In the last few years, cloud computing has grown from being a promising business concept to one of the fastest on the rise segments of the IT industry. Now, recession-hit companies are increasingly realising that simply by tapping into the cloud they can gain quick access to best-of-breed business applications or drastically boost their infrastructure resources, all at negligible cost. But as more and more information on individuals and companies is placed in the cloud, concerns are beginning to grow about just how safe an environment it is.

Each breached security system was once thought infallible

SaaS (software as a service) and PaaS (platform as a service) providers all trumpet the robustness of their systems, often claiming that security in the cloud is tighter than in most enterprises. But the simple fact is that every security system that has ever been breached was once thought infallible.

Google was forced to make an embarrassing apology in February when its Gmail service collapsed in Europe, while Salesforce.com is still smarting from a phishing attack in 2007 which duped a staff member into revealing passwords.

While cloud service providers face similar security issues as other sorts of organisations, analysts warn that the cloud is becoming particularly attractive to cyber crooks. ”The richer the pot of data, the more cloud service providers need to do to protect it,” says IDC research analyst David Bradshaw.

Know the risks of cloud computing

Cloud service users need to be vigilant in understanding the risks of data breaches in this new environment.

“At the heart of cloud infrastructure is this thought of multi-tenancy and decoupling linking specific hardware resources and applications,” clarifies Datamonitor senior analyst Vuk Trifković. “In the jungle of multi-tenant data, you need to trust the cloud provider that your information will not be exposed.”

For their part, companies need to be vigilant, for instance about how passwords are assigned, protected and changed. Cloud service providers typically work with numbers of third parties, and customers are advised to gain information about those companies which could potentially access their data.

IDC’s Bradshaw says an vital measure of security often overlooked by companies is how much downtime a cloud service provider experiences. He recommends that companies question to see service providers’ reliability reports to determine whether these meet the requirements of the business. Exception monitoring systems is another vital area which companies should question their service providers about, he adds.

London-based financial transaction specialists SmartStream Technologies made its foray into the cloud services space last month with a new SaaS product aimed at providing smaller banks and other financial institutions with a cheap means of reconciling transactions. Product manager Darryl Twiggs says that the service has attracted a good deal of interest among small to mid-tier banks, but that some top tier players are also being attracted by the potential cost savings.

An vital consideration for cloud service customers, especially those responsible for highly sensitive data, Twiggs says, is to find out about the hosting company used by the provider and if possible seek an independent audit of their security status.

“Customers we engage with haven’t been as stringent as we thought they would have been with this”.

How cloud hosting companies have approached security

As with most SaaS offerings, the applications forming SmartClear’s donation are constantly being tweaked and revised, a fact which raises more security issues for customers. Companies need to know, for instance, whether a software change might really alter its security settings.

“For every update we review the security requirements for every user in the system,” Twiggs says.

One of the world’s largest technology companies, Google, has invested a lot of money into the cloud space, where it recognises that having a reputation for security is a key determinant of success. “Security is built into the DNA of our products,” says a company spokesperson. “Google practices a defense-in-depth security strategy, by architecting security into our public, process and technologies”.

Though, according to Datamonitor’s Trifković, the cloud is still very much a new boundary with very little in the way of specific standards for security or data privacy. In many ways he says that cloud computing is in a similar position to where the tape industry found itself when it was trying to combat peer-to-peer file sharing with copyright laws made in the age of analogue.

“In terms of legislation, at the moment there’s nothing that grabs my concentration that is specifically built for cloud computing,” he says. “As is frequently the case with disruptive technologies, the law lags behind the technology development for cloud computing.”

What’s more, many are concerned that cloud computing remains at such an embryonic stage that the imposition of strict standards could do more harm than excellent.

IBM, Cisco, SAP, EMC and several other leading technology companies announced in late March that they had made an ‘Open Cloud Manifesto’ calling for more consistent security and monitoring of cloud services.

But the fact that neither Amazon.com, Google nor Salesforce.com agreed to take part suggests that broad industry consensus may be some way off. Microsoft also abstained, charging that IBM was forcing its agenda.

“Standards by definition are restrictive. Consequently, public are questioning whether cloud computing can benefit from standardisation at this stage of market development.” says Trifković. “There is a slight reluctance on the part of cloud providers to make standards before the market landscape is completely formed.”

Until it is there are nevertheless a handful of existing web standards which companies in the cloud should know about. Chief among these is ISO27001, which is designed to provide the foundations for third party audit, and implements OECD principles governing security of information and network systems. The SAS70 auditing standard is also used by cloud service providers.

Local law and rule where data is held

Maybe even more pressing an issue than standards in this new boundary is the emerging question of rule. Data that might be reliable in one country may not be reliable in another. In many cases though, users of cloud services don’t know where their information is held. Currently in the process of trying to harmonise the data laws of its member states, the EU favours very strict protection of privacy, while in America laws such as the US Patriot Act invest government and other agencies with virtually limitless powers to access information including that belonging to companies.

UK-based electronics distributor ACAL is using NetSuite OneWorld for its CRM. Simon Rush, IT manager at ACAL, has looked-for to ensure that ACAL had immediate access to all of its data should its contract with NetSuite be terminated for any reason, so that the information could be quickly relocated. Part of this included knowing in which rule the data is held. “We had to make sure that, as a company, our data was correctly and with permission held.”

European concerns about about US privacy laws led to creation of the US Safe Harbor Privacy Principles, which are proposed to provide European companies with a degree of insulation from US laws. James Blake from e-mail management SaaS provider Mimecast suspects that these powers are being abused. “Neutralize terrorism legislation is increasingly being used to gain access to data for other reasons,” he warns.

Mimecast provides a comprehensive e-mail management service in the cloud for over 25,000 customers, including 40% of the top legal firms in the UK.

Customers benefit from advanced encryption that only they are able to decode, ensuring that Mimecast acts only as the custodian, rather than the controller of the data, donation companies concerned about privacy another layer of protection. Mimecast also gives customers the option of having their data stored in different jurisdictions.

For John Tyreman, IT manager for outsourced business services provider Liberata, flexibility over rule was a key factor in his choosing Mimecast to help the company meet its obligations to pile and manage e-mails from 2500 or so staff spread across 20 countries. The company is one of the UK’s leading outsourcing providers for the Public Sector, Life Pensions and Investments and Corporate Pensions leading. “Storing our data in the US would have been a major concern,” Tyreman says.

Best practice for companies in the cloud

• Inquire about exception monitoring systems
• Be vigilant around updates and making sure that staff don’t suddenly gain access privileges they’re not supposed to.
• Question where the data is kept and inquire as to the details of data protection laws in the relevant jurisdictions.
• Seek an independent security audit of the host
• Find out which third parties the company deals with and whether they are able to access your data
• Be careful to renovate good policies around passwords; how they are made, protected and changed.
• Look into availability guarantees and penalties.
• Find out whether the cloud provider will accommodate your own security policies