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Nirvanix Shows the Dark Side of the Cloud

If you're investing in the cloud, you open yourself to risk in the event of a cloud disaster

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Having multiple websites and services hosted in a single data center (and often sharing space on the same server) makes for a target that’s much bigger and potentially much more lucrative than hitting a single website.

Cloud vendors know that, and take extreme security precautions, but they still have a big target on their backs. An attack on one client can potentially affect all clients housed in that same data center, resulting in anything from downtime to a data security breach. PCWorld recently highlighted a 451 Research survey in which, 69% of IT professionals who took part said they were “highly concerned” about cloud security.

Cloudy Outlook

Despite the recognized risks, the lure of cloud computing remains tough to resist for enterprise CIOs — who are still fighting to find savings in their IT budgets — and cash-strapped start ups. A recent report pegs enterprise cloud computing to continue growing at 36% annually through 2016.

Nirvanix is also a caution flag for investors betting on cloud services. Despite some highly publicized service outages and the bad PR created when IBM had to rush to the aid of customers who were in danger of losing their data, we haven’t yet seen an event that results in major fallout. If and when that happens, though, CIOs will be rethinking their cloud strategies very carefully.

A major event is likely to have a significant cooling effect on cloud computing. That’s going to impact the bottom line of companies like Rackspace (RAX) that rely on cloud business, as well as tech companies like Amazon, Microsoft (MSFT), Google and IBM that have been investing in expanding their own cloud services.

Gartner has begun advocating the importance for companies to have a cloud exit strategy in place. It’s not a bad idea for investors to have one, too.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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