The Pro’s and Con’s of Cloud Computing

The good (the pro’s)

There are many reasons why an accounting practice would want to introduce cloud computing to manage its IT requirements. Some of benefits that can be derived include:

1. Ease of access: The ability to access data anywhere, anytime is something that truly can improve the efficiency of your practice, and is particularly important for practices who have staff located in different time zones.

2. Cost reduction: Accounting practices can reduce their hardware investment by using cloud computing as they are no longer required to purchase additional services and other network hardware. And, when outsourcing your IT services, you will need less space to store servers. However, care needs to be taken when assessing whether the cloud option is the most cost effective one for your practice – it is not always so.

3. Easily back-up and recover data: When using public cloud, the back-up function is maintained by the provider. You can also use cloud services to maintain back-ups of the data on your in-house network servers.

4. Maintenance and management: Having your services housed in a data centre will reduce the amount of time your internal resources spend managing these services. Server virtualisation enables ease of server replacement as the image can be copied to another server. If you are using software as a service, there will be no software updates for you to install.

5. Scalability: Cloud services offer the ability to increase resources without the need to purchase additional infrastructure in-house. Provisioning and implementation are undertaken on demand, which allows for spikes in usage and reduces the time taken to implement new services.

6. Not dependent on the machine: Cloud services can typically be used on any type of computer or device (including tablets and mobile devices).

The bad (the con’s)

While the benefits of cloud computing can be readily identified, there are also many reasons for accounting firms to wait until the technology is further developed before they rely solely on cloud based applications. Some of these include:

1. Data centre vulnerabilities: If a data centre crashes, all of its users will be affected. Don’t think this can’t happen – it happened to Amazon recently and the outage lasted for almost four days. Consider what the consequence to your business would be if you were unable to access your data for that length of time.

2. Dependent on Internet connectivity: If Internet connectivity at either end (the supplier’s or the user’s) fails, the data will not be accessible by the user. You must make sure that you are happy with the service reliability of your Internet service provider before taking on cloud applications.

3. Loss of control: Once your data is handed over to a third-party, you do lose some control. You are dependent on the third-party provider to ensure that the security and confidentiality of your data and information is maintained at all times.

4. Terms of use: Users are subject to the terms and conditions of the provider, which can include items such as the lack of a guaranteed backup of your data upon termination of your account (meaning you will not necessarily be able to get all of your data). You also need to consider whether the terms of use allow you to easily migrate your data away from the cloud provider. Based on our experience, this is not something that can always be achieved.

5. Security: What happens when certain data is no longer needed or required to be stored? Do you have a way of downloading the data and destroying it? And where will the data be stored? Is it in a jurisdiction which has suitable privacy legislation in place?

6. Reduced cost effectiveness for Australian users: Because of privacy restrictions, Australian businesses may feel compelled to store data on Australian soil, which will likely deny them the economic benefits that derive from relying on more cost effective Asian based data centres.

The ugly (the double con’s)

Whatever the likelihood of any of the following matters affecting your data is, they each warrant due consideration:

1. Servers being seized or data centre closing down: What happens to your data if the provider closes down? If the data or servers are seized by government authorities, can you continue to operate your business?

2. Compliance with privacy obligations: The Australian Privacy Act places an onus on any organisation to ‘take reasonable steps to protect the personal information it holds from misuse and loss, and from unauthorised access, modification and disclosure’. With this in mind, you need to be careful in determining where exactly your data will be hosted. Singapore, for example, recognises no right to privacy of data – will this allow you to meet your Australian privacy obligations? And then there’s the US Patriot Act, which gives law enforcement authorities the right to access personal data held by US-based companies, regardless of where in the world that data is stored. Although enacted as an anti-terrorism measure, you cannot discount its potential reach and application.

3. Legal ownership of data: Can you send your client’s data to the cloud without their consent? Careful attention must be paid to any amendments to the Australian Privacy Act – will it one day (soon?) require organisations to seek their clients’ consent to having their data stored in the cloud?

4. Breaches of security: We are all well aware that hackers can and do infiltrate many systems – just think of Sony. Yes, it is true that hackers could come along today and infiltrate your firm’s internal servers, but hacking a system which contains the data of multiple organisations has much greater impact.

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