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Cloud encryption is the transformation of a cloud service customer's data into ciphertext. Cloud encryption is almost identical to in-house encryption with one important difference -- the cloud customer must take time to learn about the provider's policies and procedures for encryption and encryption key management. The cloud encryption capabilities of the service provider need to match the level of sensitivity of the data being hosted.
Because encryption consumes more processor overhead, many cloud providers will only offer basic encryption on a few database fields, such as passwords and account numbers. At this point in time, having the provider encrypt a customer's entire database can become so expensive that it may make more sense to store the data in-house or encrypt the data before sending it to the cloud. To keep costs low, some cloud providers have been offering alternatives to encryption that don’t require as much processing power. These techniques include redacting or obfuscating data that needs to remain confidential or the use of proprietary encryption algorithms created by the vendor.
In the past, many businesses felt comfortable allowing the cloud provider to manage encryption keys, believing that security risks could could be managed through contracts, controls and audits. Over time it has become apparent, however, that cloud providers cannot honor such commitments when responding to government requests for information.