When the Cloud Makes Sense for Startups — and When It Doesn’t

The Kauffman Index recently released its 2017 report of startup activity. According to the report, entrepreneurship increased slightly in 2016, continuing an upward trend. In 2015, business startup activity increased 10 percent, the largest jump in 20 years. The vast majority of entrepreneurs are starting businesses to pursue new opportunities rather than from economic necessity, indicating a rebound from the height of the Great Recession in 2009.

Entrepreneurship and innovation go hand in hand. In fact, startup companies that embrace new technologies and business models are putting competitive pressures on well-established firms. So-called “digital natives” are disrupting entire industries, from entertainment to hospitality to transportation and more.

Not every startup is going to be the next Airbnb or Uber, but startups have certain advantages when it comes to technology adoption. Without existing infrastructure, they are free to explore cloud-based options that give them access to applications and services without significant upfront investments. The cloud minimizes IT operational overhead, and provides the agility to adapt business processes to support rapid growth and changing customer demands.

But there are potential traps for the unwary, particularly as the business grows. Here are three considerations:

  • The subscription model of cloud-based services means that the meter keeps running, month after month. As more users are added and data volumes grow, those costs will continue to rise. At some point, on-premises infrastructure investments are going to make more sense for certain applications.
  • What happens when you can’t reach your applications and data because your Internet connection is down? What happens when the cloud provider goes out of business, or is bought, or changes the service such that it no longer meets your needs? What if you lose all your data when you cancel the cloud service?
  • Cloud infrastructure may be more secure than many onsite data centers, but users are responsible for the security of the data they store in the cloud. One security breach or regulatory compliance violation could spell the end of a startup business. And if proper controls aren’t established, a disgruntled insider could compromise invaluable intellectual property.

Putting the right processes in place when the company is founded can save thousands of dollars per month later down the road. These processes should include regular reviews of cloud services to ensure they are meeting business objectives. Cloud service agreements should spell out who owns what, who’s responsible for what and how to make a smooth transition when the relationship ends.

Functional security processes can help keep the company out of the news by protecting sensitive data. Organizations should set up a centralized identity store that extends to the cloud and implement multifactor authentication wherever possible. Data should be encrypted and encryption keys managed across cloud providers. Endpoint data protection and data loss prevention tools should be used to protect the company’s intellectual property.

Even tech-savvy startups can benefit from partnering with an IT solution provider with expertise in infrastructure design and implementation and information security. The key thing to remember is that the cloud isn’t the answer to every IT problem. It’s important to have a solid IT strategy that can take your business beyond those heady startup days and into the future.