Small Firms Need Blue-Sky Thinking About Cloud Computing Risks

21/11/2012 11:24 GMT | Updated 20/01/2013 10:12 GMT

Many SMEs are asking themselves whether the financial and practical benefits of using cloud computing are negatively outweighed by the associated risks it brings.

Cloud computing is no different from the other risks your business faces. When you opt to put an essential element of your business in the care and control of an outsourced provider you need to have made that decision with due consideration to your business needs and the risks associated. Assessing and mitigating the risks involved, and anticipating problems such as service failure and associated loss, will go some way to providing peace of mind when opting for cloud data storage and management.

Your options - to cloud or not cloud

For a small or startup business there are a number of ways in which using the cloud could make a positive impact on the bottom line. For one, as a new company, you can set up your entire business online without high capital outlays in purchasing new computer infrastructure or licences to run software. Having cloud computing enables you to download and access information as and when you need it, providing you are connected to the internet. This enables cloud users freedom from the traditional desk bound business environment. Freedom can offer flexibility and make you available to partners and customers more readily - and more importantly, before a competitor can get there. It also frees up capital which would have been spent on office rent and utilities, to be invested in other areas of the business that need developing.

Hiscox research* shows that there is obvious concern from SME's that their IT systems are kept secure and up to date. Of those surveyed 41% said that a computer virus attacking their system was their biggest concern. This was followed by the theft or loss of actual computer or data storage devices (32%). Cybercrime was an issue for 27% of respondents. Being in the cloud gives SME business owners greater peace of mind. Cloud providers are building more technologically advanced data centres and can provide more up to date and regularly maintained security options which SME business owners often can't afford to implement themselves. The right cloud supplier will save the time and effort which would usually be spent setting up and maintaining anti-virus software, sorting out related IT issues, training staff, keeping abreast of latest IT developments, spending time backing up data, updating systems and so on. All of these aspects are already being developed and enhanced by the cloud provider so all you have to do, is plug in and enjoy the benefits.

However, in considering your options as a business owner you should ensure you choose the cloud supplier whom bests meets your needs. When buying any new hardware or service, you also need to think about what could happen if it didn't work properly.

Following storms across the East Coast earlier this year which knocked out Amazon's data centre and took down Netflix, Pinterest and Instagram to name a few, cloud providers seemed to be better prepared for superstorm Sandy. Some websites did go offline, but although impacted by Sandy, data centers in the US largely appeared to continue to operate. The benefit to an SME is that established data centers are staffed by experts who can work behind the scenes in such scenarios to keep the data centre up and running and providing customers with uninterrupted service levels. Stories of diesel shortages emerged after Sandy, with small businesses queuing at petrol stations for diesel to keep their generators going: it is worth checking, but your cloud vendor should be able to offer a more resilient contingency plan after such disasters.

Being a small company, you're likely to be most vulnerable to service disruptions because you're unlikely to have the spare capacity or cash to get you through a major problem. If your business suffers a service disruption, or worse, a data breach, you need to feel confident that your cloud supplier has your best interests at the heart of their service model.

Know your provider

While it less likely to happen as technology improves, if there is a service issue with your cloud provider that impacts your customers, the first action to consider is to reassure them that you are aware of the issue and are doing something to rectify the situation. You will need to explain to them what has gone wrong and what is being done to put it right but if the fault lies with your cloud service provider then you may not have any of that information.

Ask potential cloud computing suppliers what processes they have in place to handle outages or security breaches and how they work with you to help you handle the situation with your own customers. You want to have access to the provider and its crisis information in those critical hours. You need to have a clear understanding of who and how the vendor will be communicating to you if there is a problem. You need to see their security certifications for additional peace of mind and even go as far as researching the potential provided by looking online at reviews from existing customers. It's important to have a clear understanding of the offering, and to establish their service levels and track record.

* The findings come from Hiscox's fourth DNA of an entrepreneur study which researched 3,000 owners or partners in small and medium-sized businesses in six countries: the United Kingdom, the United States, the Netherlands, Germany, France and Spain. The full report is available here.