As an Infrastructure-as-a-Service (IaaS) provider, it’s essential to understand the legal, commercial and technical considerations that go into an IaaS agreement.

By knowing these aspects, you can better serve your customers and create agreements that meet their needs while protecting your organisation.

In this post, we start by presenting the typical IaaS business models and then explore the key considerations to look for in an IaaS agreement. Whether you’re an organisation seeking an IaaS provider or an IaaS provider looking to serve your customers better, this post will provide valuable insights to help you make informed decisions and create agreements that meet your needs.

IaaS business models

There are several standard business models that IaaS providers use to monetise their services. Here are a few examples:

  1. Pay-as-you-go: Customers pay only for the resources they use, such as CPU, storage, and bandwidth. This model is popular because it allows customers to scale their infrastructure up and down based on their needs while only paying for what they use.
  2. Reserved instances: Customers reserve a certain amount of infrastructure capacity for a fixed period, typically one to three years. This model allows customers to lock in lower prices for their infrastructure needs while providing the provider with predictable revenue streams.
  3. Spot instances: This model allows customers to bid on excess capacity in the provider’s infrastructure. Customers can typically save money by using spot instances, but they are not guaranteed to have access to the capacity they need.
  4. Hybrid cloud: The provider offers a combination of IaaS and on-premises infrastructure services in a hybrid cloud model. This model is popular with customers who want to maintain some control over their infrastructure while taking advantage of the scalability and flexibility of cloud services.
  5. Managed services: In a managed services model, the provider offers various services on top of their infrastructure, such as database management, security, and monitoring. This model allows providers to differentiate themselves from competitors and provides customers with a more complete solution.

Each of these business models has its advantages and disadvantages, and the right model will depend on your goals, resources, and target market. Yous should carefully consider which model or combination of models will best meet their customers’ needs and provide the best return on investment.

Legal considerations

Legal considerations are a critical aspect of any IaaS agreement, as they ensure that the agreement is legally enforceable and compliant with relevant laws and regulations.

Here are some key legal considerations to keep in mind when creating an IaaS agreement:

Intellectual property rights

The agreement should include explicit provisions outlining intellectual property rights, including ownership, licensing, and use. This is particularly important if your customers use your platform to develop, create, or store intellectual property such as software code, databases, or other proprietary information.

Flexibility and customisation

While standard contracts can be helpful for some customers, many organisations have specific needs that require customised agreements.

Your IaaS agreement should be flexible and allow customisation to meet each customer’s unique requirements. This could include offering different levels of service, pricing, or add-on features that can be tailored to the customer’s needs.

Data protection and privacy regulations

As an IaaS provider, you are responsible for protecting your customers’ data and ensuring compliance with relevant regulations such as the GDPR and POPIA.

You should provide clear terms and conditions that outline how data is stored, used, and protected. You should also ensure appropriate data protection and security measures to safeguard your customers’ data against breaches and cyber-attacks.

Commercial considerations

These considerations cover the terms and conditions of service, including pricing, service level agreements (SLAs), and termination clauses.

Pricing structure

Your IaaS pricing structure should be transparent and easy to understand, enabling customers to know exactly what they are paying for and avoid unexpected costs.

It would be best to offer scalable solutions that allow customers to adjust their usage based on their needs. This will help to ensure that your pricing structure is flexible and adaptable to your customers’ evolving needs.

SLAs

An SLA is a critical component of an IaaS agreement that outlines the agreed-upon service levels, such as uptime, network performance, and response times.

Your SLAs should be realistic and achievable, providing customers with a clear understanding of the level of service they can expect from you. You should also be transparent about how you will measure and report on SLA compliance.

Service scope

Ensuring that your services align with your customer’s requirements is crucial. Therefore, you should provide a clear and detailed service scope that outlines your services and features. This helps customers to understand what services they are paying for and what they can expect from your platform.

Technical considerations

These considerations cover the technical details of the services provided, including infrastructure, security, and maintenance.

Security

Security is a top concern for organisations using IaaS services, and your agreement should outline the security measures you have in place to protect customer data.

This includes physical security measures such as data centre security and access control, as well as logical security measures such as encryption, firewalls, and intrusion detection systems.

Data backup and disaster recovery

Your agreement should include explicit provisions for data backup and disaster recovery. This includes specifying how data is backed up, where it is stored, and how it can be restored during a disaster or other event that causes data loss.

Scalability and performance

Finally, your IaaS agreement should be designed to provide scalable and reliable services that can grow with your customers’ needs. You should give precise details on how your platform can scale to meet increased demand and performance metrics such as network latency, response times, and other essential service quality indicators.

Actions you can take next

  • Manage your IaaS relationships by asking us to draft an IaaS agreement for you.
  • Ensure your IaaS agreements comply with applicable laws by asking us to review them.
  • Navigate the platform risks of IaaS by asking us to draft an acceptable use policy.
  • Comply with data protection law by joining our data protection programme.