How the cloud can put you out of business

With a focus on large scale business enterprises, it easy to lose sight of the fact that while the cloud back-end technologies are the domain of the IT professional, in many cases, the SMB target market for the cloud doesn't have anywhere near that level of IT expertise available. In fact, that's what makes the SMB market the sweet spot for cloud applications. There are a huge number of businesses in the $5-50 million dollar a year revenue category that get by with minimal IT support and who are the perfect market for the cloud service provider, who is taking some of that IT responsibility upon themselves.

But what happens to your business when you start to move critical services offsite to a service provider? A failure on their end may have a cascading effect on your business. And while the provider may have the redundancy and resources to recover from that failure, how about you? 

I've been hearing lots of anecdotal stories about failures ranging from credit card transation processing services mysteriously disappearing to completely lost service accounts, but I've found little hard information about how business are handling the potential damage that a failure with your cloud service provider can cause.

Personally, I have experience with two situations that still make me shudder, one that happened to me directly and one to a client. The personal experience dealt with hosted email; the granddaddy of cloud based services. In this situation I had moved my business from a self-hosted email solution to a hosted Exchange service. About two years into the service, while upgrading systems, a number of email accounts suddenly had no email in them; the users carefully organized email inboxes were now empty, and all of the information in those emails was gone.

It took a lot of phone calls and the power of the press to eventually figure out what had happened and restore the data, though in the initial contact with the lead vendor's tech support they were happy to offer the solution of restoring each of the missing mailboxes for $500 per mailbox, despite the fact that the mailboxes disappeared while following their directions for the upgrade/migration. A lot of digging eventually led me to the fact that my service provider was a reseller for another vendor's email hosting services, and through further investigation I determined that my vendor had elected not to use the actual provider's first tier support services, which meant that the tech's I had been dealing with knew less about Exchange Server than I did and where simply reading rote responses from their manual in response to my questions.

Had I not had the resources available to me that I do, along with a detailed knowledge of Exchange, I would have been like any other customer, left with no recourse but to pay thousands of dollars to fix something that I was able to eventually prove was caused by the reseller's actions.

But at least I knew that I was completely relying on someone else's servers when I contracted for a hosted Exchange Solution.  To new users of cloud services, it might not be quite this obvious.  Which brings me to the second situation I have personal involvement in; one which is still being resolved.

In this case a client of mine had completely replaced their accounting systems about 18 months ago. I was not directly involved in this project as I make no claims to have any accounting expertise. This business is a classic SMB; about $20 million in yearly revenue, less than 20 employees and a single person IT staff. They were in a position where they absolutely had to upgrade their internal accounting system, as it was old, specialized, and completely outgrown. 

So with the assistance of the consultant who supported their existing accounting system, they migrated to his recommended product, a well-known small business accounting system, with a vendor recommended third-party add-on designed for their type of business. What no one seemed to realize was that the third-party add-on was basically a cloud service; its functionality was dependent upon synchronization with the vendor cloud service.

So in January, when the third-party vendor unexpectedly shut their doors and closed down their cloud servers, their accounting application just stopped working.  This left them with, among other things, no way to manage inventory, generate invoices, or calculate their salesmen's commissions. They were dead in the water.

The only good side of this was that January is generally a slow month, so they actually went to manually doing all of their accounting and inventory tasks while they selected a new product and had their accounting consultant do the change-over and new product training.

Their takeaway from this whole fiasco was far different than mine; while they were basically unaware that they were using a cloud service as part of the software they had purchased, they didn't seem to care. Had the cloud component not existed, they wouldn't have had the same problem; when the vendor went out of business they could simply have made an orderly migration to a new product when necessary.

Their new software, from a single, first-tier SMB accounting software vendor, has a similar component; it too synchronizes data with the vendor's cloud servers. This factor was not part of their purchase decision process despite the problem the same type of service had previously caused. Their accounting consultant was simply concerned with getting them up and running with a better solution than he had picked the last time.

From my own research I've found that in this case, a loss of connection to the cloud service will not stop the application from working properly, which is a major improvement (though an unintentional one) and I have suggested that they add a backup component to their accounting data that isn't dependent on that same vendor. But I get the definite impression that they feel my concerns are a bit overstated.

The choice, of course, is theirs, but it does beg the question. I might choose to bet my business future on a cloud provider, but if it's up to me, there had better be a very effective plan B in place.