Clouds on the Horizon

The growth of cloud computing is grounded in good reason.

Long before the dawn of the digital age, the poet Wordsworth “wandered lonely as a cloud,” although he probably wasn’t pondering the problem of secure computing.

These days, the cloud is no longer so lonely. With exabytes of information in play for banks, government agencies, and insurers, the challenge of finding enough computing power and the expense of internal archiving—not to mention risks from hacking—seem to be looming larger.

For many, the solution is a move to secure data centers off premises, hiring vendors to establish firewalls that keep information safe and yet instantly accessible. Those data centers are now referred to collectively as “the cloud.”

But why would any institution concerned about security and privacy send data seemingly into the unknown? Although it first looks counterintuitive, the growing migration to cloud computing is based on some remarkably grounded reasons that involve cost, privacy, and potential for competitive advantage.

In terms of safety, users are able to store data in lockboxes known as virtual private clouds. These are not unlike safety deposit boxes held within a bank vault. Essentially, they can be opened only by recognized depositors. An intruder would first have to break through a cloud’s firewall before approaching an encrypted virtual private cloud.

And for industries subject to regulations about offshoring data—as governed in countries of the European Union—it’s even possible to anchor data to a specific geographic location. Some American companies continue to specify their information remains in the United States, for example.


Then there’s the money issue. Questions of cost come down to the overhead involved in any given business having to establish and maintain its own data centers, servers, and expert staff. Such investments tend to be substantial and may explain studies suggesting markedly stronger rates of cloud adoption by businesses in 2016—rates as high as 95%, according to a survey by RightScale, which found that adopters tend to go even “cloudier” after making the initial leap. The same survey reported that companies choosing to begin cloud computing wind up tapping into six different clouds, on average.

Just as in real estate, who wants to pay for hardware and infrastructure when terms may be more attractive to lease?

Less understood has been the notion of “agility” within the cloud—another way of describing a possible first-mover advantage. In choosing an appropriate cloud provider, a company is often able to transfer data instantly and seamlessly between distinct information technology systems and geographic locations.

Whether entering a new or global market or meeting long-standing needs, companies that embrace agility can bring speed and vast computing power to bear on complex problems—including cloud-based analytic tools that carry potential to penetrate data and bring insights that better inform our decisions. In the world of insurance, for example, models for underwriting property might benefit from instant access to information about flood, fire, or weather from a distant location.

There may be situations for which cloud usage looks less sensible, and some onlookers remain to be convinced. But in the main, it turns out there’s almost nothing lonely about the cloud. Cloud computing is proving to be a safe and cost-efficient solution for making use of an ever-increascloud-based our vital data.

Best’s Review columnist Scott G. Stephenson is chief executive officer of Verisk Analytics. He can be reached at [email protected]


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