Ever since news broke about the Feds closing the popular online file sharing and storage site, Megaupload.com and arresting its owners on charges of piracy, there has been a flurry of activity in the world of cloud computing. This is mainly due to the fact that many users of cloud storage services use the online file storage sites as “cyber lockers”. To put it differently, businesses use these sites to store files and exchange them amongst their employees. Hence the term “cyber lockers” is used to denote these file storage sites. Provision of storage space and the ability to share the data has been one of the USP’s (Unique Selling Propositions) of cloud providers like Amazon, Drop Box and Google.

The other players like Megaupload, Uploaded To and Filesonic have long been providing storage and file sharing facilities to users on premium as well as normal basis. Some of these sites were actually paying the users for uploading files on their sites a fact that has been noted by the Feds as well. In fact, the indictment of the Megaupload owners listed their appeal to users to upload “popular DVD rip-offs” and promising them to pay more. This is indeed a violation of copyright laws and hence this was classified as piracy which led to the takedown of Megaupload.

The way this has impacted other sites is that many of them have simply stopped the file sharing features and some have gone to the extent of disabling all functionality. Uploadbox went a step further and announced that it was “deleting all files” by January 30th. This has rightly provoked concerns from users of services as to the continuity of business in such sites where they had stored their files. Actions like the ones taken by these sites meant that users of cloud storage facilities faced uncertainties as to whether their data would remain in place and whether they would be able to continue using the sites.

The larger point about the reliability of cloud computing as an emerging paradigm in technology and infrastructure has been raised by this incident. It is no longer the case that providers of cloud storage services can guarantee uninterrupted access or ensure retention of data. Since many providers have had a mix of genuine business users as well as online pirates, the blanket removal of the services affects the genuine business users who now have to contend with the denial of service thus affecting their businesses. The point here is that it is unfair to make genuine business users suffer because the providers of the cloud storage services were indulging in a bit of nefarious activities.

Of course! The main cloud players like Amazon, Drop Box and Google do not have much to fear since all their business is legitimate and hence above board. The threat of punitive action is nonexistent in this case. Hence, the aspect of whether business users of these sites would get affected a la Megaupload event is remote. The overriding factor for business users of cloud computing services is to do their due diligence properly before signing up for cloud storage or a cloud computing site. This is the key takeaway in this affair.

The fact that companies need to do their due diligence applies to all aspects of business and the costs of not doing IT due diligence are higher than those associated with other functions. This has been borne out repeatedly ever since IT emerged as a key function in its own right. Hence, while not sounding too harsh on the genuine business users who lost out in this case, it is a fact of business that without adequate due diligence, businesses run the kind of risks that have been discussed so far. When one considers the fact that cloud computing increases the risks of third party dependence exponentially, it goes without saying that the risk management departments in businesses have to be up to the task before signing up with providers of cloud computing services.

The Megaupload incident and the associated events that have happened in its aftermath should be a wakeup call for both regulators and businesses to evolve “Fair Use” policies and adopt “Safe Harbor” practices which encourage legitimate business activity and curtails the unsavory aspects. Maybe it is time for an industry regulator partnership to determine the “Terms of Use” for cloud companies in the same way Workbooks has done for its users. Indeed, Workbook has been a pioneer in more ways than one. Other companies can no doubt follow suit. In conclusion, it is high time that the emerging paradigm of cloud services evolves into a mature and responsible industry replete with ethical and sound business practices which safeguard the interests of the users as well as the providers.