Clarity, Protection and Transparency needed in Cloud Contracts

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SMEs often lack guidance and confidence when it comes to negotiating contracts with cloud service providers (CSPs). As a result the industry needs to do more to provide them with the necessary clarity, protection and transparency when migrating their IT infrastructure into the cloud, says Peter Groucutt, Managing Director of Databarracks.

The European Commission has recently announced that it has set up an “expert group” including cloud providers, lawyers and academics in an effort to create a new set of cloud computing contract terms. The aim of this is to provide SMEs and consumers with access to safe and fair terms for cloud services.

Groucutt has welcomed the move and in order for it to be effective, he states that a standardised approach to cloud contracts and realistic service level agreements (SLAs) should be the focus:

“Despite the widespread adoption of cloud computing, it is fair to say that the industry is still in a state of relative immaturity and as a result is prone to manipulation, particularly at SME level. Unlike enterprise level firms, SMEs rarely have the legal clout to negotiate contracts and ensure that they are getting the best possible service. Many are often left with a take-it or leave-it scenario from providers.

“In addition, unrealistic SLAs often leave end-users exposed to a complex and uncertain legal framework with extensive disclaimers, which they simply do not have the experience or confidence to manage. Whilst a rigid template for contracts is not going to work for the industry because of the huge variation in technology and services, a more standardised approach to contracts will make huge strides in improving confidence, clarity and transparency.

“The news that the European Commission has introduced an expert group to address the issue of cloud contracts underlines the current concerns amongst SMEs and its imperative that this serves both them and CSPs equally,” Groucutt concluded.

These sentiments are also echoed by Frank Jennings, Partner at DMH Stallard LLP and member of the Cloud Industry Legal Forum (CILF), who whilst welcoming the move from the European Commission believes that it is crucial that the terms arrived at remain optional:

“The European Commission has stated that the Group’s recommendations will be optional, and it’s important that they stay that way. Imposing mandatory contract terms on cloud suppliers will likely stifle innovation. Rather, we would prefer to see greater commitment on behalf of CSPs to industry best practice schemes which ensure transparency, such as CIF’s Code of Practice, and improved education for end users on what a good cloud contract looks like.”

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