International Law – Clouds may bring stormy weather
There are some interesting issues being raised with regards to cloud computing, privacy, legal issues and international boundaries. These all must be taken into consideration before a business chooses to shift an IT outsourcing option. In his post Cloud Computing and International Law related issues, Di Martino (2011) raises some issues to be considered before a business chooses cloud IT services.
Some of these such as privacy, and security have been already been addressed by several others. In her post “Small International Business-Cloudy forecast” Verena raised an excellent point with regards to jurisdiction and difference in policies and laws governing storage and transfer of data in other countries, using China as an example. Should a country that censors internet choose to develop independent data storage center it begs the question as to how safe and private is data for those who chooses to use these centers and who may be accessing stored data in the name of “national security”.
Di Martino listed several other considerations for businesses including;
1) location – Where data is stored at a given time and law that governs the contract and settement of disputes. “the customer may or may not be able to control this issue by contract as the applicable law in some jurisdictions can prevent the application of the relevant contractual provisions”
2) Legislation and Reulatory – Strict rules on defence, health and financial services vary across jurisdications and directly impact cloud computing. Restrictions and regulatory provisions concerning transfer of data across borders and export and trade restrictions may impact where data can or cannot be stored.
3) Data retention for tax purposes – Businesses are required to keep data for legal and tax purposes longer than some cloud services offer.
(Di Martino, January 15, 2011)
It is imperative a company, particularly one that deals internationally, to carry out due diligence and consider the location(s) of a cloud vendor as a crucial step in mitigating risk (Di Martino, 2011) and therefore careful consideration should be given to the above issues. Should a company wind up in a unforeseen legal issue regarding any of the above reasons, this would come as a very expensive indirect cost to an outsourcing strategy.
Reference
Di Martino, M. (January, 15, 2011). Cloud Computing and International Law Related Issues [Web blog message]. Retrieved from http://www.internationalcommerciallawblog.com/2011/01/cloud-computing-and-international-law-related-issues/
Posted in: Week 08: Files in the Cloud
hall 5:00 pm on October 27, 2011 Permalink | Log in to Reply
Hi Jay
Thank you for the resources. The considerations that businesses need to be aware of are very important. I found data retention for tax purposes to be an interesting topic. Most countries survive on the taxes on goods and services. How can a country tax services provided by an organization which uses cloud computing? For example, if an educational institution in a particular country provides services to students across the globe but the data is stored in another country via cloud computing. Which country would tax this educational institution? Would both countries tax the institution?
Angela Novoa 10:53 am on October 28, 2011 Permalink | Log in to Reply
Hi Jay, thanks for sharing the resources. This is a very interesting issue. As Conroy suggested most countries survive on taxes on goods and services, so taking in consideration these issues is relevant. The need of regulation about the matter is the clue. And there is not only need of regulation on cloud computing but also on many issues related to the use of technology. And in the case of Education is very important to be clear about this.
Angela.
verenanz 7:33 pm on October 28, 2011 Permalink | Log in to Reply
HI Jay!
Thanks for continuing my train of thought…..You have a lot of good points about taxes and legislation which we will have to consider.
Thank you for the insight!
Verena:)
khenry 7:16 am on October 29, 2011 Permalink | Log in to Reply
Hi Jay,
Thanks for the resources and the discussion. Cross border policies are indeed important considerations. We even see them coming up in the use of content management systems and the location of providers for the very reasons you highlighted. I believe we will be seeing greater focus and developments in this area as I believe that Cloud computing is inevitable and really is a natural and necessary progression to facilitate needs and technology within the present and future environment.
Kerry-Ann