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Getting Realistic and Dismantling Two Myths about the Cloud

By August 18, 2014Article

Businesses that already have adopted the cloud are singing paeans of its elasticity, flexibility and scalability, which allows them to increase both top- and bottom-line revenue. 

In this scenario, it is quite natural for businesses to think of cloud as technology they simply must use if they want to remain competitive. No doubt, moving to the cloud makes a great deal of business sense; but every technology has its pros and cons and cloud computing is no different. 

While most organizations are aware of risks associated with the cloud such as data security, shared access (public cloud), centralization and the difficulty of managing different cloud services simultaneously, not many organizations give a great deal of thought to the geopolitical jurisdictions of the cloud and how it can throw a spanner in the works of cloud optimization.    

Something else that I believe will come to haunt the cloud and its deliverables is the pricing wars that are currently being fought by big cloud service providers like Google, Amazon and Microsoft. 

These points are of some concern as both have taken the form of myths. First, the cloud is considered an unfettered entity that is free from legal wrangles and not bound by any geographical jurisdiction. Second, businesses believe the pricing wars are a good thing for them as it makes access to the cloud cheaper. 

It’s time to dismantle these myths; think of it as a cold dose of reality. 

Myth #1: cloud is an infinite resource 

There is this erroneous impression in the minds of businesses that the cloud transcends all geographical boundaries and exists in a different plane altogether where geopolitical jurisdictions either don’t exist or don’t come into play. This “myth” or image of the cloud is created by cloud service providers that would like businesses to believe that the use of data in the cloud will not be governed by the law of the land. 

Here’s the truth – The cloud is not an infinite resource and the laws of the land do apply to all the data your business moves to the cloud. For example, all personal data collected for and about the citizens of the European Union (EU) is governed by the EU Data Protection Directive a.k.a. Directive 95/46/EC. 

Take a look at geopolitical jurisdiction through the laws laid down by the EU and you become aware of a few harsh truths:

  • There are restrictions on where you can store data. Some of it has to be stored within the country (Germany has this rule) and some of it can be stored within the EU.
  • Financial data must be stored for a minimum of seven years.
  • European data sovereignty rules require organizations to keep all customer data in the customer’s home country.  

The last rule is a bummer, isn’t it? 

These data protection rules apply not only when responsible parties (called the controller in this EU directive) are established or operate within the EU, but also whenever the controllers use equipment located inside the EU to process personal data. Thus, controllers from outside the EU who process personal data inside the EU must nevertheless comply with this directive. 

The rules related to data protection are extremely stringent in the EU, and these are applicable to cloud data as well. So, if your organization has customers in the EU, you are presented with a unique problem. Do you locate all their data in data centers in the EU? What this essentially means is you need to work with cloud services providers that have data centers in the EU. 

The cloud doesn’t look quite that “infinite” now. In fact, in some ways, it now looks quite limiting. Experts say these tangled legalities are threatening the Cloud and its growth. 

It’s not just the EU that has strict laws governing data usage; most countries have such laws in place.

The data privacy law in Canada might not have the stringency of the EU law, but it can bite you all the same. It goes by the name of the Personal Information Protection and Electronics Documents Act or PIPEDA. Under the aegis of this law, organizations need to make it very clear to their Canadian customers that any information provided by them can be processed in a country other than Canada and will be subject to the legal jurisdiction of that country. 

What do such rules and regulations mean for an organization that wants to leverage the optimal benefit of the cloud? It means it needs to choose its cloud service providers with care. If you are using the public cloud, your data will be at the mercy of these providers and therefore you must make doubly sure that the provider you choose is complying legally with specific geographic jurisdictions. At the same time, your organization is in legal compliance. Due diligence is the key. 

While there is no doubt businesses are getting smart about cloud adoption, they need to be smarter.  And yes – you must be prepared to spend. Cloud remains a massively affordable service. But stop thinking of it as “dirt cheap.” You need to pay if you want your data to observe all geographical jurisdictions. You might have to work with different cloud services providers or use a hybrid cloud and hire lawyers to give you a clearer idea of all the legalities involved with respect to moving data to the cloud. This requires substantial investment. 

So, the “truth” that cloud is inexpensive also comes with a few riders. (The most important rider: you prefer to remain in the “infinite resource” bubble, hoping and praying it won’t burst.) 

If you’ve been keeping track of the biggest cloud service providers, you know that it’s war out there, and the one overriding issue of this “war” is price. 

Myth #2: I am a customer; pricing wars are good for me 

No, it isn’t good for you in the long run. This is a myth. 

We have Google cutting prices, Amazon following suit and businesses jumping with joy. The public cloud is getting cheaper and cheaper (will it be free, after some time), and the price wars won’t stop anytime soon. 

The problem is that there are plenty of businesses that see the cloud purely through the prism of “price.” It’s good because it offers a truckload of benefit, at affordable costs. That’s the prevalent thinking. 

We’ve already talked about geopolitical jurisdictions and all the legalities involved. If you want cloud services that are in sync with these geopolitical “bottlenecks,” you must be prepared to pay higher. 

But hey! A cheaper cloud is great for customers, right? And it’s not all that bad; after all Google Compute Engine has been expanding its features portfolio periodically. 

Well, yes, but if you look at the price cuts with an eye on the future,  you will realize there will come a time when the big three will squeeze out all smaller competition (the competition that is offering plenty of high-performance services and coming up with useful extensions regularly). 

This is when they might just stop the development of their cloud services, knowing customers have no other option but to use their services. They’re cutting into their margins right now and still offering you a good product; but to think they will keep doing this is wishful thinking. 

They will build a solid customer base and slowly but surely stop expanding their product. Existing resources will be channelized elsewhere in areas that are liable to bring in quick profits. You as the customer might (read will) get saddled with a stagnant cloud that is going absolutely nowhere. Do you want this to happen? In all probability it will, if you are extremely price conscious about the cloud service provider you pick and do not choose a provider that is able to meet the specific needs of your project. 


As a business, start taking a look at the cloud more realistically than you otherwise might be doing. This will help you make a more informed decision related to the cloud. 

There is no doubt the cloud is good for your business. But think very carefully about how it should be used. And above all, get your cloud strategy right. Spend considerable time and effort evolving one that completely satisfies your needs and requirements. This ensures you are more realistic about the cloud and its deliverables. Also see the cloud for what it is — a disruptive technology, but a technology with its own limitations. Do that and you won’t go wrong with the cloud. 

Suraj Kumar is the founder and CEO of CloudBooks, an invoicing and billing software for small businesses and freelancers. He likes to solve problems related to small business and SaaS. Feel free to reach him. 








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