taking a computational workload and distributing it over a network across available processors.
The idea of cloud computing is to create large server farms full of generic processing power and to turn them from one job to another as needed. Microsoft's existing cloud platform is called Azure, started in 2010, and it's been steadily growing in market share against rival products from Amazon and Google. For developers to be able to use cloud processing, they need both a structure for turning game code into jobs and a means to interface with the servers. This game code model has already been pioneered with this generation's multi-core processors. Developers quickly learned to break their games into jobs on PS3's Cell processor and use a scheduling program to prioritise and distribute jobs across available resources. As for the server interface, Microsoft has developed 'Orleans' and we know it's being used for Halo, but we don't know how.
The two challenges - latency and bandwidth
Latency is going to affect how immediate the computational requests of the cloud can be. When a game needs something processed, it sends a request to a server and waits for the reply. Even assuming instantaneous processing thanks to the power of the servers, the internet is incredibly slow in terms of real-time computing. A request from your console has to find its way through numerous routers and servers until it reaches its destination, and the results have the same labyrinthine journey back. To put this in perspective, when the logic circuits of a CPU want some data, they have to wait a few nanoseconds (billionths of a second) to retrieve it from its cache.
Of course, we wouldn't send data over the internet without compressing it first. It's through compression that OnLive manages to stream high-definition game video over those same slow internet connections. If OnLive can do it with games, why can't it be done with game data for cloud computing? The main issue here is that video can be compressed with lossy algorithms that throw away large amounts of data that the viewer is insensitive to, producing a video that looks largely like the uncompressed source while needing a fraction of the data. This isn't possible with game data like AI or physics states or models.
Various less efficient but non-destructive compression techniques can be used such as zip and Lempel-Ziv (LZ), and it's of note that Microsoft has included four dedicated 'Memory Move Engines' on its main processor, two of which have LZ abilities. One has LZ decode and the other LZ encode, meaning Microsoft has such interest in compressing data that it has dedicated silicon to the job instead of leaving it to the CPU. The raw specs of 200MB/s data decoding is certainly enough to handle any amount of data traffic coming from the internet at broadband speeds, but the inclusion of these engines sadly doesn't point conclusively to an intention in streaming compressed assets from the cloud.
What can the cloud actually be used for?
What this means is that cloud computing cannot be used for real-time jobs, something Microsoft has admitted. What it could be used for though are large datasets that are non-time-critical and can be downloaded in advance to the HDD.
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