Illustration: Karl Hilzinger.

Illustration: Karl Hilzinger.

Business by and large has headed for the cloud, but don't act precipitously

THE adoption of cloud computing is running at a brisk pace.

A recent Gartner survey found 40 per cent of Australian companies already use cloud services, and only 11 per cent say they have no plan to adopt them in the next few years.

The term cloud computing describes third-party computing resources that can be scaled up and down as needs change. While widely used in consumer products - such as Gmail, Hotmail and Dropbox - some corporations are still hesitant to adopt it, even though it grew in spending by 18.8 per cent last year, Gartner says.

''There is an aggressive intention, despite the challenges,'' says Rolf Jester, vice-president and senior analyst with Gartner.

Here are the top five challenges companies are facing:

1. Security and privacy

SECURITY data continues to be a concern among many organisations, particularly around sensitive customer information.

''(Government) agencies need to take a risk-based approach with security,'' says Scott Wallace, acting first assistant secretary in policy and planning in the Australian Government Information Management Office. ''Consider the nature of transactions, such as information about a commercial arrangement or citizen information, and the risk of the proposed cloud arrangement. The agency needs to determine whether there is adequate security to protect [sensitive] information.''

Mr Wallace says the Defence Signals Directorate recommends against placing data with providers outside Australia, unless dealing with information that is publicly available.

2. Technical support

''YES, it can be frustrating to put in a service request when previously an organisation could do it themselves,'' says Loryan Strant, director of Paradyne cloud consultancy, which uses Microsoft Office 365 and Telstra T-Suite. But those who adopted the cloud and no longer need to maintain the infrastructure in-house learn to live with these frustrations.

While smaller cloud providers may be more responsive than larger ones, where there may be several levels of support, he says large organisations can provide better support services, such as dashboards, automated notification processes, and automated server recovery.

3. Cost

CLOUD'S ability to cut costs is not a given, according to Gartner's recent annual Hype Cycle report. ''There can be a higher cost for long usage,'' Mr Jester says. ''People often look at the short term, but the longer-term costs can be higher.''

Contrary to popular belief, the cost of moving to the cloud is quite high, says Rob Hilton, founder and director of promotional agency TPF, which migrated its core infrastructure onto the cloud.

''Our provider is doing a very good job, but it's a significant cost that I never felt before. The expertise needed is expensive, and it takes a lot of time to move systems across.

''We have a significant ongoing monthly cost, running and maintaining the cloud-based systems. There is a fixed minimum fee for hosting and upgrades, but if there is a major implementation it can be expensive. The implementation cost is the one to look out for, not just the hosting cost.''

Adhering to compliance rules may also increase costs, Mr Jester says. ''Are you dealing with providers that are mature in their understanding of compliance issues? If certain data is stored in Australia because of legislation, then that may cost more.''

4. Contractual agreements

ANOTHER top concern for the Australian Government Information Management Office is legal and contractual agreements with cloud providers, Mr Wallace says. ''For example, is there an ability to audit? How do the parties resolve disputes? There also needs to be clear service level agreements.'' Comparing the latter can be difficult.

5. Loss of control

WHAT do you control when you move your systems and your data to the cloud? Mr Jester says to make sure you understand who owns, accesses and manages the data.

Control over the data held in the cloud is an issue for Russell Baskerville, managing director of IT services company Empired.

Mr Baskerville made sure Empired had control over its data. ''We have access to our data through NetSuite apps via a secure connection.''

Despite the increasing popularity of cloud services and the big names attached to them, Gartner warns enterprises to perform the standard due diligence on potential cloud providers. ''It's just normal business management,'' Mr Jester says.