Businesses Confront the Cloud Security Threat

As chief information officer of the 1,800-bed Orlando Health System, Rick Schooler needs to house 180 terabytes of medical images. That's more than three times the print holdings of the Library of Congress. "Within three years we'll be at 300 terabytes or more," Schooler says.

That's a costly challenge. Storage gear isn't cheap and has to be kept cool by expensive air-conditioning. To keep expenses in check, Schooler has begun turning over online backup storage to Internet security provider Symantec (SYMC). He says the pilot program may help him slash his storage budget—currently at "hundreds of thousands of dollars"—by 20 percent to 25 percent.

Orlando joins a growing number of businesses embracing what's known as cloud computing, where tasks such as storage and database management are handled off-site and delivered via the Internet by companies including (AMZN), Microsoft (MSFT) and Google (GOOG).

Cloud computing is gaining wider acceptance: Sales of cloud-based applications are growing five times faster than those of traditional applications, according to Goldman Sachs (GS) and Piper Jaffray. "The cloud is as profound an impact on what technology will look like in 20 years as the PC," says Walter C. Price, Managing Director at RCM Capital Management, which owns 583,000 shares of (CRM) and 1.1 million shares of SuccessFactors (SFSF) according to Bloomberg Data. Both companies specialize in selling hosted software-as-service applications.

security is the top cloud concern

Even so, many companies remain skittish about entrusting important tasks to third parties. "It's a very attractive model, but there will be challenges," Hewlett-Packard (HPQ) Chief Executive Officer Mark Hurd said in a speech in Orlando in October. "It's unlikely we'd put anything outside the firewall that's material in nature that we couldn't 100 percent secure."

In a recent survey of small business owners conducted for Bloomberg by the professional social networking site LinkedIn, three-fourths of the 65 respondents cited security as their biggest concern over cloud-based apps. According to a recent survey of 169 corporate data center managers by market research firm Gartner (IT), 85 percent cited "security" as a factor that might inhibit them from deploying cloud-based applications.

Orlando overcame its concerns by turning to Symantec, the world's largest seller of computer security software. Other would-be users of cloud-based services are tapping smaller vendors such as PerspecSys, a startup based in Orangeville, Ontario. PerspecSys sells a machine that lets customers keep data on-site while also making it available to cloud-based applications. Founder Terry Woloszyn says most of his customers are also customers of "We can make that data look like it's in Salesforce, but in reality it never leaves the building," Woloszyn says. "They can do everything they would normally do in Salesforce, but they keep control of their most sensitive data."

file-folder encryption

The flexibility has helped allay customers' security concerns, says Peter Coffee, Salesforce's director of platform research. "Over the long run, the perception of risk falls as familiarity grows," he says. "People feel more confident when they have more options."

Sophos, a privately held security software firm based in Abingdon, U.K., has developed tools that control access to sensitive data in the cloud. Known as file-folder encryption, the technology allows only those who need specific data to access it. It also encrypts those files while they are in the cloud.

Sanmina-SCI (SANM), a contract electronics manufacturer based in San Jose, recently began using cloud-based services from Google, reducing its operating expenses by $1.5 million a year. Sanmina CIO Manesh Patel says security was the primary concern when he was evaluating Google. "We spent a lot of time looking at how they do things and came to an interesting conclusion," he says. "Most companies consider their security to be pretty good. But Google's entire operation depends on security and so they can afford far better security than we can. In fact it's only likely to get better over time."

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