M-F 8:00AM TO 5:30PM CST
Better coverage. Better price.
Don't Risk IT
To the Cloudmobile!

To the Cloudmobile!

IT professionals can save themselves and their clients time and money by shifting to cloud-based software and servers.

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

The secret of cloud computing is that it's actually old. Practically as old as the modern Internet itself. The first popular examples of cloud apps or cloud computing were web-based email clients. Remember Hotmail? That was cloud-based technology.

But what exactly is cloud computing? The definition of cloud computing is hard to pin down, because it can mean a variety of different systems, including…

  • Web-based applications (sometimes called cloud apps).
  • Web-based storage.
  • Access to computing power on third-party servers like Amazon's EC2.

Lower Costs of Cloud Computing

Theoretically, cloud computing can significantly lower IT costs. In the non-cloud office, IT technicians have to purchase new software licenses for each new user and computer. Even something as standard as Microsoft Word can get expensive when multiplied over an entire network of office computers.

Businesses also have to upgrade their hardware to run the latest programs. If that hardware breaks down, they need to purchase replacements.

Cloud computing reduces these costs. Rather than having to purchase software licenses for each computer, businesses can subscribe to software that's regularly updated in increments.

In the cloud, most applications are actually run on servers. Because applications are not run on the user's computer, workstations need less hardware and maintenance, which translates to more cost savings.

What is a Private Cloud?

You can create your own private cloud on servers you own and operate (or service for your clients) and reap many of the rewards mentioned above.

It works like this. IT professionals set up a cloud computing network on their servers using software like Ubuntu Cloud. Employees use their workstations to log on to the servers. Because servers have more computing power, this allows a better distribution of resources. Here's how:

Let's say you run a video editing company. Rendering and editing videos takes massive computing power, but a video editor doesn't need that much computing power every second of their workday. They may only spend a few hours of each day using their computer's maximum processing power. The rest of the day their computer is running sub-optimally.

But in a private cloud, their processing power would come from a server. When one user isn't using the server's processing power, another employee could be rendering a video. One computer is doing the job of two.

This is what's known as "scalability" - a major boon of cloud computing systems. Cloud computing allows you to divvy resources to the computers that need them most. It's more efficient and it can save money.

Security Concerns of Cloud Computing

The main cloud security issue is one of "putting all your eggs in one basket." So many companies use cloud computing that hackers are learning that if they want to disrupt services or steal data, the most efficient way is to target cloud servers.

Recently, a group of Iranian hackers was able to use malware to disrupt dozens of the largest banking websites. The New York Times explains that rather than targeting banks individually, hackers attacked cloud datacenters. By targeting a handful of datacenters, they were able to slow down or stop the likes of HSBC, Bank of America, and Wells Fargo all at once. Ouch.

But there is good news. Many cloud providers are better able to protect data than their clients. A company like Amazon invests millions into its security, and has more sophisticated data protection than small businesses.

Questions about Privacy and Data

Cloud-based computing raises complicated legal questions about privacy. If you upload your data to the cloud, do cloud providers own it? Many service agreements don't specify, which can cause legal issues get a little "cloudy." (Sorry.)

Other data-related questions linger. What happens if a cloud provider goes bankrupt? You could potentially lose all your data. Outages are also a problem. Even Amazon's EC2 has experienced outages that have kept businesses from having access to services they need to operate.

For more about cloud security, read our article "Data Security Remains Top Concern about Cloud Computing Options."

The Take Away: Liabilities of Cloud Computing

Whether you're setting up a private cloud for a client or helping them get started on a public cloud service, you can make mistakes that lead to lawsuits. Outages, data breaches, and privacy concerns may lead clients to sue you. Even if an error occurs on a cloud service you recommended (but don't own or operate), you can be held liable.

Errors and Omissions Insurance can protect you from cloud-related lawsuits, so be sure your policy is up to date. (For more on why E&O coverage is essential for IT professionals, check out our blog post "Why E&O Insurance Is More Important for Tech Firms than Others.")

The Small Business
Insurance Leader
800.688.1984 | 8 am - 5:30 pm CST | M-F
Customer Rating 4.9 out of 5
Read Customer Reviews


The Small Business Insurance Leader