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Posted by Graham Keen on Mon 23rd May 2011



Cloud computing may have gained in popularity but cloud contracts still contain areas of risk for IT decision makers, according to Gartner.
 
 
Key contractual areas that procurement executives should look out for when choosing a new cloud service range from security concerns to levels of service, a report from the analyst has found.
 
Alexa Bona, research VP at Gartner, said in a statement that IT decision makers should not judge cloud contracts at face value.
 
She said cloud services often appear to have lower initial and switching costs than traditional products but they "include hidden costs and risks, and require unique terms for contract protection" compared with traditional arrangements.
 
For example, researchers at Gartner found that numerous cloud contracts contained no guarantees of uptime or performance service-level agreements (SLA) - despite many being used for business-critical operations. The report advises that users negotiate SLAs with penalties, especially for services key to business-critical operations.
 
Gartner also recommends that users negotiate a separate SLA for security breaches and ensure the provider meets any privacy-related regulations with which the user may have to comply.
 
For those contracts that did include SLAs, the report found that vendors often included penalty exclusions. Gartner warns that procurement executives must spend time going through the penalty exclusions - for example, checking that downtime calculation begins exactly when the downtime occurs as this may not always be the case.
 
The report also advises that users should negotiate a six-month notice period for the termination of services. Researchers found that a number of contracts only include a 30-day notice period which would not give clients enough time to relocate business-critical services.
 
Similarly, the report advises users to be aware that some contracts include the right for service providers to suspend services if there is a late payment. Gartner warns that this gives the vendor increased powers in payment disputes and that users should negotiate an agreement that stipulates that service cannot be terminated while the user and vendor are in a legitimate payment dispute.
 
When negotiating these terms of service, Frank Ridder, research VP at Gartner, said in a statement that procurement executives should take advantage of the cloud markets which "are generally still very competitive".
 
He added IT decision makers "should be prepared to walk away from deals, if some of the risk elements are not satisfactorily addressed".
 
Ridder argued that over time, buyer pressure will improve the nature of contracts offered so that they are not as "provider-centric" as they are now.
 
Shelley Monet

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