Trumpeted as the latest profit boosting revolution or derided as an over-hyped fad, the world of cloud computing is making an impact on the Swiss business landscape.
Cloud computing takes information technology outsourcing to another level by promising clients more control over their data. But the financial sector in particular is grappling with how to use it without compromising confidentiality and security.
The latest innovation allows companies to tap into IT infrastructure, software or services - such as email – over the internet on a pay-as-you-go basis depending on demand at any given time. This allows firms, for example, to expand or decrease data storage space at will depending on their business cycle.
Cloud computing is offered by outside providers who take care of building and maintaining the service, allowing customers to concentrate more efforts on their core business strategies.
While cloud computing is still in its infancy, analysts expect the business to grow by 17 per cent this year to $68 billion (SFr65 billion) and to $150 billion by 2014.
Switzerland’s largest telecoms provider, Swisscom, started providing the service this summer while smaller start-up companies have been springing up to cash in on the expected boom. United States IT giant Hewlett Packard will set up its European cloud service centre in Zurich next February.
A number of Swiss companies and agencies have already signed up to take advantage of the deal. These range from publishing group Ringier, environmental consultants Valorec and the Swiss Federal Topography Office.
Swisscom said companies from a range of industries had taken advantage of its data storage services, offered at first through two partner agencies. Spokesman Olaf Schulze said that Swisscom would expand its range of services and offer in-house capabilities in the near future.
“Cloud computing is one of the most rapidly expanding parts of the information and communication technology business,” Schulze told swissinfo.ch. “It is on a low level right now, but it will evolve over the next few years.”
However, cloud computing does not come without critics who question why private firms would entrust sensitive data to outside agencies with little control over future costs of these services.
“The computer industry is the only industry that is more fashion-driven than women's fashion,” Oracle founder Larry Ellison commented on cloud computing recently. “Maybe I'm an idiot, but I have no idea what anyone is talking about. What is it? It's complete gibberish. It's insane.”
Stolen bank data
The Swiss financial sector has other reasons to question the wisdom of using cloud computing to take care of its data storage requirements.
Switzerland has suffered a number of embarrassing security breaches in the past 18 months, including the theft of several CDs containing client data that were later sold to foreign government agencies.
The issue of client confidentiality, or banking secrecy, has become even more acute in Switzerland since it was forced to water down its famed client protection rules under pressure from the Organisation for Economic Co-operation and Development.
To make matters worse, Switzerland was also forced to strike a deal with the US last year to release details of UBS banking clients.
IT law expert David Rosenthal of Zurich’s Federal Institute of Technology said laws preventing Swiss banks from releasing client data outside the country may prove a stumbling block to them using cloud computing.
“The problem with some cloud service providers, with data centres in different parts of the world, is that they cannot tell you exactly where data is at any given moment,” he told swissinfo.ch.
Suck and see
Even if the location of data was known, it might still be vulnerable if it is located in countries that had an interest in getting their hands on it as evidence in criminal investigations.
“If a US marshal walks into a US data centre with a court order that demands access to certain information, the service provider would have to unlock it no matter what level of security they provide,” Rosenthal said.
Switzerland’s biggest banks, UBS and Credit Suisse, declined to comment, but both have made moves to look into the issue.
UBS recently joined forces with a number of powerful multinational companies to form the Open data Center Alliance. The group has publicly demanded international standards for cloud computing.
Credit Suisse will open a new computer development centre at Lausanne’s Federal Institute of Technology next year. One mandate researchers will be given is to find ways that the financial sector could utilise cloud computing.
“This is not a good or bad model per se but it could be a valid model for some business operations,” Rosenthal told swissinfo.ch.
“Companies would have to analyse the costs and benefits on a case by case basis to determine whether the service levels are high enough to meet their requirements.”
Cloud computing has been likened to an “electricity grid” of servers and IT services that can be tapped into online by client companies.
The technology infrastructure is built and maintained by a third party that gives clients access.
These on-demand services range from email, software packages, data storage space and access to servers.
Companies including Amazon, Rackspace Cloud, Salesforce, Microsoft, Google, IBM, Siemens, Cisco and Hewlett Packard are the industry leaders in this field.
Swiss publishing group Ringier aims to save around SFr1 million a year by using Google’s email service for its 8,000 employees.
The Swiss Federal Topography Office uses Amazon’s web portal services to distribute geographical reference data to clients.end of infobox