Building exits in your cloud strategy
By Carol Ko 19-Jun-2012
Gigi Cheah, Partner and Jeremy Tan, Associate, Asia IP & Technology Group, Norto
As CIOs enter into new cloud service contracts for their businesses, it is natural that they first evaluate the ease of terminating them without compromising data security and integrity. As your organization put forward a 'cloud strategy,' does it also have an exit strategy in place to prevent from vendor lock-in?
In this second part of the interview with Asia Cloud Forum (read Part I here), Gigi Cheah (pictured, left), a partner and Jeremy Tan (pictured, right), an associate of law firm Norton Rose's Asia IP & Technology Group, guide us through some key issues of an exit strategy for cloud adoption: Should you review the vendors' SLAs with on a regular basis? When is it better to have automatic renewal clauses and when is it not advisable? And why is a termination clause important?
Asia Cloud Forum: Should cloud service users review their vendors' service level agreements regularly?
Norton Rose: Yes, at least on an annual basis. The service level agreements need to be reviewed regularly because the use of the cloud service may have increased (i.e., more data is being transferred) and the service levels may not be appropriate for the level of data transfer and processing. Also, given the rapid advancement of technology the service levels agreed upon may become obsolete or irrelevant over time.
Is it better to have automatic renewal clauses in cloud service contracts?
"If the cloud service contract is for a major outsourcing arrangement, an automatic renewal clause may not be beneficial to the customer as it does not give the customer the opportunity to renegotiate terms."
-- Gigi Cheah and Jeremy Tan, Norton Rose |
Norton Rose: This would depend on the nature of the cloud service. If the cloud service contract is for a major outsourcing arrangement, an automatic renewal clause may not be beneficial to the customer as it does not give the customer the opportunity to renegotiate terms.
If the cloud service in question is for software-as-a-service in relation to certain operational processes, an automatic renewal clause may be preferred to ensure continuity of service and avoid any disruption to the normal business operations of the cloud service user.
Why is it important to have termination clause in cloud service contracts when these services are "pay-as-you-go" anyway?
Norton Rose: It is important to have termination clauses as a failure to pay in a "pay-as-you-go" service arrangement does not automatically allow the customer to terminate a cloud service contract. The cloud service contract could potentially continue to be in force notwithstanding the customer's failure to pay and the cloud service user may unwittingly accrue liability under the cloud service contract.
What other steps should organizations take when formulating their cloud exit strategies?
Norton Rose: It is also important to ensure that there are exit and transition services provisions for larger cloud service contracts especially those that involve outsourcing. The jurisdiction and governing law of the cloud service contract should also be noted as there may be unique local law requirements or the issues with the enforceability of a foreign judgment.
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