Santa Clara University

 
 

Business Ethics in the News

Back to Blog

BIG DATA: Cloud Providers and Their Access to Unprecedented Information

Monday, May. 19, 2014
Source: Flickr (Torkild Retvedt)
Source: Flickr (Torkild Retvedt)

Cloud services are becoming an increasingly important part of most business operations across sectors, industries, and geographic regions. Cloud service providers create a place for companies to run, build, and store applications without having to setup their own servers, in addition to offering other software and services. As firms flock to the cloud, the small number of major service providers such as Google and Amazon, now have access to a new type of growth indicator: spending on cloud services. Through monitoring the spending of the client base, across a wide array of businesses, providers are in a unique position to forecast market trends and even growth of particular companies. IBM has already stated intentions to use this data in their consulting practice, even with companies who do not use their cloud services. The debate is centered on whether “spending on cloud” is a special kind of metric, which violates the privacy of the clients, or if it’s akin to web traffic or app downloads. Some argue the metric is the type of information only an inside employee would have access to, and should be considered insider trading. What should we make of this new business practice?

  Kirk: The monetizing of this data is another example of the creativity and opportunism of American business. If I owned a public warehouse, it would be inappropriate for me to tell others how much space a user occupied. Cloud spending supercharges this, because the metric is such a powerful indicator of growth and future prospects. Given the privileged access to this information that cloud providers have, use of it for investing or consulting purposes would be insider trading in my view. This is one more example of the law failing to keep up with new technologies. We have plugged these holes in other situations: we should do the same here.

  Patrick: I’m on the other side of the fence on this one. I see “spending on cloud services” as a metric is organically produced in the course of doing business. Cloud service providers are not insiders, they’re service providers, and they are not bound by a professional code of ethics that necessitates discretion (e.g. attorneys, doctors). Also, allowing this information to be traded on will result in more efficient outcomes on the stock market, as prices will more accurately portray the value of the company. If cloud users demand “opt-out” clauses, then providers should take note; but that’s a business decision, not an ethics decision.

Tech Giants Could Use the Cloud to Predict Their Future (Wired)

A Framework for Thinking Ethically (Markkula Center)

 

NEXT STORY: Google to Release Diversity Data

Comments Comments

Brendan said on May 21, 2014
Companies who want that data protected specifically can sign agreements to do so with their providers. If the 'big boys' don't sign such agreements, there's a competitive opportunity for smaller players. - Like - 1 person likes this.
Patrick Coutermarsh said on May 21, 2014
Brendan, I agree with your point. One consideration though, is as the major players continue to consolidate and grow, the smaller alternatives will not be able to compete on price, functionality, or visibility. One consumer facing example is Google Search vs DuckDuckGo. - Like
Brenda said on May 26, 2014
I agree with Kirk. I believe the use of information indicating spending on the cloud is the private information of each client and should not be shared by the providers that have access to that information. I agree it can be considered insider trading to use that information to forecast market trends and growth and share that information with potential investors. There shouldn't be any need for "opt-out" as Patrick states. The service providers have access to privileged information and can be sued by the clients if they use any of that information for their, or anyone else?s benefit. As part of Apple's privacy policy, service providers are ?obligated to protect your information?. - Like - 1 person likes this.
Patrick said on May 26, 2014
Brendan, thanks for your thoughts on this. One thing that may be worth pointing out is that there are a lot of ways for cloud providers to use this information. One one end, they could sell services and advice based on the purchasing history of a particular company; and on the other, they could extrapolate macro trends through a wide range of companies (e.g. metadata). Also, opt-out or not, if cloud providers are obligated to refrain from using this information, it strikes me as something that would most definitely need to be in the service contract. And as far as the SEC goes, to my knowledge it would require an amendment to make trading on this information insider trading. - Like
Post a Comment