Cloud computing under siege

Why advocates of data localization are missing the real security risks.

eye in the sky

The benefits of cloud computing can hardly be overstated. By pooling computing resources, cloud computing not only offers significant cost savings over traditional software and hardware products, it facilitates innovation by allowing users, businesses and governments to procure, rapidly and cheaply, a diversity of software, analytics and storage services.

The global market has clearly noted these advantages: In 2014, companies are expected to spend more than $100 billion on cloud services globally.

Despite these considerable benefits, however, globally distributed cloud computing has recently come under threat. Over the past year, in response to mounting concerns over data privacy, data security and the rise of online surveillance, governments around the world have been seeking to pass new data protection rules.

Several governments, including Germany and Brazil, have considered enacting “data localization” laws that would require the storage, analysis and processing of citizen and corporate data to occur only within their borders. Proponents of these rules assert that by keeping data storage and processing close to home, they can provide their citizens and corporations with better defenses against foreign surveillance and protection from the ambiguities of international data privacy rules.

Yet many of these proposals are likely to impose economic harm without achieving any of their stated goals. For example, several of the proposals under consideration would force companies to build servers in locations where the high price of local energy and the lack of trained engineers could translate into higher costs and reduced efficiencies. Data localization policies would also result in a sub-optimal deployment of servers and excessive cost, as each country seeks to build its own array for local use. Moreover, policies that restrict information flows are unlikely to address key security and privacy objectives. Requiring that data reside in a server based in Germany instead of one in Ireland or America will do little to prevent spies from accessing that data if they are determined and capable.

Localization policies also overlook the growing threats from sophisticated criminal groups that are targeting cloud-based servers for use in distributed denial of service attacks. These criminals do not care where a server resides; they simply want to take it over and use it for their purposes. Once a server is compromised, its contents become easy prey for criminals and spies alike.

Ultimately, security is not a function of the geography of a server. It is the product of comprehensive security practices, state-of-the art technology, and most importantly, support from world-class cybersecurity talent. As former U.S. federal CIO Vivek Kundra has stated, “cloud computing is often far more secure than traditional computing, because companies like Google and Amazon can attract and retain cybersecurity personnel.” Requiring data to be stored in countries where there are few first-rate computer security professionals may increase rather than decrease security risks.

Cyber espionage, cybercrime, and the preservation of privacy are legitimate concerns that deserve appropriate policy responses. International laws and agreements regarding data jurisdiction are in need of urgent clarification and reform. However, those technical, legal and normative problems can be addressed without erecting virtual walls around national borders or restricting users’ access to global services and technologies.

For example, the use of encryption for data both at rest and in motion would be hugely beneficial. Encryption might not prevent sophisticated intelligence agencies from gathering and analyzing targeted information, but widespread use of encryption would make mass surveillance and data theft more difficult, whether conducted by governments or other sophisticated hackers.

Another option, which is currently being considered by the European Union, is to develop guidance on the use of cloud computing and data transfers and require providers to meet that guidance. The EU would also reserve the right to conduct “prior checks” of cloud providers to verify that they are complying with its regulations. While the details of this model have yet to be worked out, and one can imagine challenges in making it work effectively and efficiently, a policy-based approach of this kind is preferable to a data localization policy that precludes global competition.

In the end, the best approach will likely include both technological solutions and policy guidelines shaped by international data standards. Yet it is clear that restricting international access to the services offered by cloud computing -- services which rely on the efficiency gains achieved through a distributed network of servers and users across the globe -- will increase costs for individuals and businesses, and potentially reduce rather than improve overall security.

The history of international trade has shown that walls and restrictions rarely succeed in achieving their stated goals. It is critical that both policymakers and technology providers work together to develop solutions that keep the flow of information and online services available to all who rely on them.

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