In August, 2013, research firm Gartner surveyed 651 different organizations across nine countries and found that 38 percent of all organizations were using outside computer hosting platforms like cloud computing and that 80 percent of organizations surveyed said that they intended to use cloud services in some form within the next year.

Clearly, outsourcing all or part of your IT operations to off premises vendors is on the rise, but it’s also important to remember that outside hosting of your IT is not the best solution for every situation.

First, let’s take a look at the value that companies get when they choose to outsource their IT:

Potentially lower initial IT costs

Companies often see new applications come along that they would like to add to their business “arsenals,” but then they look at the costs of acquiring the hardware and the software, and they realize that their budgets can’t accommodate it. Ten years ago you were pretty much “stuck” if you couldn’t afford to bring a new application on board. Now, you no longer have to wait for the budget to get bigger. You can get applications without having to invest in any hardware on your premises, and you don’t have to buy the software. Instead, you can subscribe to an outside service that hosts the application for you and others. In most cases, you only pay for what you use. The ability to avoid making major capital investments in computing, or to pay on-staff IT staff, has helped level the playing field for smaller firms that must compete with large enterprises.

Management of your data and applications

If your business is surveying or other engineering-intensive work, the last thing you want to do is to sidetrack part of your staff with computer maintenance and trouble-shooting—yet many smaller firms must do this. Trouble-shooting application problems is a large enough task. But when you add to it the management of mountains of data that must be available for both short- and long-term access, there is even greater challenge. An outside hosted solution for your IT eliminates the need for you to manage your own data and apps, because your vendor does this for you. You can focus on your business.

The ability to more freely collaborate with outside parties on projects

Google, Microsoft and others now provide outside hosted environments that enable companies, their business partners and their customers to sign on to applications and to collaborate in a secure environment. This collaboration can be done in real time, which makes it significantly faster than older methods like emailing documents, reading through comments, making changes, re-emailing the documents, etc. Since everyone is working in the outside hosted environment, no one has to commit internal compute resources to the effort.

Effortless scalability

In a hosted cloud computing environment, most payment models charge you only for the amount of resource that you use. If you hit an unusually busy time of year in your business and you require more computing power or storage, you can “scale up” your needs with the vendor during this time. In a slow time of the year, you can also scale down. For many companies, this is a more efficient use of IT than buying a server that sits idle during the slack times of the year.

It all sounds good—but not so fast! Here are some “down sides” to outside hosted computing that companies should also think about:

Loss of control

This is the major concern of companies about outside hosting of IT. If you house all of your applications and your data with an outside party, what happens if the outside party has a failure in its data center, or it goes out of business? Needless to say, your own business could be at risk!

Potentially more expensive costs in the long term

At the beginning of a deal, the costs of hosted computing can be very attractive—mostly because you can avoid buying your own hardware and software. But after you pay off your initial hardware and software expenses, you no longer have costs beyond licensing, maintenance and facilities. Conversely, a contract with an outside hosting provider continues for the duration of your contract. At the end of the day, some companies are finding that they are actually spending more money with the outside hosting provider than they would have spent if they had just purchased and run the IT themselves. This makes it critical for firms to extrapolate their costs of in-house versus off premises computing so they know for sure where they get the best deal in the long run.

Protection for your Intellectual Property (IP)

The work products and data that companies produce are their property and the property of their clients. When you store this property in a publicly hosted environment, you increase the risk of data and IP theft. If you determine that you want to move to an outside hosted solution, provisions should be inserted in your contract that protect your data and work products and that hold the vendor liable for breach. Vendor physical premises (as well as logical security) should be personally inspected by your staff before you sign on with a vendor. It is also the policy of many vendors that they get to use any unique work products that you develop if you use their products in developing those work products. If you don’t agree with this policy, discuss it with the vendor before you sign on any dotted lines!

Slow connection speeds

Almost all outside hosted IT is accessed over Internet. The host vendor might have excellent data communications, but this doesn’t mean that your apps or your data will run well for your employees. Why? Because the flow of the data is dependent on how well your Internet connection with the host is functioning on any given day. Companies should give careful thought to this. They should ask any potential host vendor if it has multiple paths and connections that it uses for Internet conveyance of information, and what its service level guarantees are.