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New Worries about the Hidden Cost of Cloud Computing

New Worries about the Hidden Cost of Cloud Computing

An examination of the indirect costs and risks associated with cloud computing and how IT professionals can manage these.

Friday, January 10, 2014/Categories: cloud-insurance

This summer, Forbes, Computer Weekly, and IBM all published articles expressing concern about the hidden costs of cloud computing. As they say, where there's smoke there's fire.

What has gotten everyone in a tizzy? Do you really need to be worried about the transition to the cloud?

Research in Action (affiliated with Compuware) published a study that highlights major industry concerns about the cost and performance of cloud-sourcing. It turns out that many IT professionals are coming to realize that poor performance, data loss, and integration issues could cost their business as they transition to life in the cloud. (For more on the basics of cloud security, check out the post, “To the Cloudmobile!”)

What Are the Hidden Costs of Cloud Computing?

The RIA survey revealed that 79% of CIOs have serious concerns about the hidden costs of cloud computing, but let's get specific. Among these concerns were…

  • Implementation costs. According to a study done by KPMG, 31% of excecutives found that the cost of integrating cloud services with their network was higher than expected. Not all software can be replaced with the cloud. Businesses will have a mixture of traditional software and "virtual" software that they load through a cloud operating system. Integrating these two platforms can be difficult and costly. Data with one system may not work perfectly with another.
  • Poor performance. Bottlenecks and slow performance can be especially costly, particularly when they stunt worker productivity. In addition, they can affect sales, as many customers won't stay on a website if they are having difficulty using it. They simply hop to a competitor's site.
  • Difficulty in judging performance and user experience. The most common use of cloud services is for e-commerce. But this use poses a risk. When businesses outsource their e-commerce to another firm, they lose control of the customer experience. It becomes harder to tell when customers are having difficulty with the site, and as we saw above, this can negatively affect sales.
  • Damage to a brand. If a customer is sitting at the computer waiting for your website or app to load, your company is damaging its brand. Brand identity is huge in the tech economy. Consumers expect things to work immediately. When they don't, they are ready to move on to a competitor's product.

How to Avoid the Hidden Costs of Cloud Computing

Cloud computing isn't going anywhere. Despite the fact that almost 80% of IT officers have concerns about cost and performance, cloud usage continues to grow. That means you'll need to prepare yourself for potential hidden costs and know how to avoid them.

  • Work with experienced cloud vendors. In the e-commerce world, performance drives sales. If your website isn't working, you're not making any sales. By working with experienced cloud networking companies you can make sure you're getting a vendor that has the infrastructure to handle your web traffic, sales, and data storage needs. Experienced vendors will also know more about resolving integration issues and can troubleshoot other problems that slow down performance.
  • Have independent analytics to monitor your system performance. You need to know how users experience your product. An independent analytic tool that tracks your website or service will alert you to slowdowns. Without this, you rely on customers to tell you when there's a problem. At that point, it's too late. Your brand and reputation will already have taken a hit.

How Insurance Can Protect your From Hidden Cloud Costs

Imagine this scenario. You help a client set up a cloud network. It works smoothly, but six months down the road, when it comes time for the client to file their year-end reports, they’re unable to integrate new cloud-generated data with old data.

This situation points out one of the dangers of cloud computing for IT consultants. You can't anticipate every way your client will use its cloud services. Nonetheless, you could still be sued for failing to deliver the product they need.

Errors and Omissions Insurance can pay for lawsuits that arise out of complications and the unexpected costs of integrating cloud services. (To read more about how E&O Coverage can save IT professionals money, check out "A $2,500 Investment That Can Save Computer Consultants Hundreds of Thousands").

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