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In this four-part series, we'll explore cloud computing and whether it's right for your small business

Part One: Moving to the cloud

Michael Redding describes cloud computing for small and medium-sized businesses as a form of opportunity cost.

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"If you have five guys dedicated to running your e-mail system, is that really the best use of those five guys?"

Mr. Redding is the managing director of Accenture Technology Labs, the research and development arm of Accenture, which specializes in technology outsourcing.

In the past few years, cloud computing has become one of the fastest-growing sectors of the technology industry, thanks in large part to interest from small businesses looking to save on the cost of buying their own IT infrastructure, such as expensive servers.

Technically, cloud computing is any form of Web-based, shared computing service, such as server space, on-line software or e-mail hosting. The concept isn't all that new – a service such as Hotmail, the Web-based e-mail tool that has been around for almost 15 years, is a form of cloud computing.

The cloud boom But in recent years the sheer number of cloud computing services and companies has exploded, as tech giants ranging from Microsoft to Google to Amazon have tried to tap into the market. Today, business owners can essentially outsource everything from their e-mail systems to their digital storage space to their office software programs. The results are not only smaller start-up costs, because the businesses can rent all those services instead of buying them up front, but also a set of services that can be accessed from anywhere with a connection to the Web.

In effect, Mr. Redding argues, such services essentially offload the headaches of running and maintaining certain IT services onto the cloud computing provider, letting the staff spend their time instead on more productive tasks.

Certain aspects of cloud computing have proven especially popular with some segments of the small and medium-sized business world. Small Web 2.0 startups, for example, have increasingly adopted cloud storage tools, in large part because such services allow them to scale the amount of storage they need as their customer base expands, instead of paying tens or hundreds of thousands of dollars to buy servers that may be under-utilized early on and then overburdened when the business expands.

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Indeed, according to an Angus Reid survey of 1,000 Canadian small business owners conducted for HP Canada, 47 per cent of businesses are already using some sort of cloud computing solution.

Storm warnings However as adoption rates rise, there are still several concerns about the use of cloud services. In Canada, as in many countries, one such concern is jurisdictional. Companies that deal with sensitive data are often required by policy or law to store that data on servers that are physically located in certain jurisdictions. Cloud computing servers, however, rarely meet such requirements. That can be a problem in locations such as Canada, where the population of many cities may not be large enough to make it profitable for cloud companies to set up dedicated servers in those locations. To get around this problem, some large cloud computing providers have teamed up with local hosting companies to offer services without investing in new infrastructure.

Another concern relates to data security. In some cases, such concerns tie back to jurisdictional issues – for example, if a Canadian company hosts its data on a server in another country, can that county's government use local law to access the information? The threat of sensitive data being accessed by any means, legal or otherwise, has become a major area of focus for cloud providers. Indeed, one of the main reasons Google threatened to shut down its services in China – after engineers discovered someone in the region was attempting to hack into its servers – is because those hacking attempts in part targeted Gmail, Google's cloud e-mail service.

In some cases, however, switching to the cloud can actually improve security for a small business, argues Mr. Redding. Because large cloud computing companies have more resources, he says, they are often able to offer levels of security an average small business may not be able to afford implementing on its own servers.

Regardless, the popularity of cloud computing services continues to rise, driven in large part by the exponential growth of mobile devices. As more consumers and businesses adopt tools such as smart phones and tablets, the ability to host data in the cloud and access it from just about anywhere on the planet is quickly becoming vital.

For more series, go to the Web Strategy section of Your Business.

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