Is it time to dump the cloud and go on-premises?

Published on 16 Oct, 2016

Is it time to dump the cloud and go on-premises?

With price rises from cloud providers including Microsoft and others, and huge potential fines when the GDPR comes into force, is it time to re-examine the decision to go cloud?

Cloud services are set to become both more expensive and riskier for UK-based firms, with some US providers putting up costs in response to the falling pound, and the incoming EU General Data Protection Regulation (GDPR) bringing with it huge potential fines for non-compliant contracts.

Microsoft is one of the first US-based cloud providers to announce imminent price rises, with enterprise cloud licensing set to increase by 22 per cent on 1 January 2017.

Responding to a recent Computing poll, over 60 per cent of readers stated that they had already seen their cloud costs go up, with 31 per cent stating that prices had become 'a lot more expensive'.

The price of cloud computing and other IT services in the UK and across the European Union are set to increase as a result of the added administrative cost of implementing and complying with the GDPR, according to one of the UK's leading data protection lawyers.

Regardless of what happens with the UK's exit from the EU, organisations across the UK will almost certainly have to comply with the GDPR when it comes into force on 25 May 2018 - giving them less than two years to prepare.

Organisations will be expected to demonstrate compliance at every stage of processing of personal data with, potentially, heavy fines being levied by regulators on top of the high costs of dealing with data breaches.

These issues will need to be thrashed out before the ‘hard' deadline in less than two years time - there will be no ‘grandfathering' of existing contracts and no transition period: all contracts must be changed before 25 May 2018, regardless of when they officially expire.

"These extra requirements [under GDPR] have got to go into the contracts," said Kuan Hon, a consultant lawyer at Pinsent Masons. "There's going to be lots of discussion over who's going to pay for the cost, who's going to be responsible for what, liable for what and indemnities and so on, because cloud providers could be directly liable themselves. If somebody sues them, and it was your fault, they are going to want to claim back from you.

"And pricing, unfortunately, is probably going to go up," she added.

So with these added financial burdens, has the cost / benefit ratio of cloud versus on-premises solutions changed?

According to Mark O'Conor, IPT partner at law firm DLA Piper, Brexit could actually see increased cloud adoption.

"It seems more likely that Brexit will increase cloud adoption. One of the many concerns is as regards data; where it is, who processes it, how safe it is etc.

"We know, because the UK Information Commissioner has told us, that the UK will implement the General Data Protection Regulation whatever happens with Brexit. That is good and provides certainty and shows that for cloud, and data within the cloud, there will continue to be European harmonisation.

"The ICO has said that business simply could not stand the uncertainty of implementing the GDPR and then implementing another regime shortly afterwards. And that has to be good news," said O'Conor.

Bryan Oak, director at Searchlight Consulting, explained that there are many other factors to consider in the cloud versus on-premises argument.

"All the reasons from evaluating cloud vs hosted vs on-premise still apply. The need to have in-house or outsourced technical capability; access to 'evergreen' software versions all still need to be considered. Cloud is not and has never been a panacea for everyone, and weakening currency exchange rates whilst significant should not be viewed as the killer argument for retaining legacy, on-premise mindsets.

"Recent events have just served to highlight one of the many commercial, technical and functional considerations/risks that need to be though through before undertaking any significant business applications or technology investment."

And Mayur Varandani, assistant manager, business research & advisory at consultancy Aranca, explained that there's also the question of needing the right skills to manage services on-premises.

"The decision on the use of on-premises versus cloud-based solutions should be dependent on the scale of usage and the per-engineer cost of managing the service. Doing it on-premises may have advantages of single tenancy and security, but at the same time it would also require skilled engineers and ongoing maintenance, which in turn can increase the overall IT spending of the company.

"Hence, due to changing business scenarios, companies should be flexible and adopt the right model based on their requirements," said Varandani.

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