Cloud computing is a rage today. You throw up a discussion on the technology, and it clicks with the fraternity. Everybody has an opinion on it. In my circle, people think cloud computing is an easier and economical to increase computing capacity through a subscription model. Add to this application service clouds and you have full blown datacentres to be subscribed.

Now this is going to be disruptive. Imagine the chaos that would take place if this becomes a reality, and the adoption pans faster than what one takes to migrate from traditional infrastructure. With cloud computing getting more realistic and affordable, it is a not a question of why but when would corporates start moving into the clouds. Like real clouds, computing clouds look heavenly, and they are perceived with suspicion.

As a risk management professional, I have a huge stake in cloud computing since its impact could change the rules of the game.  Consider the business of software piracy and import. With cloud computing, piracy will disappear. When this starts happening, large computing users will move to the clouds, making them many times larger with unimaginable data storage. With higher concentration of data, thieves will get there; innovate newer tools to steal. This is one of the risks we have in cloud computing. However, this time it would be a challenge, as there are many other collateral risks to deal with. Let us examine issues like legal compliance, segregation of data and data privacy.

Today, most of our contracts are jurisdiction-based and mostly relate to the location of data. With cloud computing, this is something which can’t be defined, and this is the very basis of cloud architecture. Till laws evolve to accommodate these technological issues in contractual terms, large corporations will find it difficult to migrate quickly to clouds.

Another challenge cloud service providers will face is ensuring segregation and security of data between competing businesses. If this can be achieved, cloud computing will make sense for large corporations. For example, if a logistics cloud provides all logistic requirements to a manufacturing company, it will bring in economies of scale for companies who can now look at taking calculated risks. Similarly, a banking cloud that provides all banking services can be built to provide economies of scale provided data segregation and security concerns are taken care.

Data privacy is slowly turning into legislation in many countries, EU being the most mature. The data privacy laws define who can process private information and how the information needs to be handled or managed. In many cases, the law also provides a clear direction in terms of jurisdictions where data can be processed. Obviously, such requirements can’t be met at present level of cloud offerings. May be EU builds its own cloud and allows only EU citizens to access and manage their personal data. Then this will put companies in EU at disadvantage, as they will not be able to exploit the best in clouds.