From the September 2011 issue of Entrepreneur
Gregory Potter, data analyst at market research firm In-Stat
Gregory Potter, data analyst at market research firm In-Stat.
Photo© Jeff Newton

Q: Which business apps should I put in the cloud, and which should I keep in-house to avoid a security breach?

Cloud services are rapidly becoming a more efficient, more scalable and less costly way for small businesses to manage data, applications and websites. Both public and private cloud services let businesses keep IT overhead low while encouraging flexibility for users to access corporate data from just about anywhere on any device.

But some high-profile outages and mishaps within the last year serve as a reminder that outsourcing IT to the cloud does not come without risk. Last April, a cloud data center outage affected Amazon Web Services clients. A Google Gmail outage two months earlier resulted in some business clients losing e-mails.

Companies like Microsoft and Dropbox also have had problems, and though overall such occurrences may be rare, businesses should pause before migrating their IT assets en masse to the cloud, says Gregory Potter, data analyst at market research firm In-Stat. "Small businesses can make great use of cloud services, but nothing is 100 percent reliable," he says. "You just have to be smart about these things and plan for the possibility of disaster."

Start by looking at how you want to use the cloud, and what type (public or private) best fits your needs and budget, Potter says. Some small businesses use cloud services primarily for productivity applications--services like Salesforce.com, Google Apps and Microsoft's Office 365. Services from Mozy, Dropbox and Apple also can be used to store content and archived files now clogging desktops and office servers. In addition, small businesses can use the cloud for web hosting from providers like Rackspace, Amazon and Verizon.

"The great advantage to using cloud hosting is that it is immediately scalable, so that if your website suddenly gets a large number of hits, you can be confident that it won't crash or slow down to a crawl," Potter says.

Public cloud services have the advantage of being inexpensive--as cheap as $5 per user, per month--but they are also the services that have grabbed headlines for their disruptions. A private cloud service, involving rental servers from a company like VMware, is a more secure option, Potter says.
"A private cloud is definitely more secure than a public cloud, but you are buying servers and software, and it could be cost-prohibitive," he says.

Ultimately, employ common sense. "Maybe start by doing e-mail and some productivity stuff through the cloud, but maybe not mission-critical functions and sensitive business data," Potter says. "You may also want to have your own local IT backup to the cloud service … just until you find your comfort level."