What is a Cloud HSM? Understanding Cloud Hardware Security Module (HSM) Advantages Compared with On-Premises HSMs

Protecting cryptographic keys is a core security necessity. Hardware Security Modules (HSMs) are specialized, tamper-resistant devices that secure cryptographic processes. They generate, protect, and manage keys used for encrypting and decrypting data, as well as creating digital signatures and certificates. Traditionally, these devices were primarily deployed on-premises within a company’s data center. Today, cloud-based HSMs offer a flexible and scalable alternative, with some important downsides.

What is a Cloud Hardware Security Module (HSM)?

A Cloud Hardware Security Module (Cloud HSM) is a hardware security module delivered as a cloud service. Instead of managing a physical HSM on-premises, organizations rent a secure, high-assurance cryptographic vault from a cloud provider. Cloud HSMs provide strong encryption, key management, and compliance without the need for dedicated hardware management.

Key Functions of a Cloud HSM

Cloud HSMs offer similar core security capabilities as traditional, on-premises HSMs:

• Secure Key Generation – Creates strong cryptographic keys within the HSM’s tamper-resistant environment.
• Key Storage – Protects cryptographic keys from unauthorized access and ensures FIPS-compliant security.
• Cryptographic Operations – Handles encryption, decryption, digital signing, and other cryptographic processes within the HSM’s secure boundary.

Why would an organization choose Cloud HSMs?

As organizations continue to embrace cloud-first strategies, Cloud HSMs offer a way to simplify cryptographic key management, ensuring security, scalability, and compliance while reducing operational overhead. These solutions are particularly attractive for businesses looking to integrate with multi-cloud and hybrid environments. However, shifting to a fully cloud-based HSM strategy comes with trade-offs that organizations must carefully evaluate.

While Cloud HSMs provide strong security and compliance capabilities, certain organizations—such as financial services, payment processors, and government agencies—may still require physical HSMs to meet specific regulatory or security requirements. Regulations like FIPS 140-2 Level 3 (for government and defense applications) or PCI PIN Security Standard (for PIN processing in payment transactions) may necessitate dedicated on premise HSMs in highly controlled environments. Additionally, some organizations in high-security sectors may require on-premises, air-gapped infrastructure to maintain full control over cryptographic key storage.

• No Hardware Management – If you replace physical, on premises HSMs with solely cloud HSMs, it eliminates the need to procure, secure, or maintain physical HSMs.
• Seamless Cloud Integration – The leading Cloud HSMs are designed for multi-cloud and hybrid environments.
• May Be Cost-Effective – Transitioning from on premises to cloud HSMs shifts costs from CapEx (hardware purchases) to OpEx (subscription-based pricing). This may be an advantage or disadvantage depending on organizational budgets and priorities.
• Improved IT Efficiency – Frees up cybersecurity and cryptography resources for higher-value tasks rather than hardware maintenance.
• Regulatory Compliance – Many Cloud HSMs meet the same cybersecurity and regulatory standards as on premises HSMs, including FIPS 140-2 Level 3, Common Criteria EAL4+, and PCI DSS security standards.

Cloud HSM vs. On-Premises HSM: Key Differences

Choosing between a Cloud HSM and an On-Premises HSM depends on security, cost, and operational requirements. There are a number of key considerations to keep in mind before deciding whether to choose cloud or on premises HSMs.

Key Considerations Before Adopting Cloud HSMs

While Cloud HSMs provide strong security, organizations should assess:

• Latency and Performance Requirements – Cloud-based cryptographic operations may introduce slight latency compared to on-premises HSMs.
• Shared Responsibility Model – While the provider secures the infrastructure, organizations must manage key access and lifecycle controls.
• Industry-Specific Compliance – Some highly regulated industries, such as payments and financial services, may need a hybrid approach, retaining physical HSMs for specific use cases.

Ultimately, Cloud HSMs offer flexibility, scalability, and operational efficiency, but businesses in highly regulated industries should carefully evaluate compliance and security requirements before migrating cryptographic key management to the cloud.

Feature Comparison: Cloud HSMs vs On Premises HSMs

Bring Your Own Key (BYOK) vs. Cloud HSMs

A frequent question we hear from clients is, “Why do I need a Cloud HSM if I can use BYOK? Don’t they serve the same purpose?” The short answer is no. It is important to distinguish between Cloud HSMs and Bring Your Own Key (BYOK). While both relate to key management in the cloud, they serve different purposes:

• BYOK:
  • BYOK allows you to generate your own encryption keys on-premises and then import them into a cloud service provider’s key management system.
  • This gives you greater control over your keys, as you retain the original copy.
  • BYOK is often used to meet compliance requirements that mandate customer-managed keys.
  • BYOK relies on the CSPs key management infrastructure.
• Cloud HSMs:
  • Cloud HSMs provide a dedicated hardware security module in the cloud, where cryptographic operations and key management are performed.
  • You have greater control over the cryptographic environment itself, not just the keys.
  • Cloud HSMs are suitable for applications that require high levels of security and compliance, such as payment processing, digital signing, and certificate management.
  • Cloud HSMs provide their own hardware infrastructure.

In essence, BYOK focuses on bringing your own keys into the cloud provider’s infrastructure, while Cloud HSMs provide a dedicated, secure environment for managing and using your keys within the cloud. Cloud HSMs can be used to generate the keys that are then used in a BYOK scenario.

How do you deploy a Cloud HSM?

Deploying a Cloud HSM involves a series of steps to ensure secure and efficient integration into your environment. Many organizations rely on outside technical consultants with significant experience implementing, integrating and deploying HSMs to streamline the process. Here’s a more detailed breakdown:

Choosing between Cloud Providers and Dedicated HSM Vendor

This initial step is crucial, and it often requires careful consideration of the limitations of Cloud Service Provider (CSP) HSM offerings.

• CSP HSMs: While CSPs like AWS offer HSM solutions, these often come with limitations. For example, AWS CloudHSM has restrictions on the number of keys that can be stored and the types of cryptographic operations supported. Although AWS CloudHub v2 has improved these challenges, there are still limitations may not be suitable for all use cases. Additionally, CSP HSMs are tightly integrated into their respective cloud platforms, which can create vendor lock-in and limit flexibility for multi-cloud deployments.   
• Dedicated Cloud HSMs: In many circumstances, organizations require dedicated Cloud HSMs. These provide a higher level of security and control compared to shared CSP HSM solutions. Dedicated HSMs are often necessary for meeting stringent compliance requirements, such as those in the financial or healthcare sectors, or when dealing with highly sensitive data.   
• Dedicated HSM Vendors: Solutions from dedicated HSM vendors, like Entrust or Thales, offer greater control and portability across different cloud environments. They often provide a wider range of features and support for various cryptographic standards.

Ultimately, the choice between a CSP HSM and a dedicated Cloud HSM depends on your specific security, compliance, and operational needs. In most cases, we recommend that security-conscious organizations use HSMs from a dedicated cloud HSM vendor with a proven track record in the cybersecurity space, such as Thales, Entrust, and Fortanix.

Provisioning and Setting Up the HSM Service

Once you’ve selected a provider, you’ll provision the HSM instance through their management console or API. This typically involves selecting the desired HSM configuration, location, and performance tier. This stage also includes setting up network connectivity and ensuring the HSM is accessible from your applications.

• Configuring Access Controls and Policies: A critical aspect of deployment is defining granular access controls. This includes setting up user roles, permissions, and authentication mechanisms to restrict access to the HSM and its cryptographic keys. You’ll also need to configure security policies, such as key rotation policies, audit logging, and intrusion detection, to meet your compliance and security requirements.   
• Integrating Applications Using APIs or SDKs: Cloud HSMs provide APIs and SDKs that allow your applications to interact with the HSM for cryptographic operations. This step involves integrating these APIs into your application code, enabling secure key generation, encryption, decryption, and digital signing. Consider the level of integration needed. Some applications will natively integrate, others will require custom coding.   
• Establishing Secure Key Management Practices: Effective key management is essential for maintaining the security of your cryptographic operations. This includes establishing procedures for key generation, storage, distribution, rotation, and destruction. Implement strong key lifecycle management policies to ensure keys are protected throughout their lifespan. Consider the use of key management systems to work in conjunction with the cloud HSM.   
• Testing and Validation: After implementation, rigorous testing and validation are required to ensure the cloud HSM is functioning correctly and that cryptographic operations are performed as expected. This should include performance testing, security testing, and vulnerability scanning.

Selecting Your Perfect Cloud HSM: Key Cloud HSM Vendors

Choosing the right Cloud HSM provider is a critical decision that depends on security needs, compliance requirements, cloud integration, and performance considerations. Several leading vendors offer robust solutions, each with its own strengths and focus areas. Below is a detailed comparison of Cloud HSM offerings from Thales, Entrust and Fortanix, three of the most prominent providers in the market.

Thales Data Protection on Demand (DPoD) Suite

Thales Data Protection on Demand (DPoD) is a cloud-based platform delivering a variety of HSM and key management services. It offers a comprehensive suite of solutions, including:

• Luna HSM as a Service: Provides FIPS 140-2 Level 3 certified HSMs for general-purpose cryptographic operations, including encryption, digital signatures, key generation and management, and TLS/SSL protection. It’s suitable for securing sensitive data across various applications, DevOps environments, and cloud-native architectures.  
• payShield HSM as a Service: Specifically designed for the payments industry, this service helps meet PCI DSS, and other relevant standards. It’s used for transaction processing, card issuance, EMV authentication, and mobile payment security.
• CipherTrust Cloud Key Manager: This service provides centralized key management for cloud environments, enabling organizations to manage encryption keys across different cloud providers.

Key Features of Thales DPoD

• Cloud-native HSM as a Service: Eliminates the need for on-premises hardware in many cases.
• Scalability: Easily scale cryptographic capacity on demand.
• Multi-cloud support: Integrates with AWS, Azure, and Google Cloud.
• Compliance: Meets various standards like FIPS 140-2 Level 3, PCI DSS, GDPR, and eIDAS.
• REST APIs: Enables easy integration with modern applications and DevOps pipelines.  
• Subscription-based pricing: Offers a cost-effective alternative to traditional HSMs.

Use Cases for Thales DPoD and Cloud HSMs

• Enterprises needing a scalable cloud HSM for general-purpose encryption and key management.
• Financial institutions requiring a PCI-compliant HSM for securing digital payments.
• Organizations seeking a multi-cloud key management solution with strong API integrations.

Entrust Cloud HSM: nShield as a Service

Entrust nShield as a Service is a cloud-based HSM offering that allows organizations to perform secure cryptographic operations and key management without the need for on-premises hardware. It leverages Entrust’s nShield HSMs, known for their robust security and performance, to deliver encryption, digital signing, and key management capabilities for cloud applications.

Key Features of Entrust Cloud HSM 

• FIPS 140-2 Level 3 certified HSMs: Ensures secure cryptographic key generation and storage.
• Hybrid and multi-cloud support: Provides flexibility for AWS, Azure, and Google Cloud deployments.
• Secure remote administration: Enables centralized management of cryptographic operations.
• Integration with security frameworks: Supports digital signing, authentication, and TLS/SSL key protection.
• Global compliance: Meets standards including PCI DSS, Common Criteria EAL4+, eIDAS, and GDPR.
• Subscription-based pricing: Offers predictable costs and scalability.
• Management models: Available as both self-managed and fully managed solutions.

Use Cases for Entrust nShield Cloud HSMs

• Enterprises requiring a fully managed cloud HSM with high-assurance cryptographic processing.
• Organizations seeking a hybrid deployment model, with the flexibility to integrate both cloud and on-premises HSMs.
• Businesses looking for a seamless cloud migration strategy with strong compliance and security controls.

Fortanix Data Security Manager

Fortanix Data Security Manager (DSM) is a unified data security platform that goes beyond traditional Cloud HSM offerings. It combines HSM capabilities, key management, tokenization, and secrets management into a single solution. Built on confidential computing principles using Intel SGX enclaves, Fortanix DSM ensures that even Fortanix itself cannot access your sensitive data.

Key Features of Fortanix Data Security Manager

• Unified platform: Combines HSM, key management, tokenization, and secrets management for comprehensive data security.
• FIPS 140-2 Level 3 certification: Meets stringent industry security standards.
• Zero-trust security: Cryptographic keys and data remain protected, even from Fortanix.
• Confidential computing: Leverages Intel SGX enclaves to create a trusted execution environment, further enhancing security.
• Advanced access control and audit logging: Provides granular control and meets compliance requirements for GDPR, CCPA, PCI DSS, and HIPAA.
• Flexible deployment: Supports multi-cloud, hybrid cloud, and on-premises deployments.
• DevOps integration: Seamlessly integrates with Kubernetes, CI/CD pipelines, and containerized applications.

Use Cases for Fortanix Data Security Manager (DSM)

• Organizations needing a holistic security platform that extends beyond basic HSM functionality.
• Enterprises with strict data sovereignty and compliance requirements.
• Security-conscious organizations looking for a zero-trust security model.
• Developers and security teams building cloud-native applications requiring cryptographic APIs and DevOps integrations.

Selecting and Deploying Cloud HSMs

Accutive Security partners with leading cloud HSM providers, including Entrust, Thales, and Fortanix. Leveraging our team of HSM experts and our Accutive Security Innovation Lab we help organizations select, implement, and manage Cloud HSM solutions that are tailored to your security and compliance needs.

How Accutive Security accelerates your Cloud HSM lifecycle:

• Vendor Selection: We analyze your security, compliance, and performance needs to recommend the best Cloud HSM solution.
• Proof of Concept (POC): We assist in conducting real-world testing to validate Cloud HSMs in your environment before full deployment.
• Implementation & Integration: Our security experts ensure a smooth deployment, integrating Cloud HSMs with your existing cloud, DevOps, and IT security infrastructure.
• Managed Security Services (MSSP): We provide ongoing monitoring and support services for some of the world’s largest organizations, helping them maintain optimal performance, compliance, and security in the long term.

By leveraging Accutive Security’s expertise and industry partnerships, your organization can confidently implement Cloud HSM solutions that enhance data security, regulatory compliance, and operational efficiency in the cloud.