Increasingly, software vendors and professional services providers (for example, consultants and software implementation vendors) request or require access to their customers’ data as part of delivering their products and services. This kind of data sharing can produce powerful, low-cost products and services – but it is not without risk. Before you share your data with a cloud software provider or other vendor, the following three questions should be at the top of your due diligence list.  I’ll address them over the course of three posts this week, starting with: Can They Use My Data, and If So, For What?

If you are sharing data with a cloud software provider, the answer to the question – can they use my data? – is almost certainly “yes.”  In order to make their products available to you over the Internet, cloud providers need certain limited rights to use your data. The key is in the second part of the question – “for what?” The answer: the vendor’s right to use your data should be limited to only those uses that are necessary to provide the software and services.

Cloud software providers, for example,  typically require the right to copy your data onto their servers and transmit it to you over the Internet. If the software includes functionality that allows you to work with your data in the cloud, the vendor may need the right to modify you data as well. But be wary of language in contracts that gives the vendor broad rights to use your data in ways that are not specifically tied to the services. For example, many agreements include provisions that permit the vendor to collect, use and/or distribute your data in de-identified or aggregate form to improve its products, develop new features and functionality, or simply sell it to third parties for their use. While there may be limited circumstances under which a vendor should be able to collect certain kinds of general usage information from you to improve the product (for example, collecting anonymous statistics about which menus are used most frequently to make sure they are easily accessible within the application), there are very few instances when it is appropriate for a vendor to use your data (even in de-identified form) for its own product development efforts, business purposes, or to provide to third parties.