Companies are increasingly embracing cloud computing, storing their email, files and other electronic information in a cloud storage service provider's data center accessible via the Internet. While cloud computing can make the IT organization's life easier, the lack of effective information governance controls in the cloud foretell a coming crisis.

Cloud computing is the hot, new trend in IT because it reduces capital expenditures, is charged “per the drink” based on the amount of data stored and releases the IT staff from the headaches of securing and backing up data. The cloud computing market is expected to reach $150 billion by next year. There are real, measurable benefits for some organizations to move their data to the cloud.

Yet beneath this silver lining may be a dark cloud. Many companies, such as these, are discovering after the fact that with some cloud solutions, information governance is lacking or non-existent:

• One West Coast manufacturing company's IT organization contracted with cloud vendor to host and store the company's email. IT negotiated—without consulting the legal or compliance departments—for the cloud provider to retain all email for two years. One year and 11 months into the contract, IT announced the imminent, automatic email deletion, per the negotiated agreement. However, there was one slight problem: The company was involved in more than 50 active litigation matters, and some of the email in the cloud subject to deletion had the potential to be relevant to this ongoing litigation. Furthermore, there was no effective way to easily search the emails, or selectively retrieve emails from particular individuals. Rather, the entire email corpus had to be exported before it could be searched, which was a slow and expensive process.

• When the U.S. Justice Department shut down the online file storage company Megaupload for alleged criminal activity, it also shutdown access for thousands of other legitimate and legal users. There is a similar lack of precision when investigators subpoena data—they often seek all of the content on a system, and there is little effort to ferret out to whom certain data belongs. The physical analogy is if police were to search all lockers in a rented storage facility not just the one targeted by a search warrant. In a comment to the Wall Street Journal, Julie Samuels, a staff attorney with the San Francisco-based digital-rights firm Electronic Frontier Foundation, said she was “concerned about the users who had no due process, and no notice—and no access to their data.”

Cloud computing does hold the promise of lower costs, better service levels and easier management. Yet organizations are well advised to consider their information governance requirements before jumping right into a cloud.