Cloud services continue to provide opportunities for customers to increase innovation and efficiency and decrease costs. But how do you protect your interests when procuring cloud services and ensure that the services live up to the hype? Here are our legal and commercial experts' top tips. 

Key takeouts 

The commodity nature of cloud services often creates challenges for customers which may undermine the advantages of moving to the cloud.

To maximise the benefits and minimise the risks of the cloud, customers need to understand the differences between cloud and traditional procurement.

Don't expect the cloud service to be necessarily cheaper than doing it yourself, especially if you think of it as a ‘set and forget’ relationship. 

Getting started on cloud procurement

  • For the larger cloud vendors, don’t expect to be able to use your own form of contract. In most cases, unless you can show that you are subject to a specific regulatory overlay, your ability to negotiate substantial amendments to the vendor’s terms and conditions will be limited. Agreed amendments (if any) will usually be reflected in the ‘Order Form’.

Managing changing T&Cs and obligations

  • Try to ‘freeze’ the legal terms in place (rather than allowing the vendor to unilaterally vary the terms from time to time). It is unrealistic, however, to expect that the vendor will ‘freeze’ subsidiary technical, security and support documentation – but the vendor should be prohibited (in the ‘Order Form’) from amending these documents in a way that materially diminishes the functionality, performance or security of the service.
  • Be ready to monitor and manage changes in your rights and obligations. Have a plan for how you will catch all the notifications being pushed through portals (including changes to product end of life, maintenance and SLAs).

Licence agreements

  • Carefully review the scope of the licence granted – particularly to ensure that your intended use will not (inadvertently) fall foul of ‘indirect’ licensing restrictions or breach prohibitions on the use of automated ‘robot’ users.
  • Be aware of the impact of moving existing on-premise licenses to the cloud (for example, changes in the vendor’s liability and potential for double counting of licences – such as when using a product through a third party cloud hosting platform).
  • Commodity cloud services are usually based on an all production model – there is no real concept of development and test environments. Vendors count and charge based on price per second (or other metrics) regardless of the purpose of use. Review the impacts of this approach on your licensing requirements and projected costs.

Ensuring flexibility of arrangements

  • Plan your exit strategy before you start – know how you can and will transition out of the cloud contract before you commit to anything, including by having a thorough understanding of your exit rights, requirements and costs.
  • Be aware of the benefits of investing in and leveraging cloud orchestration tools that are independent of cloud vendor offerings to enable technical workloads to be moved between vendors reasonably seamlessly (noting the commercial implications of any minimum term commitments with your current vendor) as a strategy to support both exit from arrangements, and future leverage of best market ‘spot’ pricing for cloud services.

And finally …

  • Accept and understand that you will be one client among many (unless you take a private or premium service) and that as a result, you may be relying on the vendor’s assessment of their own reputational impact when making operational decisions and responding to incidents.
  • If the public cloud offerings are not palatable when you consider the legal, security and service/performance trade-offs, consider private cloud offerings where the contract terms and the degree of client control can be a little more flexible, while providing 70-80% of the benefits of public cloud offerings – albeit typically at a higher price and with lower levels of innovation in relation to new cloud offerings that are ‘Internet enabled and integrated’.
  • Don’t expect the cloud service to be necessarily cheaper than doing it yourself, especially if you think of it as a ‘set and forget’ relationship. Like any other supplier agreement, cloud arrangements require ongoing management (internal and external), attention and nurturing.