Risk, liability, and clouds

I had discussed the issue of software vendor liability here and made the point that no software vendor (now or in the near future) is going to assume the liability for the cost to your business if there are defects in the software. Recently Ed Cone listened to some Cloud vendors talk about security and had this to say about it:

The security model is so immature right now that it is clear that most of the assurances cloud vendors offer are around infrastructure and covering their own respective risks. Most cloud vendors will tell you outright that it is up to the customers to individually secure their own applications and data in the cloud, for example, by controlling which ports are open and closed into the customer’s virtualized instance within the cloud.

As Maiwald puts it, enterprises need to be aware of this distinction. Security in the cloud means different things to those offering cloud services and those using cloud services. Even if you’re working with the most open and forthright vendors who are willing to show you every facet of their SAS 70 audit paperwork and provide some level of recompense for security glitches on their end, they’re most certainly not assuming your risks. For example, if Amazon Web Services screws up and your applications are down for half a day, it’ll credit you for 110 percent of the fees charged for that amount of time but you’re still soaked for any of the associated losses and costs that come as a result of the downtime.

As organizations weigh the risks against the financial benefits of cloud computing, Maiwald believes they must keep in mind that , “There is risk that is not being transferred with that (cloud services) contract.”

There are several important points here; first outsourcing a service doesn’t mean outsourcing the risk. Likewise purchasing software isn’t the same as buying insurance either. Customers of both cloud services and on premise software need to understand this.

Second, when evaluating the risk of moving to a cloud based service you have to compare it against the risk of NOT moving to a cloud based service. There is the risk that your service provider could be compromised. But that has to be weighed against the risk that your own IT systems will be compromised. Likewise the risk of a service provider outage must be weighed against the risk on an internal system outage. Both will impact your business.

Third, you should also factor in opportunity risks. If you choose not to do something that reduces cost you take the risk of losing an opportunity that may have been available by dedicating those resources elsewhere.

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