Beware of legal traps in Cloud sourcing contract

The word cloud computing is in news for a long time now and is being discussed repeatedly now-a-days. More and more companies are now embracing cloud services looking into the advantages it offers.

Increasing pressure on the firms to adopt cloud service to stay competitive in the market has increased the number of cloud service providers. Many corporate leaders fascinated by its charm imagine that signing up for cloud service is just a matter of few clicks away. But in reality they do not recognize the risks the service providers put forward such as non-liability of confidential information loss. The providers point out standardization as the core offering in the cloud contract and often make the lengthy contract in favor of them. Most of the times buyer do not take notice of such pit falls and move forward with the signing of contracts.

Cloud Computing Legal Risks

Cloud Computing Legal Risks

It’s true that cloud sourcing agreement is lower in total value when compared to BPO; but it doesn’t mean that the agreement does not require much scrutiny.

Below we discuss possible pitfalls that one should take care before entering into a cloud agreement.

  1. Intellectual Property Issue.When a cloud service is up for a buyer, they need to move confidential details and trade secrets to the cloud.  It is the duty of the customer to ensure that the provider have adequate infrastructure to maintain the secrecy of such issues. The customer should make sure that the providers will use the data only to deliver the agreed services.The buyer can enter into an agreement with the service provider claiming its ownership of all their data and provide provisions that give them the ownership of any assets created during the period of cloud agreement.
  2. Terms and Conditions pitfalls.It is a reality that many of contract deals are signed by reading only the offerings and claims of the vendor provided in their website when in actual their contracting agreement are different. The buyers are advised to read the actual contract of the vendor. The buyers should make it a point to define the specific service level to be delivered in the contract.
  3. Recovery of data and continuity of business processThe customers of the cloud service are required to get into an agreement with the vendors to maintain backup of the data in case of any computing failure and the speed with which the providers can recover the data.
  4. Understand the customer’s liabilityWhen moving to cloud services, customer may have to permit the provider to access certain software application. In such cases, buyer should ensure that the license agreement allow other users to access the application. Or else, the customer will face a breach of contract.

The buyer of the service must be aware of the performance level required. They should monitor it constantly and rectify these legal pitfalls before getting late.

Latest Columns

September 2006 News

September 2006 American firms offshoring the lawyers Mention offshore outsourcing, and Americans fume. But who would cry if we outsourced the work of lawyers, with their fat fees and endless strategies for adding years to litigation? Sounds like a great idea, but many might say it can’t be done anyway. Legal work is too sensitive […]

Budget 2013 in India: Build infrastructure or seek tax exemption?

Established in 1988, NASSCOM (The National Association of Software and Services Companies), whose objective is to build a growth led and sustainable business services sector in the country, is hopeful that the Indian government will expend its resources with leanings towards the IT segment initiatives. MAIT (Manufacturers Association for Information Technology) on the other hand, […]

Speak Your Mind