How Cloud Contracts Booby-Trap Businesses

Attorneys may want to launch the new year with advice to clients about legal headaches headed their way, courtesy of the cloud.  Cloud service has been widely adopted for storage and software licensing, as a matter of convenience and economy.

But companies are getting trapped by bad service agreements, according to a recent piece in Computerworld.

Habeas Hard Drive has long lamented that there’s no language in cloud contracts for incident response after an outage due to cyberattack.  Habeas Hard Drive has not seen any cloud contract that spells out, for instance, how digital forensics would be handled after such an event.  There is no provision specifying how evidence would be preserved, and how parties would get access to data that’s on a virtual server in a data center – i.e. “the cloud.”

Meanwhile, the Computerworld piece offers good advice from experts about eight different traps for cloud customers  – all of them discovered too late to get out of the agreement, or without recourse for burdens the users had no idea they’d face.

Some companies run into trouble because they’ve got contracts with multiple cloud providers, often procured by different employees or departments in the organization.  Each cloud provider has a different standard for offering support, different response times when service goes down, even different policies for alerting the user to outages.

In the event of losses due to service interruptions, several uncoordinated agreements can make it impossible to pursue damages.

The takeaway – vetting cloud contracts might require teamwork by IT and legal personnel, because  neither, working alone, is likely to have a complete grasp of the technical and legal implications in those service agreements.

And it’s impossible to overstate the difficulty of negotiating terms with cloud providers.  In fact, small and mid-sized users get a “pop-up-and-click-here” contract.  Getting concessions could be a matter of sheer persistence to find an authorized company representative, or it could be impossible.

Larger firms may have the luxury of a sales rep who brings bosses and legal counsel to the process, and can get permission to alter terms.

Even as you read this, you have clients committing to click-through cloud contracts, and it’s very likely they’re making some uninformed decisions.  The business loses virtually all power to negotiate contingency clauses, or other terms once it agrees to the cloud contract.

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