While the electrical wholesaling world is abuzz with the promise of cloud computing — a new approach to IT in which all company applications and all company data are moved to the Web — many IT industry insiders warn the strategy is fraught with peril.

Specifically, skeptics say wholesalers relying on remote, Web-based solution providers to ensure critical data is safe, computer applications run efficiently, and all other computing needs are easily met, are simply asking for trouble.

“As a security guy, I tend to look at the idea of cloud computing from a risk perspective,” says Kai Axford, a senior security strategist at Microsoft. “I have to tell you, I don't see a lot of companies agreeing to become liable if your data gets breached on their network.”

In concept, cloud computing does seem to live up to its “breath of fresh air” marketing. Instead of dealing with often increasingly overtaxed in-house IT departments, wholesalers working in the cloud will be able to access all their computing needs the same way their employees now log into Microsoft's Hotmail for their messages, stop by YouTube to catch a video or two, or visit the Google Docs online word processor to jot down a few thoughts.

Essentially, all employees, no matter where they are in the world, will be able to instantly access their online apps and data with a wide array of Internet devices — desktops, laptops, PDAs, smart phones — which will be little more than dumb, easy-to-maintain terminals connected via the Web to the company's universal brain.

Moreover, service fees for working in the cloud will be based on an extremely reasonable, metered plan. If your wholesaling company only requires a smidgeon of computing time, that's all you'll pay for. If you need a little more, you pay a little more. Very fair.

Plus, it seems clear some of the biggest guns in the business are more than ready to help you navigate your way through the cloud. IBM rolled out its Smart Business cloud portfolio this past June. Microsoft responded in July with a sneak peak at its Windows Azure cloud computing platform. And a number of other heavy hitters, including Google, Salesforce.com, Amazon.com, Intuit, Hewlett Packard and Cisco Systems have been involved in the market even longer. “Cloud is an important new consumption and delivery model for IT and business services,” says Erich Clementi, a general manager at IBM.

Still, out there in the mist, naysayers persist. “There are plenty of positive things that cloud computing provides, but at what cost?” says Microsoft's Axford. “I'll take the extra time to patch my enterprise's servers if it means keeping my data close.”

Bottom line: Before you launch your wholesaling business into a questionable new stratosphere, industry insiders recommend you ask yourself — and your potential cloud solutions provider — these tough questions:

  • Is the cloud really less expensive? While reduced cost is one of the most often cited reasons for moving to the cloud, a McKinsey and Co. study released earlier this year found that for large corporations, cloud computing actually costs more. In fact, McKinsey researchers authoring “Clearing the Air on Cloud Computing” assert that cloud computing costs more than twice that of an in-house solution — although they did add that companies with $500 million in revenue or less could reap significant savings.

  • Can I afford service outages or apps that don't work? Anyone who has had to endure endless downtime with their web-site hosting provider or other online services vendor (sorry, please hold) knows that service hiccups can be infuriating. With your apps and data squired by in-house IT, you can pay, cajole or command your IT people to go into maximum overdrive to fix a snafu. With your remote solutions provider, priorities on system fixes are decided by someone who is not on your payroll, and may have plans for the evening.

  • How vulnerable am I to “Vista syndrome”? During the past few years, most businesses have wisely avoided upgrading to Vista, due to its reputation as an often incompatible resource hog. En masse, they voted “No” to the Vista change, one IT director at a time. But with cloud computing, your vote, and the votes of hundreds and even thousands of companies, will no longer count. Instead, all those votes will be usurped by one IT director, working at one cloud computing firm. Does your wholesaling business really want to relinquish its vote about which apps fly, and which apps rightly die, to a handful of future, all-powerful, Gatekeepers of the Cloud?

  • Will I become trapped in the cloud? Another great risk in entrusting all your apps and data to a remote third party is that once you're locked into their service, it may be very difficult to migrate to another provider or migrate back to an in-house solution. Happy smiles, warm handshakes — all those could vanish the day you tell your cloud provider, “We've decided to move on.”

  • How secure is my data? The nature of cloud computing — generally distributing data and apps on multiple servers across the Web — lends itself to security lapses. Your cloud solutions provider agreement may include all sorts of reassuring verbiage about painstaking safeguards. But in the end, what's stopping your cloud provider from storing your critical company data on a server in Afghanistan?

  • Who's liable if my data is stolen? As IT security pros know all too well, stolen data too often affects many people and businesses besides your own. If there's a security breach on your cloud provider's server, is that ultimately the cloud provider's responsibility, or does your company take the hit? Put another way, whose name and signature at your company is going to be at the end of a Breach of Security letter you'll need to send out to your customers and clients if your cloud provider missteps on security?, asks Microsoft's Axford.

  • How safe are my trade secrets? Another spin on data security, this concern warrants separate consideration. Best intentions by cloud solution providers don't prevent competitors from placing hackers inside their businesses, freely cherry-picking your best ideas, studying your future strategies, collecting key customer and client contacts from your database, and the like.

  • Who calls the shots if the government comes calling? Corporate counsel can be energized and beefed-up to fend off unfair government perusal of your business and your business data for years if need be. But how motivated will a cloud solutions provider be to defend one client from the government, when it can simply kiss off your wholesaling company, and go back to servicing hundreds, or perhaps thousands, of other clients?

  • What happens if you go bankrupt? Not a pretty thought, but it happens. Will your cloud provider have a contingency plan in place to keep your business running and your data accessible if it suddenly goes bankrupt? Will the contingency plan really matter once there are locks and chains on your provider's doors, and its servers and other computer equipment are quickly sold off to liquidators?

Granted, cloud computing is shot-through with all sorts of potential efficiencies, flexibility and access to powerful computing power that are simply beyond the reach of many wholesalers, and especially smaller wholesalers. But without a careful, point-by-point examination, your leap into the cloud could leave you with absolutely no footing.

Joe Dysart is an Internet speaker and business consultant based in Manhattan. Voice: (646) 233-4089. E-mail: joe@joedysart.com. Web: www.joedysart.com.