What's wrong with cloud storage? Quite a bit: and most most of the (potential) issues have been mentioned above. My main concern relates to stability. Will the company still be around next week? Next month? Next year? And, if it's not, what happens to your data? Will you have time to get it back before the company closes its doors? Cloud companies have gone belly up before, and it's inevitable that others will meet with a similar fate. While this probably isn't too much of a concern if you've got your data with one of the big guys, it absolutely is if you're using the services of a smaller company (Carbonite has been bleeding money for years - in fact, I'm not sure that the company has ever turned a profit).
It’s also worth noting that many cloud companies do not actually have their own servers and instead rent capacity from one of the majors – Dropbox, for example, uses Amazon S3. And there are pros and cons to this. On the positive side of things, it means your stuff probably isn’t being stored on a hokey home-brewed server in a recently converted warehouse with a leaky sprinkler system and no lock on the front door; rather, it’s ensconced a nice purpose-built data centre. On the negative side of things, it means that you have absolutely no contractual relationship with the company that actually stores your data and that your ability to access it is entirely dependent on your cloud company paying its bills to Amazon, Google or whoever the back-end infrastructure provider may be (cloud companies’ contracts with providers typically enable the provider to switch off a service in the event of non-payment and to eventually delete the data in the event of continued non-payment – usually after either 30 or 60 days).
I view data like cash. I wouldn't trust a cloud provider I knew next-to-nothing about with my data any more than I'd trust a bank I knew next-to-nothing about with my money. For me, that means I'd never use Carbonite or any other small company - and potentially cash-strapped - company that I didn't know much about.
I'm not a paranoiac when it comes to security/privacy and think that data stored with a major cloud provider is - for the most part - just as secure, if not more secure, than it would be if it were kept in the home/office. I say "for the most part" as there are some specific scenarios where that may not be the case. Take trade secrets, for example - which, by definition, is something that you've made reasonable efforts to keep a secret. To quote Forbes magazine, "Given such security vulnerabilities, might a court find that, by placing highly-sensitive and valuable information in the cloud, a company did not take “reasonable” efforts to maintain the secrecy of its information? While the courts have yet to grapple with this question, it deserves careful consideration. The fact that cloud providers may contractually limit their liability to far less than the likely value of such “crown jewels” could further undermine a company’s efforts to show that it took reasonable precautions to protect its data. For instance, cloud provider Salesforce.com has limited its liability for a data breach to the lesser of $500,000 or the amount paid by the subscriber in the twelve months preceding the breach. Given the potentially vast differential between the value of trade secrets and limitations on a provider’s liability, a court might find that it is simply unreasonable for a subscriber to have placed such valuable information in the cloud."
And the cloud isn't necessarily the cheapest option. I use a fire/water/theft-proof hard drive (at least, I did until I recently upgraded to a fire/water/theft-proof NAS from the same company). The hard drive cost $350 plus an extra $100 for a 5-year warranty and their Data Recovery Service (if your hard drive breaks, they’ll replace it as well as recovering the data from your old drive and putting in on the new one). While that may seem like a lot, I did the math and, if you spread the cost out, it’s actually pretty cheap. Between my and my wife’s computers, we have about 500GBs of data. To back that up with CrashPlan’s Family Plan would have cost $12.50/month, or $750 over 5 years. To back it up with Mozy would have cost about $30/month, or about $1,800 over 5 years (yikes!). In other words, the drive should save me quite a bit of money compared to the alternatives (touch wood!). And that, of course, assumes that cloud companies don’t increase their pricing – which I suspect is something that may happen in the not too distant future. (the current downward trend cannot continue indefinitely).
All that said, I also put our important but non-sensitive stuff – photos, for example – in the cloud simply as a precautionary measure. It costs nothing to do - using the free 15GBs of OneDrive capacity - and provides an additional layer of protection.