Why Some Cloud Contracts Put Businesses at Risk

    March 30, 2017

    By Scott Adams

    With so many companies moving their operations to the cloud, it’s important that CIOs and IT managers read the fine print before committing to any particular vendor.

    We’re all guilty of telling the occasional white lie every now and then, and it’s likely that none of them is more common than this: “I have read and agree to the terms and conditions.”

    According to Time Magazine, if you were to read all of the terms and conditions you have agreed to when signing up for anything from a gym membership to a new music software for eight hours a day, it would take you 76 days to finish every word. But while circumventing the boring legalese of your iTunes or Facebook account isn’t likely to hurt you in the long run, taking the same mentality with your cloud contracts could prove costly.

    The Dangers of Unread Cloud Contracts

    Cloud adoption is growing rapidly, with large American enterprises expected to dedicate $1.77 million per organization to cloud computing in 2017, according to the 2016 Cloud Computing Executive Summary. However, while cloud adoption grows exponentially year-over-year, cloud contracts have not evolved to keep up with the rapid rate of added users. If businesses sign on with a cloud provider without reading the fine print of their contracts, they end up caught off guard by certain restrictions.

    For example, the biggest issue currently facing cloud contracts is the question of risk — if data is stolen, who is ultimately responsible for the mistake? According to ComputerWeekly, “Cloud customers could face fines large enough to put them out of business if data is stolen or accidentally made accessible.”

    Suppliers tend to push risk onto customers in order to keep costs low. Added risk for the supplier would increase the cost, and the assumption is that such a rate hike would adversely affect sales. This is a particularly high risk when dealing with cloud vendors, whose industry is highly regulated and therefore involves a particularly high level of financial risk. Cloud contracts therefore often place responsibility on the customer for risks that might seem to intuitively belong to the vendor, such as the risk of data loss in cases where the vendor is being trusted to move data between servers.

    URL-based agreements — a common practice among cloud providers — create another set of issues for customers looking to migrate to the cloud. Cloud suppliers can change URL-based agreements on the fly without any input from their customers, even going so far as to raise the price of service without the client’s agreement.

    Why Do Customers Accept These Terms?

    The cloud is a growing commodity for nearly every business, regardless of industry or size. Small-to-medium-sized enterprises in particular are feeling a growing pressure to catch up to larger competitors by migrating their infrastructures to the cloud. These inexperienced clients often simply don’t know what to look for when reading over their cloud contract.

    Any company’s first step towards avoiding contracts that aren’t to their advantage should be to educate themselves. From termination clauses, to intellectual property ownership, to liability issues, cloud adopters need to enter into the contract portion of their migration with a heightened level of scrutiny. Cloud agreements — like other contracts — have their points of negotiation, and CIOs should be willing to enter into a dialogue about their specific terms.

    In the end, IT decision-makers should view their cloud contracts as they would any other outsourcing contract: negotiate the finer points and be willing to walk away from a deal that doesn’t help to advance your company’s IT strategy.

    Getting the Most from the Cloud

    Businesses move to the cloud because they want to take advantage of all the cost-savings, scalability, and stability the cloud has to offer — a poorly crafted or constantly changing contract can completely nullify those benefits.

    IT teams should also look to adopt a solid cloud management system so that they don’t lose visibility of their services when turning it over to a third party. The Vityl Suite from TeamQuest helps IT teams with every kind of infrastructure maintain their critical services. At-a-glance views of IT health and risk help IT managers know where to dedicate time and resources to avoid costly overprovisioning, helping them to prevent ceding any more money to providers than they already owe.

    Cloud adoption holds great potential for companies to cut costs and lower overhead, but losing visibility and entering into disadvantageous contracts can quickly turn the experience sour. Businesses of all sizes should do everything they can to enter the negotiating room with a firm understanding of how cloud contracts work.

    Category: cloud