3 Things to Consider When Signing a Cloud Computing Contract

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Business man signing a contract

Cloud computing entails a paradigm shift from in-house processing and storage of data to a model where data travels over the Internet to and from one or more externally located and managed data centers.

It is typically recommended that a Cloud Computing Contract:

  • Codifies the specific parameters and minimum levels required for each element of the service you are signing up for, as well as remedies for failure to meet those requirements.
  • Affirms your institution’s ownership of its data stored on the service provider’s system, and specifies your rights to get it back.
  • Details the system infrastructure and security standards to be maintained by the service provider, along with your rights to audit their compliance.
  • Specifies your rights and cost to continue and discontinue using the service.

In addition to the basic elements of the Contract listed above, here are three important points to consider before signing your Cloud Computing Contract.

1. Infrastructure & Security

The virtual nature of cloud computing makes it easy to forget that the service is dependent upon a physical data center. All cloud computing vendors are not created equal. You should verify the specific infrastructure and security obligations and practices (business continuity, encryption, firewalls, physical security, etc.) that a vendor claims to have in place and codify them in the contract.

2. Disaster Recovery & Business Continuity

To protect your institution, the contract should state the provider’s minimum disaster recovery and business continuity mechanisms, processes, and responsibilities to provide the ongoing level of uninterrupted service required.

3. Data Processing & Storage

  • Ownership of data: Since an institution’s data will reside on a cloud computing company’s infrastructure, it is important that the contract clearly affirm the institution’s ownership of that data.
  • Disposition of data: To avoid vendor lock-in, it is important for an institution to know in advance how it will switch to a different solution once the relationship with the existing cloud computing service provider ends.
  • Data breaches: The contract should cover the cloud service provider’s obligations in the event that the institution’s data is accessed inappropriately. The repercussions of such a data breach vary according to the type of data, so know what type of data you’ll be storing in the cloud before negotiating this clause. Of equal importance to the breach notification process, the service provider should be contractually obligated to provide indemnification should the institution’s data be accessed inappropriately.
  • Location of data: A variety of legal issues can arise if an institution’s data resides in a cloud computing provider’s data center in another country. Different countries, and in some cases even different states, have different laws pertaining to data. One of the key questions with cloud computing is, which law applies to my institution’s data, the law where I’m located, or the law where my data’s located.
  • Legal/Government requests for access to data: The contract should specify the cloud provider’s obligations to an institution should any of the institution’s data become the subject of a subpoena or other legal or governmental request for access.

The Cloud Computing Contract is for the benefit of both the consumer and the provider. While it can be highly technical and digitalized, the Contract will ultimately establish the partnership between the parties, and following these steps should help mitigate any potential problems.