[citation][nom]yyk71200[/nom]A big problem with cloud vs. local data storage is that cloud is one big target. If something goes wrong with it, everyone that depends on it suffers. With local data storage, the data is dispersed and the damage is limited. At this point, cloud looks to me more like an addition but not a replacement for local data storage.[/citation]
To some degree you are correct, the central location of data is a larger target, a single entry point, etc etc. However, if "cloud" storage and security are done correctly then it's still not an easy target.
Distributed and shifting encrypted keys can diffuse most of the problem with central storage by breaking the data into small, distributed pieces.
To your point, though, if someone tapped into the key server they could find everything and put it together. However, they'd have to do it quickly, since the amount of computing power needed in-system would send access alerts. If they downloaded everything they would have to get all of the information and the keys at the same time, which even for gigabit lines is not likely for large datasets. Depending on the sensitivity of the data keys can shift anywhere from every 10 sec to every 60 sec. Try downloading 100 TB of data in 10 sec.... not going to happen.
Security is like anything else, you get what you pay for.