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Current era of Web 2.0 is enabling new business models for using the semantic web. One such business model is leasing out computing platform of hardware and software over the internet to the tenants and is dubbed as Cloud Computing. The anticipated future trend of computing is believed to be this cloud computing as it promises a lot of benefits like no capital expenditure, speed of application deployment, shorter time to market, lower cost of operation and easier maintenance for the tenants. This paper analyses how cloud computing on the background of Web 2.0 is going to impact the software engineering process to develop quality software. As the cloud provider is an external entity or third party, how difficult will be the interaction with them? How to separate the roles of SW engineers and cloud providers? SW engineering should include framework activities to leverage all the benefits of cloud computing systematically and strategically. This paper extends the traditional agile process model named Extreme Programming (XP) and integrates interaction with the cloud provider to facilitate acceptance of cloud computing.