Nebulous Contracts


Cloud computing has been changing the shape of IT provision for several years now. If you include private cloud then you could argue it has been for decades. It has broken the link between the ownership of computing infrastructure and its use for many yet its economic argument is still to be proven.

As with most markets, such as in automotive and housing, there is a balance between renting or leasing and purchasing. Cloud computing has given rise to software and infrastructure as a service (SaaS and IaaS) and I guess you could argue that we have lived with cars and housing as a service for a long time. We’ve just never thought of them in those terms.

What is less obvious perhaps, though implicit in the way that cloud arrangements have been put in place, is the relationship with another vendor in the provision chain. Cloud infrastructure and hosted services are often done so on a third party’s equipment or in a third party’s data centre. This adds a further complexity to any contractual arrangements. Having reviewed a number recently, this is not reflected in the contracts that vendors use when selling you services.

The problem is quite simple. In a one-on-one contract it is good practice to put a clause in that describes what happens should the provider go bust, or is taken over. What happens though when there are three companies involved?

Should the vendor of an application cease trading, what happens to the arrangement that they have with the cloud provider? The equipment can still run and the software can still be used yet the provider will be well within their rights to switch the hardware off.

What happens if the cloud provider ceases trading? What arrangements will the application vendor make to continue service provision?

I’ve been advising that clauses are included that allow the continuity of trading should such an event occur. It makes me wonder though why this issue has not come up already.

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