Many cloud providers are at risk of going bankrupt and taking their customers' data with them, according to Simon Hazlitt, co-founder and relationship manager at financial services firm Majedie Asset Management.
Hazlitt explained at Computing's Cloud and Infrastructure Summit that cloud providers going bust presents a huge risk to businesses looking to outsource to the cloud.
"The biggest risk of cloud provision is bankruptcy. With most outsourcing deals you can spool your resources back in, but it's trickier with cloud," he said.
"And if a receiver comes to you and asks you to pay a second time to access your data [when you've already paid the cloud provider], that's potentially a big cost to the business."
However, this doesn't appear to have dampened the public sector's enthusiasm for cloud services, even though local authorities appear to be less keen than central government, according to the latest figures on G-Cloud sales.
Hazlitt added that working among financial experts is a boon for someone looking to use cloud providers, as he could ask one of them to look over a prospective supplier's balance sheets to check on their viability and likelihood to survive.
He explained that simply checking for strong revenue is not enough. "I asked one of my fund management colleagues to examine the balance sheet of some our cloud providers," he said.
"Tech people don't really get the numbers. Revenue is fool's gold. It doesn't mean they're going to survive. You've got to be careful because we're in the 'land grab' phase when it comes to cloud."
Hazlitt was referring to the huge costs incurred by some cloud providers in setting up the business and acquiring customers in the hope that they will become profitable in the future.
"[Cloud providers] are all underwater in a financial sense, so you've got to be really careful in terms of picking your partners. There are lots of risks," said Hazlitt.
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