What does the future hold for cloud computing?

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As we have seen in our previous articles, cloud computing offers great IT benefits to companies making accessibility to new applications and delivery of new IT infrastructure easy, efficient and cost effective. This is not to say, however, that companies should ignore both commercial and legal risks that inevitably arise. New opportunities go hand in hand with new challenges.The challenge for suppliers is differentiation and targeting their services in a crowded market place. The challenge for the customers is to be able to determine out of the various possibilities and offers the best technical, commercial and legal solutions for their needs. The challenge for legal advisors is to understand the risk, cost and control balancing act at the heart of cloud computing and advise clients in a way that is appropriate to their business.

So, what now?

Currently, most SaaS and PaaS services are provided as stand-alone services and customers buy the services they need direct from the suppliers they choose. It is anticipated that customers will start looking to the market to provide outsourced solutions that bring together public and private cloud elements and cloud service providers may start forming alliances and distribution channels with systems integrators and outsourcers.

Understanding the risks of cloud computing

The potential benefits of cloud services have been extensively advertised. What the customers must now understand are the inherent risks (both commercial and legal).

One of the key risks here is storage: if customers pay extra when they need to use more storage for information and data, they need to be certain they have policies in place to control these increases. Duplicate records will become a direct cost as well as an inconvenience. Businesses will need to think clearly about how long they really need to keep information for (there is a clear link to legal obligations under data protection and limitation periods here).

Another risk is in identifying and amending (where necessary) the contractual model for cloud computing. Customers need to be aware of these risks in order to be able to manage them. It would be desirable that both service providers and customers could come closer to negotiated contractual terms so that the terms are not supplier favourable and the customers do not have to try so hard to amend them.

Accreditation and certification standards

The development of standards and accreditation or certification bodies define what a good cloud service is. If suppliers want to discourage customer audits and improve quality providing independent due diligence information will go a long way. When suppliers join accreditation and certification, customers are able to reduce their costs and to rely on third-party audits.

The incorporation of added value services

Traditional systems integrators will similarly look to compete by bundling additional services (along with risk transfer) with cloud services and a services integration offering.

The ability of communications infrastructure to cope with significant growth in demand

The potential of cloud computing to increase network traffic for telecoms companies is another potential risk and is one of a series of trends in the enterprise and consumer markets that are increasing demand on the communications network infrastructure (for example, mobile apps, location-based services and media streaming). We expect to see the limits of the current communications infrastructure tested by the increasing demands being placed upon it. As companies and public bodies put more applications and services into the cloud, communications outages will cause greater disruption.After a number of years where communications was seen as a commodity, and for which pricing was being forced lower and lower, we anticipate seeing traffic shaping arrangements under which telecoms companies charge more for a priority service.

This reflects a shift in the balance of power in supply and demand but also recognises that telecoms companies need to invest in next-generation infrastructure to support growing demands on the communications infrastructure. This might encourage software developers and customers to look to IaaS and PaaS providers who will have the scale to negotiate more effectively with communications providers over traffic management.

All articles are for general purposes and guidance only and do not constitute legal or professional advice. Copyright 2010 Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.

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