3 Myths About Cloud Services
Over the past decade, the term "cloud service" has evolved from an amusing, incomprehensible oddity to a frequently mentioned concept in the business world. It is no stranger to accountants either, as cloud storage has become the preferred location for financial data storage among company managers and accountants. In 2015, we also launched the cloud service product Jumis Pro, and now more than two-thirds of all users of the company's accounting solution Jumis have transitioned from local solutions to the cloud.
Storing data outside the company has many advantages. Companies no longer need to maintain server rooms and servers, worry about data backups, and information can be accessed from both computers and smartphones. It doesn't even matter where you are at the moment — even on the beach. All you need is an internet connection.
Despite the convenience, many companies are deterred from adopting cloud solutions due to entrenched myths that no longer hold true but still linger in people's minds. Here are the most popular ones, along with their debunking.
"Storing data on a computer is safer than in the cloud"
This is perhaps one of the most common myths about cloud services. Security is one of the most critical factors for cloud service providers to offer successful services. Significant investments are made in employee training and the creation of data centers to meet all security standards set by the European Union and globally. Professional IT specialists, who are aware of risks and trained to use the most secure technologies, ensure data security in the cloud. Cloud services utilize special data backup systems that ensure regular creation of data backups. This means that data in the cloud is always stored in at least two copies. If the original data is damaged for any reason, it can be immediately restored from the backup. For accountants, this means that in cases of erroneous data entry or deletion, they can always revert to the previous version of the data. The cloud also maintains special access security systems, or firewalls, that protect it from hacker and virus attacks.
Since cloud data is accessible via an internet connection, it is also essential to ensure a secure data channel between the database hosted in the cloud and the client's computer. Most commonly, SSL (Secure Sockets Layer) encryption algorithms are used, which protect data even if intercepted by unauthorized persons or internet service providers. For example, in the case of an unsecured wireless network, data is not encrypted, and transmitted data can be intercepted by a hacker or an unscrupulous employee.
In practice, there are many cases where data stored on a computer or company server is lost. The reasons are most often damaged hard drives, lost or stolen computers, accidental damage to the computer, and less frequently — fires, floods, or other natural disasters. Hackers and fraudsters are increasingly interested in seizing company data for extortion purposes. Recently, the world was hit by a wave of "ransomware" viruses, causing significant losses to countless companies worldwide. These viruses also affected Latvian companies, and data stored on company computers or servers was lost.
"Regulatory authorities can freely access data in the cloud"
It's hard to imagine how this myth originated, but rumors have been circulating for some time that regulatory authorities in Latvia might have free access to data stored in the cloud. In reality, this is not possible legally, practically, or from a moral and ethical standpoint. All legal nuances are included in the agreement signed between the cloud service provider and the client.
Data stored in the cloud belongs to the company, and access to it is determined by the company's responsible employees. One of the rare situations where regulatory authorities can access company data is when company employees provide this access during an inspection. Other situations are regulated by the legislation of the Republic of Latvia.
In the more than four years since our cloud service has been operational, serving over 6,000 companies in the cloud, we have received only a few requests to grant access permissions. These requests were not approved because they lacked justification.
"Cloud services are too expensive"
This myth cannot be explained with a single answer, as for some companies, cloud services may cost more than maintaining their own IT infrastructure, while for others — significantly less.
A company's costs for cloud services or its own IT infrastructure depend on its data security strategy, business model, and needs. It is important to identify all cost items related to IT infrastructure and understand how seriously the company wants to treat its accounting and financial data. The principle is — the more there is to lose, the more complex and expensive it is to ensure a comprehensive security system.
Cloud service costs differ fundamentally from traditional IT infrastructure costs. Cloud service costs are operational (OPEX), whereas if a company builds its internal IT infrastructure, capital investments (CAPEX) are usually required. It is essential to evaluate whether the company needs to purchase its own servers (as they might be used not only for accounting but also for other systems) or whether IT server infrastructure should be entrusted to cloud service providers.
Each company's situation is different. For example, a company providing IT services will choose to build its own IT infrastructure because IT is its core business. It plans to use various systems, and the company has enough IT specialists to maintain these systems. On the other hand, a company engaged in trade, not IT, will calculate that it is more cost-effective to use cloud services and not worry about hiring IT specialists and investing in servers.
One of the significant advantages of cloud service costs is flexibility. For example, if a company's business is seasonal, cloud service costs are incurred only for the resources used.
Example. The company SIA MSG is involved in construction projects, which are mainly carried out in the summer. Therefore, additional employees, payroll accountants, warehouse managers, and project managers who need access to the company's management system are hired during the summer. In the case of cloud services, additional users can be added to the system during the summer period, and the company pays monthly for the specific number of users. After the active season ends, the company cancels the additional users and no longer pays for them.
Sometimes cloud service costs may seem higher because only license costs are calculated, not total costs. To objectively evaluate whether to maintain its own server with databases or use cloud services, the total costs of data storage in the company must be considered, and they include:
- Purchase of a data server or computer
- Software purchase and maintenance
- Computer network infrastructure
- Additional electricity costs for the data server
- IT specialist services.