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Written By:  Roger W. Nainby, Esq.

Houser, Henry & Syron LLP

Toronto, Ontario

Cloud computing is one of the most talked about technology trends in business today. In a 2011 report, “Sizing the Cloud”, independent research firm Forrester Research estimates that the size of the cloud computing market will grow to $241 billion by 2020. An almost 600% increase from 2010.

So what is cloud computing?

Cloud computing involves the use of remote third party servers (the “cloud”), instead of your own server to store information and computer applications, such as e-mail or word processing. Cloud computing, at least theoretically, enables users to access and share data on demand, at any time, from anywhere in the world over the Internet. It may also offer cost savings as compared to conventional server hosting and application licensing because you no longer need to maintain your own hardware and IT infrastructure and your “cloud” service provider supplies the software licences.

Cloud computing is an exciting technological development but it is still “early days”. For businesses, reliability is critical and must be a key consideration in any decision to move services to the cloud. Disruptions can be costly and for some businesses catastrophic. Many discovered this first-hand when Amazon’s cloud services suffered a major outage in April 2011. This outage caused many businesses to pause and think about the inherent risks and lack of reliability that can be associated with the cloud. Other major concerns remain the privacy and the security of critical data which is shared and stored on the cloud.

Questions businesses need to ask

Before deciding if moving some of your applications to the cloud is right for your business, there are a number of issues to consider:

  • Where will the data be hosted? Is the host server outside of Canada and potentially subject to search and seizure under foreign law?
  • Who will have access to my data? For what purposes will they be able to access this data?
  • Will the data I share remain private and confidential? Will personal information be protected as required under Canadian privacy legislation?
  • Who will own the data? Will ownership pass to the service provider or another third party?
  • Will I have continuous access to my data? On what terms will the service provider be able to cut off access to this data?
  • What sorts of redundancies are built in in the event that access to my data in the cloud is interrupted? What sort of contingencies do I need to put in place in the event that I am unable to access the Internet?
  • If I am dissatisfied, can I easily move to another service provider?
  • What will happen if the service provider goes out of business or their servers are destroyed or seized?
  • What will my remedies be against the service provider if it violates the terms of our agreement or a privacy or security policy?
  • Does the service provider sell information about its users, or sell the data the users share?
  • What security measures does the service provider have in place to protect data? Can I audit these security measures to ensure they are actually in force or effective?
  • Will the service provider retain data for the length of time I require?
  • Will the service provider allow forensic investigations?
  • Is there a way to check that data that must be destroyed is actually destroyed?

If the answers you receive to these questions are unclear or do not satisfy you, it may be too soon for your business to move to the cloud. Cloud computing should always be compared with the other existing alternative services to determine what is appropriate for your particular situation.

Typically cloud service providers require the customer to sign a standard form non-negotiable contract that includes provisions that limit their liability as much as possible for such things as service interruptions and breaches of confidentiality. Given the risks referred to in this article, it is wise to review your cloud computing services agreement carefully.

Businesses considering moving to the cloud would be wise to seek legal counsel to ensure that your cloud service provider contracts protect you and your business from potential loss or liability.

If you are considering cloud computing and would like more information on this topic, please contact Roger Nainby at 416.860.8017 or rnainby@houserhenry.com.

For more information about Houser, Henry & Syron LLP, please visit houserhenry.com or the International Society of Primerus Law Firms.