Reach for the clouds...

01 August 2016 Greg Potter, Centriq Insurance

Are small businesses ready for the cloud? According to the 2016 BSA Global Cloud Computing Scorecard, cloud computing platforms are becoming more popular around the globe, and South Africa is following suit despite its current low levels of broadband penetration.

However, this begs the question; are small South African businesses in particular truly ready for the cloud and do they understand the make-up and implications of storing data in the cloud?

Bootstrapped and constrained

One aspect that stands out is that small businesses tend to lack in the area of information technology, because small businesses are typically resource constrained.

Small businesses seldom have shareholders with deep pockets, and tend to bootstrap themselves up or rely on their own, sometimes limited, cash-flows.

Small businesses also usually require less specialisation and more multi-tasking, for example, managers take on multiple roles instead of assigning certain tasks to certain people.

One such area is Information Technology (IT) – especially when the business did not grow up in a digital environment. Proper IT infrastructure, and more importantly, good disaster recovery practices, are often relegated to the list of things-to-do but are not a priority on the list until something happens.

Taking to the cloud

Given the above, cloud services are a good value-proposition for small businesses, even though the big, external IT providers also have outage risks.

The truth of the matter, however, is that small businesses that do not grasp the basics of good disaster recovery are at a higher risk than the big IT providers with their outage risks.

Applications like Gmail and Google, or Office 365, provide a way for small businesses to have their information managed by people who do it for a living. It is convenient because data can be accessed from anywhere. This allows for things like virtual offices and remote teleworking – a boon for small businesses not wanting to pay office rent. It also allows small businesses to focus on their area of expertise.

Small businesses should leverage cloud services as much as they can, for everything from website hosting, collaboration, archiving to virtual server infrastructure.

But there is a catch

The Protection of Personal Information Act (POPI) has a good reason for being, but one of the clauses is that a person’s information should not be allowed to leave the borders of the country, unless it is going to a country with similar or better privacy laws.

This rules the United States out. Privacy laws in the US are seriously lacking and have a road to travel before they are up to the standards of POPI and the privacy laws of the European Union.

For this reason, small businesses in South Africa work against using free services such as Dropbox and Google drive to back up their client’s information. These services, at this stage of the game, replicate that data across servers on multiple continents. Even they cannot point a finger at the physical server that the data resides on due to the scale on which they operate.

Even if small businesses get their client’s consent to store their information in the cloud, the reality is they cannot contract out of the obligation (in terms of the act) where they need to ensure that their client’s data remains safe. This means that unless the business has a signed agreement with a service provider that is able to provide a complaint service in South Africa (or maybe the EU), they should avoid putting client data in the cloud.

What is the solution?

Small businesses should band together, working with some of the local cloud providers to get some scale out of their solutions and thereby reduce their costs.

At the end of the day, the benefits of cloud services for small businesses are just too good to ignore. However, small businesses need to do their homework to ensure the cloud computing platform they use complies with South African policies and laws.

Quick Polls


How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?


Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now