Episode 25: Commercial risks of cloud computing

Cloud platforms offer flexibility and scalability, but they also introduce a set of commercial risks that organisations must manage carefully. This blog explores the common concerns around cloud security, data privacy, supplier dependency, automatic updates, and the challenge of keeping costs predictable. It highlights what technology procurement professionals need to look out for and why clear controls and governance matter.

Security concerns when relying on cloud providers

One of the biggest commercial risks in cloud computing is security. When all IT services and data sit within a third party’s cloud platform, that provider becomes entirely responsible for protecting the organisation from cyber attacks. This creates a challenge for procurement teams because they have no direct control over how the provider manages its security operations.

This is where contracts become critical. Cloud providers, especially the major ones, rarely negotiate bespoke terms, so organisations must ensure they fully understand the standard security services being offered. If the provider does not carry out the level of penetration testing or cyber protection required, it may not be the right fit. Procurement teams must work closely with IT departments to define minimum security expectations and ensure the chosen cloud provider can meet them.

Managing data privacy and regulatory requirements

Data privacy introduces another major commercial consideration. Regulations such as GDPR have strict rules about how personal data is stored, accessed, and transferred across geographies. Some cloud models involve offshore support teams, which may mean data is visible to regions like Asia or India.

Organisations must define clear boundaries around which data can be accessed and by whom. This is especially important for sectors with heightened requirements, such as defence. Both the organisation’s own regulatory obligations and those of its clients must be taken into account when assessing whether a cloud provider's operating model is appropriate.

Understanding dependency and supplier lock-in

Cloud platforms make it easy to become dependent on a single provider. Once services are migrated, moving away can be technically complex, operationally disruptive, or in some cases not feasible at all. This dependency becomes a commercial risk if the provider increases prices or changes its service model. Large providers have raised prices before, and customers generally have little ability to challenge such changes.

Procurement professionals should therefore ensure there is a realistic exit strategy in place, even if it may not be used. Understanding the cost and effort of switching providers is key to managing long-term supplier risk.

Impact of automatic updates on IT services

Cloud platforms stay current through automatic updates. While this removes the burden of manual updates, it also means organisations must ensure their applications can accommodate changes introduced by the provider. If a cloud platform decides to roll out a new version of a service or operating system, organisations typically have little say in the matter.

Although providers give notice, they usually follow strict vendor policies, meaning customers must adapt. Ensuring that technology and application design can withstand these changes is an important part of managing commercial and operational risk.

The challenge of cost predictability

The final and often biggest commercial risk is cost predictability. Cloud is a consumption-based model, which means organisations pay for what they use, but predicting usage can be difficult. If someone in the IT department spins up a virtual server and forgets to turn it off, the business could end up with an unexpectedly high bill.

To stay in control, procurement teams must work closely with IT to introduce processes for monitoring usage and forecasting costs. Regular reviews—daily, weekly, or monthly depending on the organisation—help prevent avoidable overspend from mistakes or system misconfigurations.

For organisations looking to strengthen their approach to cloud procurement and manage commercial risks more effectively, get in touch.