What is "The Cloud"?|
- In its broadest sense, the Cloud refers to anything that is
accessed via the Internet. All websites reside in the Cloud. All
email travels through the Cloud (except perhaps internal email).
If you have to use the Internet to get at something, then that
something is "on the Cloud".
- However, in general use, "the Cloud" usually refers to running
applications on the Internet and storing your private data on a server
accessible only through the Internet. The applications are
usually specially designed proprietary applications that run
only in a web browser and cannot be run locally on your own
A very important question...
|If you are considering moving to the Cloud you need to ask
yourself a VERY important question:
Are you seeking remote access to your applications and
Do you want
to run your applications in a web browser?
- If you want remote access to your applications,
YOU ALREADY HAVE THAT CAPABILITY! (see below)
- If you want to run your applications in a web browser,
then you really need to ask yourself WHY? Running any
function or application in a web browser is less functional,
more prone to errors, issues and security problems than running
it normally on your local computer and network.
Please read this carefully: If you own a
computer you can ALREADY access your applications from
anywhere in the world. You
are ALREADY ON THE CLOUD if you want to be.
Both Windows and Mac have the ability to allow you to remote in from
anywhere in the world, to your own computer on your own network. All
it takes is about 1/2 hour or less of setup by a competent IT
person. Plus YOU have 100% total control over it. You own the
network, server, computers. And YOU have complete control over the
security. Extra security can be added. You're not on a known Cloud
network so the likelihood of getting hacked into is slim - you have
to be a target before you can get hacked (unless you do something
unwise like opening an unknown email attachment!). The chances are
small that you will be randomly hacked, although, yes,
it does happen.
What are the drawbacks on being on the Cloud?
In this article the focus is on accounting and ERP systems, with
examples given of other software as well.
First off ... THINK about it. You will
be RENTING ACCESS to YOUR OWN DATA, forever! Let's say that again
... If your accounting application is on the Cloud you will be
paying someone to give you access to your own confidential and
PRIVATE business data, forever. You're RENTING access to your OWN
DATA! And in certain circumstances they can deny you access to your
data. Is this REALLY what you want?
- Security Issue #1: Theft of your data
Your valuable accounting data and other data are being stored on
someone else's server. What is your recourse if someone hacks in
and steals that data? Nothing! Cloud contracts typically protect
the vendor if your data is stolen. And after your competition
has your customer list, your financial information, your
inventory, your supplier pricing - well, you get the idea - "too
bad so sad".
Just ask the celebrities who recently had their nude photos
stolen off iCloud if they still think the Cloud is a good idea!
Or the thousands of customers of Target, Home Depot and others
who have had their personal and financial information
- Security issue #2: Integrity of your data
What if your data becomes corrupted as a result of something the
Cloud vendor did or failed to do? If they're nice they may try
to recover it. But usually they will restore from an older
backup (if there is one), say "too bad so sad we're sorry," and
then it's up to you to re-enter all the transactions since that
time. Will there be compensation for your trouble, staff time,
business downtime? Nope.
- Security Issue #3: Who's REALLY in charge of your data
The Cloud vendor may give you all sorts of assurances about
how secure their systems are. But remember WHO is talking: the vendor
salesperson who is trying to convince you to sign up for their
services. But in reality the security of your data lies entirely in
the hands of the IT staff at the Cloud vendor. And they are just employees, who may be having a
bad day, hate their job, hate their supervisor, even hate you or your
business, or whatever. Or be just plain incompetent. Are you willing
to take that risk?
- Security Issue #4: USA
Many Cloud vendors are located in the USA where the government
has the right to look at your data anytime they want to. There
may be legal reasons why your data or data about your Customers
and Vendors cannot be kept in another country. What about your
employee's private information?
- Security issue #5: Points of failure
On your local network all you have to do is control physical
access to your computers, ensure staff are sensible regarding
email attachments and web browsing (or control same), and ensure
password security. With a Cloud application all of the above
still applies, except now there are multiple points of potential
access. You may not realize it, but ALL data to and from your
location over the Internet has to travel through 10-20 or even
30 or more other points on the Internet, whether these are servers or
routers and other devices. Each of these is a potential security breach point.
And in additon to that are all of the devices and servers (and staff!) at the
- Security issue #6: Dependencies
See the "Dependency" items on this page. Being
dependent on someone else means you are not entirely secure.
issue #1: CRA: Location of books and records
Most Cloud vendors are located in the USA. CRA requires
Canadian companies to have their books and records located in
Canada. This includes electronic and online systems. CRA is
quite clear about this.
issue #2: CRA: Retention of records
Should you wish to move away from the Cloud vendor of your
accounting system, you will immediately no longer have access to
your accounting data. CRA requires you to keep your records for
seven years. Once you switch away, you would have to retain the
Cloud vendor's service for a full seven more years!
- Dependency #1: Cloud Vendor: All the eggs in one basket
You are totally 100% locked into and dependent on the Cloud Vendor
for your crucial accounting systems. You are at their mercy.
Read that again: You are at their mercy; you are 100% dependent
on that Cloud vendor. What if they go bankrupt? What if they are
bought out by another business and changes are made or they are
shut down? What if they decide to discontinue the product you
are using? What if they suffer a calamity such as their building
burning down? What if their policies change to your detriment?
Etc. See also the preceding Security issues.
- Dependency #2: Your own Internet connection
You are totally 100% dependent on your Internet connection being
up and fast. You will probably need to enhance your own service
if you have any sort of volume going across the Internet due to
your Cloud application. Be sure you count the cost of this when
- Dependency #3: Vendor's Internet connection
Not only that, but you are totally 100% dependent on the Cloud
vendor's Internet connection being up and fast enough to handle
the volume of activity from all of their customers. This is an
area where vendors are typically reluctant to upgrade until they
receive enough complaints from customers - vendors will often
- Dependency #4: Vendor's internal servers and systems
You are completely dependent on the vendor's servers and systems
being up and running at all times. Remember when Blackberry was
down for a couple of days a few years back? Microsoft and
Quickbooks have also experienced significant outages. As have
most Cloud vendors.
- Dependency #5: Security
See preceding Security points.
- Dependency #6: It's YOUR data, Part I
This is largely a philosophical point, but nevertheless vitally
important. When you are on the Cloud YOUR valuable and
confidential information that you use to run your business is on
SOMEONE ELSE'S computer SOMEWHERE. Would you give it to your
neighbour down the street? To a stranger in a city 2000 miles
away? Of course not! Yet you don't personally know the Cloud
vendor, nor can you ever know for sure how they treat their
customers' data. Go for a visit to the vendor's premises ... and all is smiles and
assurances. But what happens when YOUR data is actually compromised or
slips into your competition's hands? This is not Facebook where
it maybe doesn't matter. This is the lifeblood of your BUSINESS.
- Dependency #7: It's YOUR data, Part II
If you are using a Cloud-based accounting application, and
someday you decide to switch away from it, you are dependent on
the Cloud vendor to be nice and allow you to retrieve an
up-to-date copy of your data. This may prove difficult if you have a dispute
with the vendor and perhaps you haven't paid them for a few
- Dependency #8: It's YOUR data, Part III
Speaking of payment ... What if you miss a monthly payment for the Cloud services?
What if the vendor doesn't receive your payments? What if their
accounting system screws up and they have no record of your
payments? How quickly will the vendor cut off access
to YOUR accounting data - a few days? The same day? Or will they be "nice"?
- Lack of Control #1: Unwanted upgrades
Remember when Office 2007 came out and how much everyone hated
it? And how you (probably) put off upgrading for 1-2-3 years or
more because you already owned and loved Office 2003? When your
accounting system is on the Cloud you will receive upgrades
whether you want them or not. Presto, one day you log on and
everything's different. You have no control over this. You will
get the changed screens, added new fields and new ways of doing
things whether you want them or like them, or not. Plus as an added bonus you
will get all the associated bugs of a new release, for free!
- Lack of control #2: Backups and restoring
With data stored locally on your own network, you can
restore your data at any time (assuming you have a good backup
system in place - but that would be under your control). You can even restore a portion of your data
(one file, or even a few records) if
appropriate and necessary. But with a Cloud vendor you are
dependent on their backup and restore services. Their backup
systems may not be adequate or proper. They may not allow custom
- Lack of control #3: Customizability and add-ons
When your accounting software is running on your own local
system it is quite feasible to have third party applications
added to it, or have one custom-written for your own particular
business needs. You have an enormous amount of flexibility of
who you select to do this work for you and what the custom app
will do. When you are running Cloud-based software your choices
are severely limited, if there are any options to do this at
- Browser compatibility issues
NOTHING runs on "any browser", no matter that the Cloud vendor
salesperson tells you. Most of us have had experiences where a
web page doesn't display properly because we are using a
particular web browser (Internet Explorer vs Firefox vs Chrome
vs Opera) or even a particular version. Cloud-based software is very sensitive to browser brands and versions.
- Cost issues #1: You pay forever
With any Cloud-based software you will be paying for it for as
long as you use it: years. At least when you purchase an
accounting software or a server, it is a one-time cost (if you
elect to not pay the annual maintenance, which is usually not
required) - you
won't have to buy any upgrades or pay annual maintenance if you don't want to, or at least
not until technology renders that version obsolete (often 10
years or more). And don't forget that what you are actually
doing is renting access to your own private and confidential
- Cost issues #2: Price increases
The Cloud vendor may promise a certain monthly fee for a
particular time period at the outset in order to get your
business. But look out when that
initial time period expires! You are at their mercy.
And they may even hit you with an increase before then, citing
"unforeseen factors beyond our control" (examine the fine print
- Cost issues #3: Is it really cheaper than hosting your
Cloud vendors like to tell you that it's cheaper to pay a monthly
fee, that this is cheaper than paying up front for a server and
related infrastructure. They do this by bringing in all sorts of
costs you allegedly incur when running your own local servers
and network. Do your own math and comparisons on
this. Ensure that you are only including actual real
differential costs. For example, if you don't need to buy a new
server to run software "x" then that should not be part of your
comparison of costs. For example, maintenance costs are usually negligible
for a properly set up server and network for a small business.
- Cost issues #4: Your Internet connection
You will need a very good Internet connection to run your
software on the Cloud. You will very likely need to upgrade this. Don't forget
to get full and accurate costs for this BEFORE you commit. It
may be more than you think.
- Consider the Source: Who is behind the push to the Cloud?
The Cloud vendors are behind this push, of course. Do some research.
Everywhere you look, it is the Cloud vendors who are preaching
the so-called benefits of moving to the Cloud. Most of the
benefits are things which you can easily do for yourself, and
for a lot cheaper. Software vendors have been trying to push
consumers into a software rental model for many years. For some
reason they have been able to push this more to the forefront
lately. Perhaps it is due to our obsession with all things
Internet and the "connected" world we live in.
- Myth: Cloud requires no Infrastructure or hardware
A common pro-Cloud argument is that you will require no
infrastructure. This is absolutely and completely untrue. You will still need local
workstations, network cabling and connections, and a very good
Internet connection. The only thing you may not actually need is
a server. But you'll probably want some sort of server anyways,
because there's probably still data you will want to keep
locally at your premises that your staff will need access to.
- Myth: Cloud is faster
Your own network is about 1000 times faster than the Internet,
and with significantly less wait time between operations.
- Myth: Cloud is easier and quicker to deploy
Deployment of modern software and updates to workstations is
usually quite easy nowadays and takes minimal time, in some
cases only seconds. As for deployment of new software, you will
still require the same amount of training. Data
conversion will be the same in either case. New software will
usually run on your existing
infrastructure unless you are significantly scaling up.
- Myth: Cloud is new
Cloud is not new. Some businesses have been on some form of the
Cloud for over 35 years. You have probably seen those clunky
text-based systems at stores and businesses. Those have been
around for ages, and used to run over the phone line through a
1200-baud modem. They are running on the Cloud. The only thing that is new is the connections
are now much faster.
And you have had the ability to remotely access your system
since Windows NT Server v4 - that's a lot of years ago!
Software vendors have been trying to push customers onto Cloud
applications for 10-15 years or more. For some reason they are
now having some success. The reason they have been so persistent
is because it's good for them.
- Myth: Cloud is flexible
Running your application on the Cloud means you are locked into
the vendor's software, with your data on their server. Your
options are limited or none. You are paying forever. You are
locked into many dependencies. You MUST run whatever version of
the software the Cloud vendor is providing. There are limited or
no options for add-ons. Etc. This does not equate to "flexible" no
matter how you read it. Inflexible is more like it.
- Myth: Cloud is reliable
Only as reliable as your own Internet connection, the vendor's
internet connection, the vendor's servers, the vendor's
security, the browser and version you use, the stability of the
vendor's software, the vendor's IT staff, ... need we go on?
- Myth: Cloud is cheaper
Even aside from the cost to you of your data being compromised,
the Cloud is not cheaper, or at best costs the same as running
applications on your own network. Cloud vendors usually
exaggerate the costs of running a local business network. When
actual numbers are carefully compared, you will usually find
there is no advantage from a purely cost perspective. Very generally
speaking, after 36 months the Cloud is more expensive. It just seems
cheaper because the costs are amortized over time. Wait a sec
... that's what you do with capital outlays anyways via
depreciation, or with leasing, isn't it? And don't forget to
take into account what the Cloud vendor salesperson is
exaggerating or not telling you. And also any hidden fees or
gotchas (such a a setup fee for adding another company to your
- Myth: Going to the Cloud is good because everyone else is
doing it, it's how things are done now, it's the latest trend.
NONE of these are actual business reasons for doing it, and none
of these mean it's beneficial for you or for anyone else.
Actually, these aren't good reasons for doing just about
When might the Cloud be appropriate?
- When you actually do need to share something with the public
at large. A good example of this is your website and webstore.
These must be on the Cloud, by definition.
- When you need to share something quickly and easily with a
lot of people. Here's where Facebook, Twitter and Flickr come in
handy. But you could also do that on a blog page on your own
website. And these services are not really suited to business
activities, in spite of the hype you might read otherwise.
- You are absolutely broke, have no equipment or resources,
and it is critical to get something up and running ASAP.
- For completely personal and casual non-confidential
information such as holiday photos, sharing thoughts and
feelings, etc. In short, generally non-business reasons.
With thanks to Andrew Bates of Adagio Software.
Although he did not contribute directly to this article, he has
insightful perspectives on the Cloud in his presentations.