Salesforce.com's New Data Residency Option (DRO) Will Widen Door for Cloud Adoption

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Despite the rapid growth of cloud-based alternatives to traditional, on-premise systems and business applications, the greatest barrier to broader user adoption continues to be lingering concerns about data privacy, security and ownership. Salesforce.com unveiled a new Data Residency Option (DRO) at Dreamforce ’11, which could eliminate this obstacle to adoption and exponentially expand the addressable market for cloud solutions.

Over the past year, nearly every major market research firm has revised their market forecasts to predict faster growth of the cloud computing marketplace. Yet, at the same time they also continue to publish various survey findings expressing persistent customer apprehensions about the  consequences of giving their sensitive corporate data to relatively unknown and untested cloud vendors.

Whether for compliance or competitive reasons, a substantial proportion of business and IT decision makers in organizations of all sizes remain uncomfortable about feeding their customer, patient or  other corporate data to cloud-based services.

Some cloud vendors have circumvented these concerns by offering location-independent “appliances” that permit users to deploy a vendor’s cloud solution behind a customer’s firewalls. Purists view this deployment method as a violation of the basic principles of cloud services because it threatens to undercut the efficiency and scalability that underlies the multi-tenant architecture at the heart of true cloud-based solutions. However, a growing number of cloud vendors are adopting various forms of this appliance model to alleviate user angst about giving up their data.

Rumors have floated around the cloud industry for years that Salesforce.com has permitted a handful of its largest customers to deploy its cloud-based customer relationship management (CRM) solution behind their corporate firewalls. Salesforce.com has denied these rumors. But Marc Benioff finally acknowledged at Dreamforce ’11 that enough corporate decision makers have continued to resist moving to the cloud because of data protection concerns to goad Salesforce.com to develop a method that can resolve this issue.

At Dreamforce, Salesforce.com unveiled a new Database.com Data Residency Option (DRO), which enables customers to retain ownership of their data behind their firewall. DRO is based on a unique encryption technique developed by Navajo Systems, an Israeli start-up and former THINKstrategies client, which Salesforce.com acquired for an undisclosed amount shortly before Dreamforce.

Navajo Systems has developed an encryption technique that permits the user to conceal their corporate data as it leaves their internal data source. The technique provides the cloud vendor, Salesforce.com in this case, a key that enables it to translate the encrypted data as it passes through its cloud application. The data is then re-encrypted as it leaves the cloud vendor’s solution and returns to the customer’s data source. Navajo’s approach safeguards the customer’s data and enables the customer to maintain control over the location of the data.

This encryption technique overcomes the most important impediment to cloud adoption. By addressing customer fears about potential data threats in the cloud, Salesforce.com has alleviated the greatest source of apprehension among business and IT decision-makers. Eliminating this barrier to adoption makes the addressable market for cloud solutions infinite.

Salesforce.com isn’t alone in offering this type of cloud encryption solution. CipherCloud provides a similar cloud data encryption and tokenization tool, which enables users to retain control of their data as it passes through cloud-based solutions.

Salesforce.com didn’t dedicate much time to talk about its new DRO capabilities at Dreamforce. It was more determined to demonstrate the business value and use cases for its Chatter social networking platform as the foundation of the new “Social Enterprise.”

Marc Benioff only provided a tantalizing teaser about the potential benefits of DRO during his Dreamforce keynote talk, which were echoed by senior product management and marketing personnel in a series of analyst briefings. We won’t get a good look at this new functionality until 2012. In the meantime, we can dream about the industry-wide repercussions of DRO as other cloud vendors scurry to emulate Salesforce.com’s latest innovation.

Jeffrey M. Kaplan is the Managing Director of THINKstrategies and Founder of the Cloud Computing Showplace. He can be reached at jkaplan@thinkstrategies.com.

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