Stepping into the cloud

Friday, 01 October 2010
An explanation of the significance of the cloud revolution for those who don't work in technology.

Until now, articles about the next best thing in technology have been confined to media that is only read by those who understand and enjoy the subject. One of the most important aspects of cloud computing is that this has to change and this article puts into plain English the reasons why.

Cloud computing

Cloud computing is utility computing, outsourcing the supply of everyday technology functions so that they are delivered to you (via the internet) ‘on tap’, in the same way that you receive water, electricity and telephony.

A little more than a century ago, large organisations generated their own electricity. Then came power stations and the national grid. The same change is about to happen to the way businesses manage their IT.

It is unlikely that in ten to 20 years’ time, businesses will still be allocating premises and buying and maintaining hardware, software licenses and the resources needed to run their technology supply in house.

I think the word cloud is a misnomer and, given how important perception is in conveying a product or service, quite misleading. It originated from the shape adopted by those who work in the industry when drawing a diagram of IT circuitry that incorporates the internet. Servers are drawn as boxes and the internet has always been shown as the outlines of a big cloud. And yet the highly resilient infrastructure that the shape represents cannot be equated to something as nebulous and insubstantial as a cloud.

How new is it?

As consumers we are no strangers to cloud technology. Anyone who has a Hotmail or Googlemail account will have been sending emails via ‘public clouds’ for years without realising it. These providers use a global network (cloud) of thousands of computers to move and store our emails wherever suits them best. For example, an email sent from Jersey to the UK is likely to go via America.

Have you ever wondered why you can log in to a Hotmail account anywhere in the world, at any time and be completely confident of the service being there? Or how they seem to have infinite capacity (you never have to delete emails from these accounts) and all this costs nothing at all? Compare that to the cost of running your business email, the level of reliability you can generally expect and the constant need to manage storage, etc. Business always follows consumer trends and when you consider this, it’s not hard to understand why.

For businesses, however, cloud computing is relatively new. Many disaster recovery systems include the online backup or archiving of data in remote data centres, which also comes under the cloud computing banner because the company’s own systems are not used to store the information.


Benefits include lower costs, greater flexibility and increased reliability – all the things that improve competitive advantage in the early stages and become essential as a business and the environment in which it operates mature. One of the other great benefits is that the capacity to meet any demand is available, but a firm only pays for what it needs and uses. Peaks and troughs are accommodated on pay-as-you-go basis.


The most important thing for all business owners to understand is the security implication of cloud computing.

To explain this more clearly I need to go back to Gmail and Hotmail. When you log in to Gmail and retrieve your emails you may have noticed that the advertisements that run down the right-hand side of the screen are relevant to you. If you’ve never noticed, you are not alone, but the fact is, Google (or its equivalent) ‘reads’ your emails before you do and delivers the advertising content of that page accordingly.

And that is why consumer cloud is so inappropriate for businesses, especially financial services providers who build confidentiality into their service offerings and need to know their data is both secure and exactly where it is held.

Credible cloud computing providers will have three key elements to their offering: the latest encryption technologies, extremely resilient networks and backups recording data in case of the unlikely event of a system failure.

Encryption is a vital factor that can guarantee the domicile of data at rest (stored). If encrypted data can only be disclosed in a readable format (which is required by law enforcement agencies and regulators) by its owners, as the encryption key holders, then in the eyes of the law (and for all practical purposes) the data still resides in its home jurisdiction irrespective of its physical location.

When thinking of moving across to a cloud computing model, it is clearly important that financial services firms choose jurisdictions that can provide the required levels of guaranteed confidentiality.

For example, under US law, in particular the Patriot Act, the FBI and other agencies have the right to view the content held on any computer, even if it is being used to store information from other jurisdictions. The authorities in Jersey have taken a more balanced approach to the question of investigatory powers and have granted the authorities the right to see only data that may be related to a particular investigation.

When thinking of moving across to a cloud computing model, it is clearly important that financial services firms choose jurisdictions that can provide the required levels of guaranteed confidentiality.

All this means that those who are responsible for managing and complying with complex regulations and clients’ requirements for confidentiality have to understand and take ownership of their IT strategy. And that is often not those currently in charge of running IT. The business owners’ knowledge and understanding of the regulatory environment in which they operate is fundamental to the decision to move from the traditional in-house, self-provisioning model to taking software as a service. This is quite a shift and one that IT providers must also grasp, as from now on they are going to be consulting with business stakeholders who do not speak their language, because until now, they didn’t have to.


There are great cost and efficiency benefits to be made with cloud computing and if the move to this model is handled correctly, then IT really can become something that drives a business without pulling on large and often scarce resources.

I have worked in technology for longer than I care to share and believe that this is one of the most significant and positive developments the industry has brought to businesses for some time.

Author block
Chris Evans

 Chris Evans is CEO of Foreshore.

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