Is Regulation Coming to Cloud Computing?

Not sure too many people noticed, but Google, Microsoft, EMC, and Salesforce.com took on the House Committee on Oversight and Government Reform and the Subcommittee on Government Management, Organization and Procurement to talk about the upsides and the downsides of cloud computing. The federal CIO, Vivek Kundra, who has been an advocate of cloud computing for use within the government, joined them as well.

There are a few interesting things about this situation. First, something like cloud computing has the attention of government leaders. Second, does this attention translate into good things, or bad things?When the Web first emerged in the 1990s, it appeared to me as an open frontier, something that government would not attempt to regulate or control. Today, that's clearly not the case as laws and regulations around the use of the Internet are appearing monthly, and coming from governments all over the world. While some are good, such as privacy rights, many more seek to limit the way we use the Internet, typically in response to corporate lobbyists.

I'm not trying to sound too paranoid. However, we become more dependent upon cloud computing everyday, and many companies and government agencies will end up counting on cloud computing providers for much of their core IT services. I just can't help but think that governments will treat cloud computing providers like they do other regulated utilities, such as power, cable TV, and water. This means price controls, government audits, hearings to get the bottom of outages, and all of that fun stuff. Oh yeah, new taxes.

No matter where you fall on the issue of government regulation, you have to admit that industries that are regulated behave very differently than industries that are not. I think that regulating the emerging cloud computing space will end up hurting productive use of the cloud, overall. There will be less innovation and investment in the space, and as we've found out with SOX, the amount of money required for compliance issues will drive many cloud providers back to on-premise software.

I would have liked to see some other players in front of the House this week, other than the large cloud computing monsters. Some of the best thought leadership and innovation is coming from minions of small upstarts that are depending upon the emerging cloud computing space to be left alone for at least 5 years.

Moreover, cloud computing is moving toward better and more efficient computing models, meaning more green, more cost effective, and even more secure if you do cloud right. There should be tax incentives for building and leveraging clouds. Come on politicians, help us out here.Cloud computing has the attention of government leaders. Does this attention translate into good things, or bad things?