IT contractors will find data security will be a major issue this year as growing numbers of firms embrace cloud computing, an IT security services company claims.

Cloud computing involves businesses handing over their data to a third party, which means firms must take extra care in identifying who will be able to access that data, according to Network Box Limited.

"[Cloud computing companies] must ensure that all the data that they store is encrypted so that even if they are breached a further hack is required to make use of that data," said Simon Heron, internet security analyst at Network Box.

According to a survey from Infosecurity Europe, one-third of organisations do not currently have systems in place that could deal with a security breach.

Failure to have a plan of action that covers containment, damage limitation and recovery following a breach could see firms fined up to £500,000 under new data protection laws announced by the Information Commissioner's Office in January.