Online Legal…

One of the buzzwords in IT at the moment is “Cloud Computing” (also sometimes referred to as “Software as a Service” (SaaS)). Many consider it to be  the next great wave in the IT industry.

The term “Cloud” can be interpreted as a reference to the cloud symbol frequently used in network diagrams to represent the Internet. In the context of cloud computing, the data centre hardware and software is what is often meant by the Cloud. In its simplest form, cloud computing involves running applications on an Internet server (which are provided “as a service”) or downloading the software from the Internet each time it is used.  An example is Google Apps:[1] the software comes from the Web servers, and the data may be stored on the servers as well.

Cloud Computing therefore refers to both the applications delivered as services over the Internet and the hardware and systems software in the data centres that provide those services. [2]

Cloud deployment models

There are 2 Cloud deployment models: Public and Private.

When a Cloud is made available in a pay-as-you-go manner to the general public, we call it a Public Cloud.  A Private Cloud to refer to internal data centres of a business or other organisation, not made available to the general public”.[3]

Cloud delivery models

SaaS is one of 3 “delivery models”.  The other 2 are Cloud Platform as a Service (PaaS) and Cloud Infrastructure as a Service (IaaS).[4]

1. SaaS enables a consumer to use the providers applications running on a Cloud infrastructure and is accessible from various client devices through a thin client interface such as a Web Browser.[5]
2. PaaS permits access to a software platform remotely via the Internet whereby a consumer can deploy consumer-created applications using programming languages and tools supported by the PaaS provider (e.g. JAVA, Python, .Net).[6]
3. IaaS is the capability provided to the consumer to deploy and run arbitrary software, which can include operating systems and applications.  Here the consumer does not manage or control the underlying Cloud infrastructure but has control over operating systems, storage, deployed applications.[7]

One of the interesting things about Cloud Computing from a lawyer’s perspective is the way of contracting ‘in the Cloud’ is very different to the traditional way of IT contracting.

Traditional model

The traditional approach up until fairly recently has involved software being licensed and users signing licence and support agreements.  Where the software needs to be modified to meet the needs of the customer, a development agreement (for new software) or customisation agreement (of existing software) is needed to cover the required development or customisation activity. The cost model usually provides for the payment of licence fees, development/customisation fees and integration fees up front with support fees being paid on an annual basis.

Under the traditional model the software is usually deployed at the customer’s computer systems.

The software is either proprietary (owned by the developer) or is “open source”, namely, is provided on the basis that it is freely available to use and share, and therefore to modify.

New Cloud Computing business model

The Cloud Computing business model involves paying for the SaaS, PaaS or IaaS on a subscription basis, with the payment stream based on use by way of micro payments or periodic per user payments, and with no upfront payments required.  These new payment models are attractive to users from a cash flow perspective.[8] Therefore, instead of paying a licence fee for the software and paying for periodic upgrades, all upgrades are provided during the term of the subscription.  When the subscription period expires, the use of the service is no longer permitted.  In this model, the applications are maintained in the service provider’s data centre and every time users launch their browsers and logon, they get the latest version.

Cloud Computing v ASP

Cloud Computing differs to services offered by an Application Service Provider (ASP).  An ASP is an organisation that hosts software applications on its own servers within its own facilities.  Customers pay a licence fee for the use of the application and access it over the Internet.  With an ASP, the services tend to be provided on a  one-to-one basis whereas with Cloud Computing, they are provided on a one-on-many basis.

It is therefore important for organisations to understand whether or not their services are being offered on an ASP or Cloud Computing or traditional computing basis.  If a Cloud Computing basis, it is important to understand whether it is a SaaS, PaaS or IaaS as the terms and conditions of use relating to each will differ substantially.

It is necessary to “look under the bonnet” and understand the nature of the technical and business model in play.  Then armed with this knowledge, it becomes necessary to understand what level of contractual protection is necessary as low levels of contractual protection might not matter for some users of Cloud Computing, particularly where, for example, the user keeps separate copies or backups of all content used in the Cloud Computing environment for separate access where needed and where the use is not business critical.  However, where use is central to the user’s business model, and involves significant investments of time and money, or where there are particular risk factors, there may be a need to engage with the Cloud Computing provider in a more traditional form of negotiation before the transition to a Cloud Computing model is made.[9]

[2] “Above the clouds:  A Berkeley view of Cloud Computing” - http://www.eecs.berkeley.edu/Pubs/TechRpts/2009/EECS-2009-28.pdf

[3] Ibid.

[4] http://csrc.nist.gov/groups/SNS/cloud-Computing/cloud-def-v14.doc

[5] Ibid

[6] “Ibid

[7] Ibid

[8] Bill Jones, “Cloud Computing:  The journey has begun”, Magazine of the Society for Computers and Law, Vol. 20, Issue 2, June/July 2009

[9] See Bill Jones article at page 16

Similar:

• Customer Agreement templates
• Michalsons TechLaw Predictions for 2009
• What is ICT law?
• Get an overview of ICT laws
• Making money / preventing others from making money from OSS