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April 29, 2016updated 28 Mar 2017 5:29pm

The limits of cloud

By John Oates

Cloud computing promises to solve all the major problems experienced by enterprise IT departments.

It means the end of downtime and no more security problems. Cloud marketeers promise instant extra capacity when you need it, perfect interoperability with all your applications and they claim they can provide all of this along with reduced costs.

The reality of course is somewhat different.

Utility computing can bring fantastic benefits and there is hardly a large company which does not rely on cloud infrastructure for large parts of its IT function.

But it has its limits and recognising these is vital when planning your hybrid infrastructure strategy.

Utility computing is not yet a utility

The old term for cloud computing was utility computing – the idea that getting your hands on computing power would be as simple as using a plug for electricity or a tap for water. But the reality is that using cloud computing in an enterprise environment still requires detailed deal making, checking of service level agreements and a myriad of other checks to make sure it works.

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Setting up a remote storage agreement might not be as difficult or time consuming as building a data centre but it is still a very long way from ‘turning on a tap’.

Bandwidth and latency

Putting any data or application in the cloud puts you at the mercy of your network providers. Staff will need access to cloud functions both in the office and at home. They will need to download data at reasonable speed with reasonable reliability and they will need to upload data too. You need to think about bandwidth and latency to make sure moving to the cloud does not cost you functionality.

This is especially crucial if you are thinking about moving what have traditionally been ‘desktop’ functions to the cloud.

If logjams or even periods of unavailability do occur you need to be very sure who is blame and if necessary who will pay compensation. This can be a complex question when different network providers, hardware companies and applications are involved.

Interoperability and vendor lock-in

For all the claims that cloud services are accessible from anywhere on any device the reality is not quite so sunny. There are risks of vendor lock-in from cloud providers and you should only enter into any such agreement if you are sure you can get out of it. Moving ever increasing quantities of data from one provider to another might be a headache but there are many reasons you might want to do it in the future.

Apart from anything else knowing that you can fairly easily change providers will make negotiating on price easier.

The other issue is what happens if your provider changes terms and conditions during your contract. Nine times out of ten this will not impact your business but again your contract needs to cover you if it does.


One of the main claims of cloud computing is that it can save your business money. It also promises to make accounting and cashflow easier by charging a simple monthly fee.

But the reality is that you still need to look very carefully at costs.

Cloud contracts usually come with a set-up fee – and most come with a termination fee too.

Although there is less need for initial hardware expenditure compared to running your own project you can bet there will still be a need for some spending. Making sure your network is up to the job – now that core business functions will rely on connection to the cloud – is another area of expense you should consider.


Of course you need to choose a cloud provider which takes security extremely seriously. And you need to know what your security responsibilities are too. If someone in your organisation gets a virus, and uploads it to your cloud provider, who is responsible for any loss?

Using a cloud provider also makes compliance with data protection rules more complicated.

Just following normal European Union is difficult enough. These mean you will soon be liable to inform customers if their data has been breached – which means your cloud provider has to tell you first.

If your business has to deal with additional data protection requirements then you need to make sure your cloud partner is following those rules too.

These might require data be kept in certain jurisdictions. But they might also govern back-up requirements, when and how data is deleted and who pays for all this compliance.

If your organisation is subject to Freedom of Information requests for example – will you have to pick up the bill or will your cloud provider?

An end to ‘light bulb moments’

This is a more controversial area and deals with the less tangible business benefits of retaining control over some IT systems.

Every business relies on the unique nature of the systems it uses to deal with its customers.

If you are a small, barely-funded start-up then there is a huge attraction in using an off-the-shelf, cloud-provided billing system to charge your customers.

But as your business grows you will start to see the way you bill your customers, and the data that process creates, as a core part of your business. Making tiny improvements in how you bill thousands of customers can create sizeable new profits.

The same is true for any business relying on any kind of software whether it is a mapping system, logistics or content management.

Any of these could provide the opportunity to create a significant advantage and way to differentiate your firm from its competitors.

The truth is this sort of innovation is far more likely to come from an in-house team than from a distant provider who is selling a similar system, with a few tweaks, to dozens of its customers.

Many companies start by relying almost entirely on cloud providers and then begin to bring services back in house as their business matures.

This has two immediate benefits.

Firstly it should increase flexibility – you can do what you like with your own systems.

Secondly the improvements you make to your own systems are your intellectual property and potentially provide a barrier to entry to competing companies.

This can bring benefits to customers but also to suppliers if you can more easily integrate and align your systems with theirs.

Keeping key business data inside the organisation can also make big data projects easier. Having a team available to run pilot projects using real time data can provide real business insight.

Cloud computing has huge benefits. It can give you access to more, or indeed less, computing power almost at the touch of a button.

But as IT systems and increasingly sophisticated use of data play an ever more central role in business innovation and success so the need to keep some systems in-house grows ever stronger.

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