Contracts
Plug, Negotiate, And Play
Buying cloud services is very different from buying packaged software when it comes to the legalese. At its most basic, just about anyone can sign up for services by filling out a few Web forms. Most companies, however, are going to want some more official license agreement tailored to their needs, and that's where things can get more complicated.
Providers typically follow one of two approaches with their cloud service and SaaS licenses--by the person, or by usage. Microsoft Exchange Online costs $10 per user, per month, for example. Others charge per transaction or per gigabyte of data exchanged; Amazon S3 storage costs between 12 and 15 cents per gigabyte of storage and between 10 and 17 cents per gigabyte of data transfer in the United States. Some providers use a hybrid of the two approaches.
While one of the big appeals of the cloud is its scalability, companies should know what the limits are to that. Service providers often cap service levels based on what they think a customer can pay, says Ed Sullivan, CEO of Aria Systems, which provides billing services to cloud providers. For small businesses, that can limit customers to $10,000 worth of a service per month.
With SaaS, providers increasingly are selling bundled versions that range from basic to high end. Microsoft sells a cheaper "deskless worker" version of Exchange Online that gives access to the basic version of Outlook Web Access, rather than the Outlook client. There's a free version of Google Apps, and a premium version with some business guarantees.
Like any technology, the more SaaS and cloud computing services a company buys, the more leverage it'll likely have with the contract and price. Microsoft, for example, gives discounts if buyers wrap their services into an Enterprise Agreement. Amazon charges less as customers use more of S3 and EC2. As cloud computing becomes more popular, and companies start making bigger deals, vendors are having to get flexible.
Shared Liability Not Included
SaaS and cloud computing carry a degree of uncertainty in terms of security, uptime, performance, and stability. With packaged software, in-house IT pros handle problems. But in the cloud, companies must rely on the service provider to minimize risks, and that needs to be spelled out in the contract, says Robert Scott, an attorney who represents both vendors structuring their licenses and business customers negotiating cloud contracts.
Standard terms often say little about many important topics related to risk, Scott says. For example, if there's a security failure in a service that compromises financial data, a company might be required to notify customers under state or federal law, and potentially face legal action. "Who pays for that?" Scott asks.
Much of this negotiating is similar to that of an outsourcing agreement, including scrutinizing licenses with the end of the relationship in mind. Companies should make sure the terms and conditions lay out how to get data back if they decide to leave the service or can't pay for it, or if the provider suddenly shuts down. Customers need to know how they'll get data from the service provider, and how to use that data once they have access to it.
SLAs: Complexity And Limits
The service-level agreement is another piece to the puzzle. Most cloud providers give some refund if the service is down for a certain percentage of time each month, as measured by the service provider responding pings, or data requests, from the customer. Negotiating a stronger SLA will cost a pretty penny, says Warren Ross, Capgemini's global director of IT product marketing, because services get more expensive with specialized SLAs attached.
Most companies, like Salesforce.com, exclude planned downtime from SLAs, so if the vendor tells you about a planned outage, there's no refund. There tends to be a good bit of planned downtime, and it takes away from the value of SLAs, says Divakar Jandhyala, CEO of SaaS billing and metering startup eVapt.
That said, SLAs are getting stronger and in some cases more complex, much as they did as Web hosting became mainstream. Microsoft's Exchange Hosted Filtering service includes five SLAs: for uptime, one each for anti-spam and antivirus effectiveness, one for latency, and another for performance.
Microsoft has tiered SLAs for Exchange Online and SharePoint Online. The starting point is a 99.9% availability SLA; if that's missed, customers get a 25% monthly credit. At less than 99%, customers get a 50% credit. And if there's a major outage or a virus outbreak, customers get a 100% refund for the month. But companies negotiate SLAs hoping they won't have to use them. A retailer won't be happy with a 5% refund of monthly fees if its Web site goes down on Cyber Monday.
Other elements of a cloud computing license should include a written understanding that the service provider will meet compliance demands and protect intellectual property.
Licensing cloud services is at once simpler and more complicated than using packaged software. The services are easy to buy, and many come with standard SLAs that offer a reasonable level of protection. But to ensure all areas of risk and liability are covered, keep those negotiating skills--and a lawyer's phone number--handy.
Bob Friday, Chief AI Officer for Juniper Networks, explains how the advanced technology is transforming operations.
Contact center leaders from 8x8, Awaken Intelligence, and 360insight discuss the importance of agent experience.
AI may force enterprises to rewire parts of their data centers so they are fully optimized to run such workloads. The question is do you use Ethernet or InfiniBand?
