Switching to the cloud computing model of buying technology as a service purely to cut costs and speed up deployment...
can be a mistake.
Regulatory or legal requirements are often forgotten, and this can expose businesses using cloud computing to unnecessary risk says Andrew Scott, partner at law firm Dickinson Dees.
The Data Protection Act, for example, requires businesses to control the way personal data is processed and stored, but this is extremely difficult with cloud computing, says Scott.
It is also unlikely that businesses will have any of the control they need over where the data is stored or have any real assurances that no data is left behind after the contract ends.
Cloud computing service contracts, says Scott, require the same amount of care as traditional outsourcing agreements when it comes to regulatory compliance.
Cloud computing does not work in every context, he says, and services have to be selected carefully with legal requirements in mind.
This is particulary true for businesses in highly regulated sectors such asfinancial services.
"Businesses must ensure they select only cloud computing services that enable them to avoid risk entirely or manage it to a reasonable level," says Scott.
Cloud computing is still animmature business model and issues around risk and compliance still need to be ironed out.
"We are still in the period of learning and just beginning to come up with best practices," he says.
A lack of business process management to go with the services offered by cloud computing is another reason businesses should be cautious about the model.
Although companies are saving up to 40% on project costs by deploying CRM applications using the cloud computing model, the benefits could be short term says Michael Maoz, analyst at Gartner Research.
These services typically do not include help for businesses to improve customer processes over time.
This could result in an erosion of customer satisfaction, says Maoz, unless those using CRM services invest their own resources to measure and manage long-term process improvements.
Businesses need to realise that being able to deploy enterprise level applications quickly at a lower cost does not necessarily guarantee success, says US-based management consultant John Thorp, president of The Thorp Network and chair of Val IT Steering Committee for the IT Governance Institute.
The perceived benefits of the cloud computing business model are making it a popular and likely choice, with no end of the current economic crisis in sight, with some surveys indicating adoption by more than 60% of businesses.
A successful outcome, says Thorp, depends on understanding what the business wants to do with IT, selecting the right IT services, and then making the necessary organisational changes to use that service to achieve the desired business outcome.
Technology deployed through cloud computing may satisfy short-term needs, but has no more chance of delivering longer term benefit if services are not selected carefully and their use managed properly, says Thorp.
Considering the benefits of lower cost, faster deployment and no maintenance worries, it is clear why cloud computing is attractive during an economic downturn.
It is equally clear that not all businesses can make use of all computing services offered via the internet cloud without first doing a full analysis of the implications.
Signing up to a cloud computing service without being aware of the legal and compliance risk and without ensuring the business has processes in place to manage, measure and use that service, could be a recipe for failure.