Cloud computing purchasers must change mentality

Paul Snell is managing editor at Supply Management
10 October 2013

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Purchasers need to change their approach when buying cloud computing services because there is little room for negotiation, according to a lawyer.

Sam De Silva, partner and head of the IT and outsourcing practice at law firm Manches, told delegates at yesterday’s CIPS Annual Conference in London although contracts weren’t that different, there were additional issues to be aware of.
“I think there needs to be a shift in mentality in how you are procuring, and I think contract evaluation should be a part of provider selection. Because in the majority of cases you haven’t got the ability to negotiate cloud computing contracts – they are ‘take it or leave it’,” he said.

“You need to compare the contracts with different providers as well as doing the technical and operational evaluation. I think the test you need to ask yourself is will a standard offering with their standard terms meet your business needs? You assess different contracts, rather than contract negotiation.”

He added as many providers only offer their own terms and condition using traditional software licensing contracts was not appropriate and deals should instead be structured more like long-term outsourcing deals.

De Silva also warned of the danger of “cloud washing”, with providers attempting to present their services as “low on legal-ease”. But while many contracts are very short, they often contain hyperlinks to numerous other documents and conditions which also form part of the deal.

Purchasers must also pay careful attention to the contracts themselves, as they often do not contain the typical obligations, warranties and safeguards you might expect to see in IT sourcing or hosting agreements.

“Due to their commoditised approach they contain less onerous obligations on the supplier,” said De Silva. “You need to undertake a gap analysis, what you would expect from a typical IT supplier, and what the cloud computing supplier offers and what are the gaps, and are you prepared to accept the risk of contracting with this service provider, given they are not complying with the benchmark obligations you would expect.”

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