What's actually new about Cloud Computing, apart from the hype? For some years now the Internet has been portrayed graphically as a cloud in order to represent its vague and nebulous nature. We have long been storing our data on servers accessed over networks. Even the wardrobe-sized mainframes of the 1960s ran the software which we accessed remotely via 'dumb' terminals. So what's different?

Ownership. We used to have to own everything we used: the hardware, software, even the networks. Now, we need only own the computer we use to access the Internet. The rest we can rent or get for free. There is an old business maxim that you should never buy what you can rent, nor rent what you can borrow, nor borrow what you can beg. Cloud Computing follows the thrust of this philosophy in that access to storage, software and services is either free or is rented for a modest sum.

In many ways Cloud Computing is simply an extension of outsourcing. The concept of Software as a Service (SaaS) gives us the functionality we want want without the hassles of buying and managing assets. However, while it is good management to outsource peripheral things, like premises management, that might not be mainstream to how your business creates value, critical components of your business are normally best under your own control. So, you need to ask yourself whether your customer contact lists, project management files, corporate accounts, or strategic plans are core business or not? Thought so.

But Cloud Computing makes sense in so many ways:

Cost – it is generally cheaper than purchasing, installing and maintaining your own facilities, and some things are free

Cashflow – there are few up front costs and costs are usually scaleable in small increments to match changes in business size and activity

Management time – much less time and people are needed to meet your IT needs and less senior management attention is distracted

Robustness – professionally managed systems supporting hundreds of thousands of users are likely to be better protected from failures than your own back room system

Functionality – software is better designed and frequently improved as vendors don't have you locked in to a purchased system

So what are the issues?

Undoubtedly the biggest issue is security, and it's a multi-faceted issue. First of all you are trusting someone else with your data. Cloud vendors can go bust, be taken over, or stop providing services because it suits them. Then there is commercial security. If your data has a value, how do you know that some back-room system administrator is not going to steal it and sell it? People used to claim that the Net made geography irrelevant, but storing data in other countries has legal implications. How can you monitor where your data is being kept?

Cloud computing allows you to share information more easily: with customers, suppliers, associates, or branches. However, that means that access control has to be closely managed so that you know who can see what and some computer or human glitch is not going to embarrass you. Complexity is the enemy of clarity here and over-engineered systems are the ones most likely to have bugs in their logic that can one day bite you.

These kind of problems associated with Cloud Computing need not be show-stoppers as they are not without solutions. For example down loading frequent back-ups of your data in some structured format that is recoverable 'in the unlikely event'; encrypting data on the fly so that what is stored is not readable by others; and negotiating service level agreements with providers that contain close-down procedures, would all be wise management moves. The issues are very real, but, while they involve some technical understanding, they are nevertheless the same old issues of good management that we have always known. Ignore them and you are going to look both 'dumb' and 'terminal' on the day that Cloud Computing goes wrong for you.

Neil Rathbone is an 'intelligent' and 'ongoing' consultant in managing new web technologies.