Security fears hampering SME’s cloud lift-off

Cloud computing.JPG

This article is part of our special report ICT: Fuelling the economy.

European SMEs could scoop up additional profits of €1.2 billion if they set aside their persistant security fears over cloud computing and adopt the new technology, claimed participants at a round table yesterday (October 4).

The cloud – infrastructure, software, data or applications held off companies’ premises and accessed via the Internet – can hone economies of scale by cutting out hardware costs and reducing SMEs costs per unit as demand increases.

“Talking to SMEs in many member states we know they are afraid about what will happen to their data, there needs to be a form of education about the extent to which third parties may be privy to their data,” said Maurice van der Woude, the general director of Eurocloud Europe, a trade group supported by  Microsoft and other companies.

SMEs can gain savings from conversion to cloud

The problem lies in the lack of business awareness of the opportunities, van der Woude said, adding: “It would be beneficial for SMEs to educate them about this because it’s happening way too slowly.”

Nigel Gibbons, the managing director of technology SME Unitech, claimed that €1.2 billion was being wiped off the profits of SMEs each year – money that they would otherwise be able to invest – if they transferred their computing to the cloud system.

He said the figure had been achieved on the basis of savings calculated to UK SMEs if they migrated to cloud and then extrapolated across the EU.

Efforts are under ways to allay SME fears through education and creating a controversial new pan-EU regulation of the cloud however, policymakers and industrialists at the Microsoft hosted symposium in Brussels heard.

André Richier, an official at the European Commission's Enterprise directorate, acknowledged that SMEs were cautious in their approach to the cloud. He said that the solution was to embark on effective education schemes which DG Enterprise had already undertaken, targeting business school students in Europe.

On regulation, Richier said: “Where are the cyber cops? We have problems with fraudsters and we need to think about the regulatory regime and enforcement, because for companies this is very important.”

Parliament keen to legislate

Referring to the possibilities for formulating specific regulation relating to the cloud, Rainer Zimmermann, the head of software at the Commission's Infosociety department, warned that if no proposals were forthcoming, the European Parliament would attempt to impose impractical legislation as soon as the opportunity comes.

He said: “If no solutions are offered then we will get a bureaucratic solution of the worst kind. There will be a monster of bureaucracy if from the start  these issues of general public interest are not addressed.”

Hungarian socialist MEP Edit Herczog, a member of the Parliament’s industry, research and energy committee, said that the Parliament should not be seen as the problem.

She said: “If we do not act together at EU level there is a danger that each country will start to address the issue alone.”

EU has cautious approach

Despite the EU's best efforts, laws to protect and store data are outdated and cannot cope with the legal problems presented by cloud computing, such as determining who owns data which is no longer handled in situ.

When a company processes data in the UK, stores it on a server in Ireland but sends it via France – as it may have a subsidiary there – it is not yet clear which country's law would prevail in a legal dispute.

Regulators who have recognised this maze of unanswered questions are busy consulting industry and data protection authorities, while industry is busy trying to make its mark on an as yet unformed legal framework.

In November 2010, EU Digital Agenda Commissioner Neelie Kroes called for cloud-computing providers to build data security into their services and products. And at the 2011 World Economic Forum in Davos, she said the EU was working post-haste to update its data protection rules.

Cloud computing is highlighted in the Digital Agenda for Europe, and EU Commissioner and Vice President Neelie Kroes announced early this year the launch of a cloud computing strategy for Europe.

She wants to make Europe not only ‘cloud-friendly’ by providing the right regulatory framework but also ‘cloud-active’ which means that she wants European IT industry – and especially SMEs – to take the opportunity to become leaders in the area.

To this end Kroes has initiated a number of private and public consultationswith industrial stakeholders looking both at the supply and demand side.

DG Information Society has been researching cloud computing and how it differentiates from other IT systems and its opportunities for European industry over the past two years.

This research culminated in two reports, one by the expert group on the future of cloud computing and another by the European Network and Information Security Agency (ENISA) on cloud security.

Jeremy Fleming

“The idea of a cloud strategy is frightening,” said Jonathan Zuck, the president of the Association for Competitive Technology, referring to the Commission's intended regulatory proposals. He said that it was better, rather than starting with an imposed Utopian vision of the market place, to allow the market to work out by trial and error what the shortcomings were and to use these as the basis of regulation.

Zuck added that high-profile data protection leaks have been committed by huge companies and would not have been avoided by regulation, adding that the kind of regulatory controls which large companies can afford to comply with, can be prohibitively expensive for SMEs.

Such an approach to regulation would result in no more than ‘a placebo effect’, Zuck added.

“Start-up companies have a less risk-averse attitude and are more willing to embrace the cloud,” according to Ruud De Jonge, a director of technology at Microsoft.

He said that the picture varied from country to country, with countries such as Ireland, where the poor state of the economy is spurring innovation, enjoying a resurgence of start-ups.

“This is also reflected in Asia, where countries such as Japan have a much lower take up of SMEs, unlike in Singapore and some other Asian countries, where the level of SME development is much greater,” De Jonge concluded.

“The impact of cloud technologies goes beyond reducing IT costs and improving business efficiency,” said Rainer Zimmermann, the head of software at the European Commission's DG Infosoc.

He added: “Cloud computing combined with web based applications and services are preparing the ground for new European start-ups that could play a positive role in the IT landscape. Companies of all sizes and government institutions will achieve new levels of productivity and innovation.”

The term 'cloud computing' describes a whole range of infrastructure, software, data or applications residing in the 'cloud' – that is to say, off your own premises and accessed via the Internet.

A study carried out by the University of Milan, published in late 2010, estimated that cloud computing has the potential to create 1.5 million new jobs in Europe over the next five years.

While businesses and governments wax lyrical about the benefits of cloud computing, EU regulators have been more wary, as further take-up of cloud systems would mean a large swathe of public and commercial data would migrate to servers possibly located outside national borders or even on other continents.

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