Cloud Computing: Understanding the Concepts

At Founders Workbench, we’re always updating our resources to provide our clients with the latest information and tools they need to run their startups. One area that we increasingly receive questions about is cloud computing.

What exactly is cloud computing?

The phrase “cloud computing” refers to the concept of using a network of remote servers hosted on the Internet to store, manage, and process data, instead of relying upon a local server or a personal computer for such data storage, management, and/or processing.

In general terms, cloud computing facilitates easy access to networks, servers, storage, applications, services, and other computing resources with minimal management effort or service provider interaction.

Founders that have experience with sourcing arrangements will be familiar with such a definition of cloud computing, and may benefit from focusing on those aspects of cloud computing that are legally similar to outsourcing, rather than focusing on the technical aspects of the practice.

On an operational level, cloud computing services range from the familiar – think email services or prominent customer-relationship management tools – to the complex. Founders will do well to recognize that despite cloud computing’s many forms, the most common legal issues arise nearly universally.

Helpfully, despite the breadth of cloud offerings, certain common categories of classification have begun to emerge that may be useful for lawyers. They include the following:

  1. cloud software as a service, in which the provider’s applications are used over a network;
  2. cloud platform as a service, in which customer-created applications are deployed to a cloud; and
  3. cloud infrastructure as a service, in which rent processing, storage, network capacity, and other fundamental computing resources are outsourced to the cloud.

Over the past few years, this idea has become a reality for more and more companies of all sizes, including startups. A 2014 study showed that more than 90 percent of companies are using some sort of cloud computing.

While cloud computing has become increasingly popular, the very characteristics that make cloud computing such an attractive option for managing computing resources also give rise to complex legal issues. As cloud computing takes a recognized place in the startup information technology toolbox, we realized that founders will benefit from an overview of the legal questions inherent in the practice, including contractual relationships with cloud providers, government regulation of data, and electronic evidence stored in the cloud.

This post is the first in a series that identifies several important and common issues that company founders may encounter when utilizing cloud computing resources. In the next part of this series, we will examine key motivations for cloud computing.

We hope this series gives you a framework to inform strategies that startup companies can employ to mitigate the risks involved with cloud computing.

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