By Alyzabeth R. Smith, CPA | Wipfli LLP CPAs and Consultants

Storing information “in the cloud” is a nebulous concept for most. It can be as ambiguous as the “they” used when people want to give an idea credibility but don’t know to whom it should be attributed: “They” say your data is safe in the cloud. Yet, can anyone pinpoint the exact location of your clients’ sensitive data?

Chances are you do not know the exact location, but if your curiosity persists you may be able to come close. The data “in the cloud” is often maintained on servers at one or more physical locations operated by an outside vendor. Upon request, cloud service providers may divulge the location of their data centers. If these locations are SOC 2 audited, those reports may be available upon request. An SOC 2 audit report will provide information on the security and maintenance processes of the data being stored.

To put it simply, cloud computing is essentially a place to store a lot of stuff. If the cloud was tangible, it would be an organized and (theoretically) limitless version of your attic. An Internet connection will help you ascend to your storage loft, and your login information will be your key. Information can be stored in a private cloud if the information is only for your organization, or in a community cloud for joint or consolidated entities that share a common objective.

Loss of data from outages is less likely to occur with cloud storage as opposed to the use of hardware, and you can be set up to access your data from nearly anywhere. Speed of access to information is increased exponentially. Fewer resources are required to facilitate cloud storage as power consumption is shared and little local hardware is required to manage and store data.

With all these perks, what would keep logical minds from converting to cloud storage?

For one, many business owners don’t want to relinquish control of their data, particularly if it is sensitive or classified. News stories about access to private data by the National Security Agency and other governmental units have amplified public skepticism about cloud storage. Squeezed in the fine print of your cloud contract, you may find disclaimers where cloud storage companies indicate specific situations where data or metadata can be relinquished to third parties or governmental authorities without your consent.

While the monthly costs of maintaining cloud storage may be less than those of on-site hardware, transferring your data to the cloud could come with additional fees. Over time, your total financial outlay for cloud storage could exceed the costs associated with purchasing your own storage infrastructure. As another strike, a cloud service provider could segregate pricing for necessary services, making the overall price structure cumulatively uncompetitive. Additionally, since you don’t know how others are using the storage space they are allotted, demands placed on the system by you or another user could strain the system and create potential performance issues.

In somewhat of a mixed blessing, cloud service providers often offer development tools for business owners who are personally responsible for their own web development. However, if the cloud service provider developed the application, a business owner may find that the tools are not compatible in all environments. This means that business owners may have difficulty with customization. Additionally, once one is locked in with all of the bells and whistles, changing to an alternative service provider could prove to be a Herculean task.

In spite of these reservations and as more industries progressively rely on cloud services, late comers may ultimately find themselves forced to convert to remain competitive. As cash hoarders of old had to eventually resign themselves to the ubiquity of plastic payment methods, those with hardware storage separation anxiety may find themselves grudgingly pulled toward cloud storage.

While your business should be firmly planted on solid ground, letting your information float away to a cloud service provider is a comparatively safe way to remain competitive and technically relevant. Instead of supporting bulky servers on site, you can send your data to the big electronic warehouse in the sky – if the price is right.

Alyzabeth R. Smith, CPA, is a staff accountant with Wipfli LLP CPAs and Consultants in Media, Pa. She can be reached at alyzabeth_smith@msn.com.