By Frank Jennings

Outsourcing computing in this manner to cloud providers allows a business to benefit from cost reductions through the sharing of computing resources, software and data. Recent issues in the reliability of service provision will result in companies re-evaluating the risks of being too reliant on a single cloud outsourcing supplier. In order to spread the risk, firms should ensure their cloud-based systems are resilient by distributing across a number of data centres, territories or even providers.

Companies use cloud based services to host their websites, applications and for data storage. Although only a small amount of data was permanently lost in the recently reported service outages, any service outage can have a huge effect on both the companies involved, with their own websites being inaccessible and business being lost as a result.

Highlighting a separate issue, Sony admitted at the beginning of May that the personal details of over 100 million PlayStation, online gaming and entertainment users had been stolen. As a result, Sony took both its PlayStation Network and its Sony Online Entertainment service offline.

Sony reported that data taken may have included names, home addresses, e-mail addresses, credit card information, dates of birth, phone numbers and gender information of the services users. Since the data breach was exposed, shares in Sony have fallen by 4% along with calls for the company's CEO Howard Stringer to stand down over the crisis.

Sony said: "There is no evidence that our main credit card database was compromised. It is in a completely separate and secured environment."

However, in its statement, Sony has warned customers to be conscious of any contact via e-mail, telephone or postal services by what seems to be official Sony correspondence.

The recent service outages and data loss incidents, though different in nature, raise key questions: is the technology properly evolved and are customers prepared for the consequential impact of problems on their business. Cloud outsourcing does hold many benefits for businesses, offering solutions with both increased speed and flexibly at a relatively low cost. Companies are increasingly using cloud-based outsourcing solutions for a number of different areas of their organisation, varying from CRM and human resources to finance and transaction processing.

As UK business conditions continue to recover, we have found that our clients are increasingly looking to cloud solutions to meet challenges key to their organisation’s future success. We find the main reasons clients look to outsource to the cloud are increase flexibility in their IT and reduce costs. Whenever there is a great degree of change, there is also a high degree of risk – especially when the proposed solution does not appear to have a long track record. Although outsourcing to the cloud does give rise to potential issues for business, these can be easily overcome through careful planning and a clear understanding of how to address the risks, from a practical and legal perspective.

About the author

Frank Jennings is Head of Commercial at DMH Stallard and specialises in technology and new media. He has advised clients such as ADA, on managed IT services, TriSystems, on software as a service/cloud computing and London Borough of Croydon, on the new IT system for their one-stop reception service. If you have any queries regarding cloud computing, email Frank at frank.jennings@dmhstallard.com.