Providers are rushing head-first into the cloud revolution, marketing their latest cloud offerings and promoting the benefits of hosting data externally.
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But as customers analyze whether the cloud is the right fit for their technology and data, they need to carefully review whether the contract terms proposed by cloud providers truly work “in the cloud.” Customers may discover that cloud providers simply have taken their existing standard licensing agreements for software hosted at the customer site (or at least large parts of their existing agreements), slapped the word “cloud” on the document, and voilà! A new cloud contract!
In reviewing a supposed “cloud contract”, customers should ask themselves: “Does this make any sense at all, if all that I can do is access and use applications hosted by the cloud provider?”
Contract provisions that protected software vendors when the software was installed on the customer’s servers and computers frequently make no sense – or even worse: can be completely inappropriate – for cloud-based services.
For instance, look carefully at the following, if all that a customer really can do is access and use a cloud-based application:
- Terms holding the customer responsible to install modifications or updates to the application (including updates delivered “on media” to the customer)
- Restrictions on decompiling, reverse engineering or altering the application (again, assuming there are no rights granted to the customer to modify the cloud-based software, but only to access and use it)
- Provisions allowing the provider to access the customer’s systems, in order to make corrections or perform maintenance to the application.
Customers may find other provisions that are relics of the customer-hosted model, rather than a cloud provider-hosted model.
And it’s not all that surprising – technology services are often two steps ahead of their accompanying contract provisions. But in the rush to jump into the cloud, customers should be careful not to get stuck with contract terms rooted in the past.