As important as cloud computing is for startups and random, one-off projects at big companies, it still has a long way to go before it can prove its chops. So let’s turn down the noise level and add a dose of reality. Here are 10 reasons enterprises aren’t ready to trust the cloud.

Many entrepreneurs today have their heads in the clouds. They’re either outsourcing most of their network infrastructure to a provider such as Amazon Web Services or are building out such infrastructures to capitalize on the incredible momentum around cloud computing. I have no doubt that this is The Next Big Thing in computing, but sometimes I get a little tired of the noise. Cloud computing could become as ubiquitous as personal computing, networked campuses or other big innovations in the way we work, but it’s not there yet.

Because as important as cloud computing is for startups and random one-off projects at big companies, it still has a long way to go before it can prove its chops. So let’s turn down the noise level and add a dose of reality. Here are 10 reasons enterprises aren’t ready to trust the cloud. Startups and SMBs should pay attention to this as well.

  1. It’s not secure. We live in an age in which 41 percent of companies employ someone to read their workers’ email. Certain companies and industries have to maintain strict watch on their data at all times, either because they’re regulated by laws such as HIPAA, Gramm-Leach Bliley Act or because they’re super paranoid, which means sending that data outside company firewalls isn’t going to happen.
  2. It can’t be logged. Tied closely to fears of security are fears that putting certain data in the cloud makes it hard to log for compliance purposes. While there are currently some technical ways around this, and undoubtedly startups out there waiting to launch their own products that make it possible to log “conversations” between virtualized servers sitting in the cloud, it’s still early days.
  3. It’s not platform agnostic. Most clouds force participants to rely on a single platform or host only one type of product. Amazon Web Services is built on the LAMP stack, Google Apps Engine locks users into proprietary formats, and Windows lovers out there have GoGrid for supporting computing offered by the ServePath guys. If you need to support multiple platforms, as most enterprises do, then you’re looking at multiple clouds. That can be a nightmare to manage.
  4. Reliability is still an issue. Earlier this year Amazon’s S3 service went down, and while the entire system may not crash, Mosso experiences “rolling brownouts” of some services that can effect users. Even inside an enterprise, data centers or servers go down, but generally the communication around such outages is better and in many cases, fail-over options exist. Amazon is taking steps toward providing (pricey) information and support, but it’s far more comforting to have a company-paid IT guy on which to rely.
  5. Portability isn’t seamless. As all-encompassing as it may seem, the so-called “cloud” is in fact made of up several clouds, and getting your data from one to another isn’t as easy as IT managers would like. This ties to platform issues, which can leave data in a format that few or no other cloud accepts, and also reflects the bandwidth costs associated with moving data from one cloud to another.
  6. It’s not environmentally sustainable. As a recent article in The Economist pointed out, the emergence of cloud computing isn’t as ethereal as is might seem. The computers are still sucking down megawatts of power at an ever-increasing rate, and not all clouds are built to the best energy-efficiency standards. Moving data center operations to the cloud and off corporate balance sheets is kind of like chucking your garbage into a landfill rather than your yard. The problem is still there but you no longer have to look at it. A company still pay for the poor energy efficiency, but if we assume that corporations are going to try to be more accountable with regard to their environmental impact, controlling IT’s energy efficiency is important.
  7. Cloud computing still has to exist on physical servers. As nebulous as cloud computing seems, the data still resides on servers around the world, and the physical location of those servers is important under many nation’s laws. For example, Canada is concerned about its public sector projects being hosted on U.S.-based servers because under the U.S. Patriot Act, it could be accessed by the U.S. government.
  8. The need for speed still reigns at some firms. Putting data in the cloud means accepting the latency inherent in transmitting data across the country and the wait as corporate users ping the cloud and wait for a response. Ways around this problem exist with offline syncing, such as what Microsoft Live Mesh offers, but it’s still a roadblock to wider adoption.
  9. Large companies already have an internal cloud. Many big firms have internal IT shops that act as a cloud to the multiple divisions under the corporate umbrella. Not only do these internal shops have the benefit of being within company firewalls, but they generally work hard — from a cost perspective — to stay competitive with outside cloud resources, making the case for sending computing to the cloud weak.
  10. Bureaucracy will cause the transition to take longer than building replacement housing in New Orleans. Big companies are conservative, and transitions in computing can take years to implement. A good example is the challenge HP faced when trying to consolidate its data center operations. Employees were using over 6,000 applications and many resisted streamlining of any sort. Plus, internal IT managers may fight the outsourcing of their livelihoods to the cloud, using the reasons listed above.

Cloud computing will be big, both in and outside of the enterprise, but being aware of the challenges will help technology providers think of ways around the problems, and let cloud providers know what they’re up against.

  1. I still think a lot of the SaaS apps will migrate back to user servers. SaaS is booming right now because it’s cheap it’s cheap to get started, costs are predictable and apps are decent. However I think that virtually all companies should develop a sufficient competence in LAMP-based serving to be able to run many of these services themselves. For example, I’d much rather run my own installation of SugarCRM than continue with Salesforce for many of the reasons cited above.

  2. Bill Roberts Tuesday, July 1, 2008

    Enterprises may well not be ready to trust the cloud, but I don’t think most of your reasons are significant disadvantages of cloud computing. Of course there are a variety of types of SaaS or cloud computing and the detailed issues vary from one to another. But most of the reasons above also apply to the internal servers of any reasonable sized company and by outsourcing to specialists, then in most cases you will get a better service more cheaply. Probably the main issue remaining to be tackled for many companies is the security issue, though again, because it is their core business and essential for their success, cloud computing companies in many cases will take this more seriously than in-house IT departments.

  3. Satish Sharma Tuesday, July 1, 2008


    Some of your arguments are insane.
    #1. By your arguments small cars are more environment friendly than railroad, that’s the what a small data center to a large data center is — power consumption wise, not to mention the other costs.
    #2. Almost all data centers go down — even one run by companies themselves and it’s probably far more than S3 or google going down for a few hours in 2/3 years.

    #3. Others are mostly bougs.. or for idiots to worry about, except your first item, secure is what most C-levels worry about. Rest you have just filled up with junk .. platform agnostic .. come on .. since the history of computing nothing has been platform agnostic.

    Come to think of it; even god isn’t platform agnostic .. that’s why we have religious wars all the time.

  4. My guess is that cloud computing is only the future right now for Web 2.0 type companies – which, despite what many bloggers believe, is only a small portion of the computing world.

    One reason I’m not interested in SaaS and “cloud apps”: who owns the data? At least with the MS monopoly, you can reverse-engineer the file formats (e.g. Open Office & such can read Word & Excel files pretty well – excepting macros). But with all your critical data “in the cloud”, you don’t even know how it’s stored. So what happens when the SaaS vendor goes belly-up? (Likely to happen to most startups) Or gets bought by a bigger fish with a different agenda? Or decides its profits aren’t increasing fast enough, and has to increase revenue from existing customers to get its stock price up? (Likely to happen to salesforce.com customers — like it’s already happened to MS customers, eBay sellers, etc).

    pwb’s comment makes sense to me – run open source apps on commodity hardware, on site, hosted, or both.

  5. Don Jones – VentureDeal Tuesday, July 1, 2008

    My belief and experience says that small businesses will adopt the cloud at a much faster rate than medium and larger enterprises, who are much slower moving, have greater security and IT issues and sensitivity, and at much larger switching costs.

  6. Thanks for the really good dose on cloud computing. With cloud computing being touted as the next ‘big thing’, it ‘s nice to have a piece like this one. But as one reader already commented, smaller businesses will definitely be the ones to easily and quickly adopt cloud computing due to cost. I think cloud computing fits them perfectly. But as one expert pointed out, cloud computing can also be use to larger businesses: Where Cloud Computing Makes Sense (http://www.internetevolution.com/author.asp?section_id=630&doc_id=155107&F_src=flftwo)

  7. Michael Sheehan Tuesday, July 1, 2008

    Interesting post and I’m sure you will get a lot of response to it. Some quick comments:

    #1 – Security – I would say Cloud Computing is as secure as with any data center or hosting provider. What the Enterprise is not sure of is the concept of cloud security and determining the parameters that define it.
    #2 – Logging – Technology is driving this movement. Generally stating that it can’t be logged is a bit of a mis-statement. This depends on the provider of the cloud, the engineers administering and developing on it and the 3rd parties developing around it. It will be there sooner than you think.
    #3 – Platform Agnostic – Clarification: GoGrid offers Windows AND Linux so you have a choice. The Cloud Infrastructure providers will offer all flavors. I would say opting for an Infrastructure provider (like GoGrid) ensures that you as the Enterprise or Smaller Company Developer can worry about your development items and not the supporting infrastructure.
    #4 – Reliability – with ANY hosted service (whether your bank, a small website, a SaaS or larger providers), you will experience issues/downtime. Computers will break, infrastructures will not perform correctly, architecture can be bad (e.g., Twitter). Look beyond that to what bolsters that service (e.g., Support, SLAs, etc.). It’s not only the Technology but what support it as well.
    #5 – Portability – Cloud computing is still in its infancy. Telephone number portability took YEARS to come to fruition. Portability will come to the cloud as well over time.
    #6 – Environmentally sustainable – I could be wrong but virtualization and the cloud can help with this. 1 dedicated server is very different than 1 virtualized or cloud server running on a grid or node of servers. It’s better efficiency.
    #7 – Cloud Computing on physical servers – I agree with you here. Don’t really see how it could be done otherwise.
    #8 – Need for speed – to add to this idea, putting things into the cloud is actually faster than going with a traditional dedicated path. Faster setup and deployment. Faster scalability. But yes, if you corporation is on the Right Coast and your cloud infrastructure is on the Left Coast, you will have some (minimal?) latency. But this will changes as more POPs (points of presence) come into existence. There need to be studies benchmarking the difference.
    #9 – Internal Clouds – Yep. There will always be internal clouds, especially for the Enterprise or Gov’t. But there will be (and are) providers of internal clouds. Just depends on the needs.
    #10 – Longer due to Bureaucracy – Agree. But this is true with other technology evolutions (like cloud computing). Enterprises are like cruise ships that take hours/days to make a turn. Right now, early adopters (e.g., startups, web 2.0, etc.) are helping to form the industry. Enterprise will come in a few years (probably starts now with internal projects or skunkwork departments that test the technology and then recommend a further rollout).

    Thanks for your post! It really got me thinking!

    -Michael Sheehan
    Technology Evangelist for GoGrid

  8. Greg Glockner Tuesday, July 1, 2008

    Stacey: I enjoyed the article, but disagree with you on two points:

    4: I agree that cloud computing is not 100% reliable, but I would expect Amazon EC2 and similar cloud services to be much more reliable than the average IT department. That is the core expertise of the cloud host.

    6: I agree with your point here, but I think you go a bit far. No one should be claiming that cloud computing has zero ecological footprint. Rather, one should claim that, thanks to the cloud, you can locate the server where it will make the least impact. Why host a server in NYC, the Bay Area or LA when you can put it in middle of nowhere where it will make less of an impact.

  9. GigaOm loves the Cloud « It’s in the Cloud Tuesday, July 1, 2008

    [...] latest post – 10 Reasons Enterprises Aren’t Ready to Trust the Cloud – is a perfect [...]

  10. OnSaaS » Blog Archive » Response to “10 Reasons Enterprises Aren’t Ready to Trust the Cloud” Tuesday, July 1, 2008

    [...] Higginbotham over at GigaOM wrote an interesting piece on 10 Reasons Enterprises Aren’t Ready to Trust the Cloud. Even though I agree that some of these points are valid reasons on why enterprises are hesitant in [...]

Comments have been disabled for this post