Clearing skies: Is the 'Cloud' getting safer?

For a new technology to reach mainstream acceptance, two things are generally required. Firstly it must address and overcome concerns flagged by early critics (in the way that clever user interface design has effectively countered the criticism that smartphones are too small for business functions). Secondly, it must receive some endorsement from the key incumbent players in the market (in the way that Microsoft's acquisition of Nokia ultimately confirmed the overriding power of the smartphone).

On this basis, cloud computing (which has long been regarded as an “emerging” technology) now seems primed and ready for a mainstream breakthrough. In particular, cloud vendors are rapidly developing solutions to address security concerns that early critics flagged as its potentially fatal weakness and, at the same, the world's biggest technology companies are all rushing to invest in cloud capability and develop their range of offerings.

Companies of all sizes need to monitor these developments closely, so that they are in a position to make the right decisions about if, or when, to introduce cloud technologies into their business.

Addressing security concerns

Many businesses using traditional technology solutions have grown accustomed to their data being stored in a known location, on a network that they can control and ‘defend' against intrusion.  As a result, some have been hesitant to commit their data to a cloudnetwork in an indeterminate location that is beyond their control. After all, how could a cloud vendor ever take the same degree of care with their data as they do themselves?

These concerns have been fuelled by cautious regulators in some industries, a number of high profile security lapses (such as the heavily reported incidents where hackers were able to access nude photos of a number of female celebrities that had been stored on Apple'scloud services) and, in Australia, new privacy laws under which significant civil penalties may apply for serious breaches of data security affecting personal information.

However, the underlying foundation of these fears – namely that data in the cloud is less safe than data stored on a company's own equipment – needs to be scrutinised. After all, the fact that money may be stolen from a bank in a robbery doesn't mean that it's safer to store your life savings under your mattress at home.

Information stored on a company's own servers may well be as vulnerable, and is perhaps even more vulnerable, to hacking attacks than information stored on a cloud network operated by a responsible vendor with a well-funded and resourced data security team.

Cloud vendors have a very strong incentive to properly secure the data that is stored on their networks. They know that any security lapse will damage their market reputation and may have a direct impact on their revenue. As specialists in their field, it is not unreasonable to expect that they will be in a better position to defend their networks against hacking attacks than prospective customers who have no special data security competency.

In fact, there is an increasing range of cloud-based security services that customers can use to improve security on their own network infrastructure, with research firm Gartner predicting that the value of this segment of the industry alone will double in size over a four year period from $US2.13 billion in 2013 to $US4.1 billion in 2017. Far from being a weakness, security is set to become a strength and key selling point for cloud services in the future.

The question of timing

While in the early days the cloud may have been the domain of start-up companies and smaller innovators, it is clear that times have moved on and the biggest players in the technology industry are now all heavily invested in cloud technology – evidenced by the huge investments made by Amazon, Microsoft and Google. There can be no clearer indicator of the direction in which these companies think the market is likely to develop.

So, if you are still too reluctant due to security concerns to jump on the cloud bandwagon now, is there a risk that you will be left behind?

Certainly it is important to pick the right time to make your first steps into any market. And there may be some benefits to waiting for competition in the cloud marketplace to mature. In particular, the greater the number of viable service providers, the stronger the price competition should be as different providers battle for market share. Furthermore, some organisations may be wary of backing the wrong horse, given that the next 12 to 24 months should see a marked increase in the diversity of available service offerings. No one wants to commit to one product only to see it overtaken a short time later by some new innovation.

However, at the same time there are real risks with assuming the role of the technology laggard. In particular, delaying for too long may enable more nimble and forward-looking competitors to gain some advantage from the improved flexibility and business efficiency that new technologies can deliver. This is evident in the Australian banking sector, where the big banks who have been more proactive in upgrading their core banking platforms have won market share from their tardier competitors. This advantage will only increase over time, in line with the increasing cost of maintaining legacy systems that are ill-suited to cope with new business demands.

It is clear that the cloud services industry is building significant momentum. Those who are still sitting on the sidelines now face the difficult question about when to join in. Whether it is still too early or already too late is impossible to tell. However, cloud services are developing at a breakneck pace, and little effort is being spared in addressing security concerns and any other lingering doubts that thecloud sceptics may still have. 

Michael Swinson is senior associate at law firm King & Wood Mallesons