An odd, superficially unrelated, lesson from the current global credit crisis is the crazy ideas people have been having about online services.

Over the last few years, there has been a growing trend in technology and internet magazines to promote the idea of online office applications and “renting” software that is held on a main server. The holy grail of this has been along the lines of using a remotely hosted system to edit and store your data in the manner of Google Documents.

This has some fantastic advanages – it is operating system independant (so might draw an end to the Linux-Windows wars…), it saves on having to purchase local software licences and data storage, it allows mobile workers complete access, it removes the need to have in-house admin staff etc. These are powerful advantages and even I use Google Docs, Basecamp etc. They really do have their place.

However, the big problem is pretty big.

You have no real control over what happens to your data. You can have all the service level agreements in the world, but when the s*it hits the fan, you have no real say over the matter. You may be able to take legal action, but if the company has gone bankrupt what good will the do you? Equally, how water tight are the user agreements you signed up to when you took on the service? If they go down at a critical time for you does that fall foul of their overall 99.98% uptime?

Drawing on the Icesave farce as an example, if you store all your data with a big company – we’ll use troogle as a totally made up example – then it is great when everything works. But if, Thor forbid, Troogle has problems (financial, technical etc) then what real recourse do you have? Even if the company is in the same country as you, you may have less weight than you think – what value is there in suing a defunct company?

Fundamentally, giving your data / software to a third party company is a risk. We may have forgotten what that means in recent years, but it would be negligent to not take this on board now and refresh our mindsets. UK councils forgot that giving money to a bank to gain interest carried a risk because the risk had been (traditionally) so low. The ignored the fact that increased rate of return carried with it an implied increased risk and suffered as a consequence.

By all means use online storage, use online applications, etc. Just remember the risk is there and make sure you have considered it.