Cloud adoption in Canada may be ticking upwards among small businesses, but there may still be a host of barriers that is holding the industry back.

In an IT World Canada survey of small to mid-sized businesses (SMBs), out of the 350 IT decision-makers polled, a solid 54 per cent said one of their priorities for the new year would be to undertake cloud computing projects.

Still, many of the survey’s respondents said they have concerns with cloud migration. Forty-six per cent of respondents ranked data security as their number one concern in leveraging cloud technologies, while 22 per cent said their biggest worry was keeping the sovereignty of their data intact.

Given the recent slew of headlines about privacy and security scares in the U.S., especially with revelations surfacing on the NSA and PRISM, it’s unsurprising Canadian SMBs would want to guard their data jealously and keep it within Canada, says Robert Hart, founder and CEO of the Canadian Cloud Council. His organization acts as an advocacy group for cloud computing within Canada.

Keeping that data here “is absolutely a relevant concern,” Hart says, adding he feels there isn’t enough clarity around what the legal implications might be for companies hosting data outside national borders.

“My thought is, if organizations want to compete right now, they have to use cloud … But the fear of not being able to use public-based cloud services, things like, and even Yahoo and Google and DropBox, because these infrastructure and application services are not hosted in Canada … [This] remains the most significant barrier to cloud adoption in Canada,” he says.

“I think what really needs to happen in Canada is a group of organizations needs to come together and create a similar infrastructure platform, something like Amazon Web Services down in the States.”

As Canada is a relatively small market, Hart doesn’t believe bigger players like Google or Amazon will be making any forays here any time soon. That mean Canadian SMBs have to turn to U.S. infrastructure if they want to leverage cloud. Still, if they had the choice, they might opt for their Canadian counterparts, he says.

However, he notes the Canadian Cloud Council has already had some U.S. companies inquire about cloud services in Canada, and he believes Europe and other regions are beginning to turn to Canada as a data haven.

He adds that many Canadian companies, like Mitel Networks Corp. and SaskTel Corp., have started making their own plays into the cloud computing space.

“It’s very kind of strange and ironic, but I have to say, from a controversial standpoint, Edward Snowden has actually opened a very large market for Canadian data centre companies to go and capture business,” Hart says.

Aside from Canadian companies, there are also some U.S. companies who are taking notice of Canadian customers’ demands. Take Etherfax LLC, a company that has just announced it has built a data centre in Toronto.

Based in New Jersey, Etherfax supports a customer’s existing fax servers to send encrypted communications through the cloud. Its solution negates the need to use a fax board, media gateways and other telephony infrastructure.

It already has a high availability data centre in the U.S. which could have served Canadian customers as well as American ones. But company president Paul Banco says he essentially put a data centre there to reach out to clients in Canada who wanted to keep their data within their own borders. However, he’s not fully convinced it matters whether a data centre is based within Canada or in the U.S., saying some clients’ fears may be unfounded.

“I think a lot of people are concerned with our version of the Patriot Act. I think a lot of people don’t have a very strong understanding of it. A lot of people that are just stating hey, this is what my boss says,” Banco says. “We thought, let’s just give Canadians what they want and put a data centre in there.”

Adi Kabazo, manager of cloud solutions at Telus Corp., says SMBs have their fair share of misconceptions around cloud technologies.

While he can understand why Canadian SMBs want to ensure their data stays firmly planted in Canada, he adds a lot of them don’t think about choosing a cloud services provider that is incorporated outside of the U.S. Even though a cloud services provider’s data centre may be physically outside the country, it’s still possible a government agency could ask it to hand over data if it falls under that government’s jurisdiction, Kabazo says.

That’s especially key if an SMB decides to branch out and start serving customers who have specific regulatory needs, he adds.

“For an SMB serving the provincial government, I might think the data is not sensitive, but the client might have specific needs and can’t allow data to be hosted outside of Canada,” he says. “SMBs need to consider the limitations a future client might have, because you can’t sell to future customers with those restraints.”

If SMBs are indecisively hovering between choosing to host their data in Canada or the U.S., Kabazo says there are plenty of reasons to pick the former. For example, Canada has low energy costs, and it allows for collecting the benefits from cloud while cutting back on the level of risk, he says.

Still, there are some services that Canada just doesn’t have, Hart says. For example, he says the Canadian Cloud Council tries to stick with Canadian cloud services, but it still has to use Gmail for its cloud-hosted email solution.

Plus, the vast majority of data centres in Canada are carved up between Bell and Rogers, Hart says. That’s something he believes the federal government needs to address. While the House of Commons collected some recommendations from a Canadian Cloud Council-affiliated working group in July, the industry has yet to hear about any firm regulations, and that’s holding Canada back, he says.

He believes SMBs, whether they’re from Canada or elsewhere, would stand to benefit from greater federal oversight in the cloud industry.

“A year ago, or two years ago, the Canadian Cloud Council was moaning a lot about Canadian companies not using cloud. It does not seem to be the case anymore. I think there’s a huge movement over the last year or two to adopt cloud services,” Hart says.

“The opportunity right now related to data sovereignty, it’s getting a lot of media attention. … And I think there’s a wonderful opportunity to capitalize on that right now, but we’ve got to do so quickly – not six or seven years from now.”

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