Cloud computing has revolutionised the way we store, access and process data. It provides users with a scalable, cost-effective and secure solution that can be tailored to their needs. However, before you jump into cloud services agreements, it’s essential to understand what they entail.
We’ve written this post for cloud service providers and customers. In the end, you’ll gain a comprehensive understanding of cloud services agreements, including the different cloud services and deployment models, business models for cloud services, key legal areas to consider, and technical considerations for negotiating these agreements.
What are cloud services agreements?
Contracts between a cloud service provider and a customer.
These agreements outline the terms and conditions of the cloud service, including the service level agreement (SLA), data ownership and control, security and privacy, and liability.
Cloud service types
Cloud computing offers three main services: infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS).
IaaS
IaaS provides users with virtualised infrastructure resources such as servers, storage and networking. Customers have complete control over the infrastructure and are responsible for managing it.
PaaS
PaaS offers a platform for developing and deploying applications. The provider manages the infrastructure and operating system while customers focus on building and deploying their applications.
SaaS
SaaS provides software applications over the internet, such as email, customer relationship management (CRM) and accounting software. The provider manages the infrastructure, platform and application, while customers access the software through a web browser or mobile app.
Cloud deployment models
Providers can deploy cloud services using three main models: public, private and hybrid clouds.
- Public cloud: Multiple users share cloud resources over the internet. It’s cost-effective and scalable but may not meet specific security and compliance requirements.
- Private cloud: A provider dedicates cloud resources to a single customer that hosts them on-premises or by a third-party provider. This model offers greater control and security but can be more expensive.
- Hybrid cloud: Combines public and private cloud services to create a customised solution. It offers the benefits of both public and private cloud but can be complex to manage.
Business models for cloud services
| Business model | Description |
|---|---|
| Pay-as-you-go | Customers pay for the resources they use, such as storage and computing power, hourly or daily. |
| Subscription-based | Customers pay a monthly or annual fee for a set amount of resources, such as storage and computing power. |
| Usage-based | Customers pay for resources based on their actual usage, such as the number of transactions processed or the amount of data stored. |
Key legal areas to consider in cloud services agreements
- SLA: The SLA outlines the service level the provider promises to deliver to the customer, such as uptime and response times. You must understand what’s included in the SLA and what remedies are available if the provider fails to meet these standards.
- Data ownership and control: The agreement should clearly define who owns the data and how you can access, download or delete it. Also, customers should understand their rights to their own data and their control over it.
- Security and privacy: The provider should outline their security measures and policies to protect customer data. Ensuring these measures meet the customer’s security and compliance requirements is crucial.
- Liability: The agreement should clarify the liability of each party during service disruptions, data breaches or other issues. Further, both parties should understand what compensation is available and what liability limitations exist.
Technical considerations
Interoperability
When selecting a cloud service provider, it’s essential to consider whether their service can integrate within the customer’s existing IT infrastructure. Considerations include compatibility with existing applications, data formats and protocols.
Performance
The performance of the cloud service can significantly impact user experience. So, when negotiating the SLA, you should consider factors such as response time, throughput, and availability.
Scalability
A significant benefit of cloud computing is the ability to scale resources up or down based on demand. So, the agreement should specify how the provider will allocate and scale resources to meet the customer’s changing needs.
Data portability
Customers should be able to move their data in and out of the cloud service as needed. As such, the agreement should specify how it can export data and what export formats the provider supports.
Disaster recovery and business continuity
The contract should include provisions that ensure the provider can recover from disruptions such as hardware failure, power outages, and natural disasters. It should also specify the provider’s data backup and recovery responsibilities.
Actions you can take next
- Streamline and manage your cloud services relationships by asking us to draft your agreements.
- Upskill your in-house teams on these agreements by asking us to train them through workshops and practical guides.
- Stay updated on the latest insights about cloud services agreements by subscribing to our newsletter.
- Become an expert contract drafter by joining our contracts programme.
