Since the cloud knows no crisis, here’s how to (re) negotiate your contract

Last month, the existence of a massive and highly controversial cloud contract between the NSA – the U.S. national security agency – and Amazon Web Services, worth $ 10 billion, was announced.

It is likely that a major U.S. government agency buying $ 10 billion worth of cloud services will have some influence over the terms of the deal. However, for traditional businesses, the opposite may be true: the cloud service provider holds most of the cards, legally or contractually, with terms that can backfire on the consumer.

Global end-user spending on public cloud services is expected to increase by 20% in 2022, to $ 495 billion, from $ 411 billion in 2021, according to Gartner. By 2023, end-user spending is expected to reach nearly $ 600 billion. So there’s a lot of money flowing into the cloud industry right now. It’s time to put sellers on the back foot: they’re not short on revenue.

“Often complex and vendor -centered, cloud subscription contracts require a unique negotiation approach,” wrote Adam Mansfield, head of Microsoft Consulting Services, Salesforce and ServiceNow at UpperEdge. “Companies using cloud applications should approach their cloud agreements with appropriate rigor and ensure they include the necessary upstream and downstream protection and flexibility, while also addressing various security concerns. . »

What should be discussed first?

In his landmark book on the subject of cloud negotiations, The Best Guide to Cloud Subscription Agreements (available as a free download), Adam Mansfield said subscription companies can assert themselves in cloud agreements. Remember that everything is negotiable. Adam Mansfield provides some important tips for negotiating reasonable terms with a cloud service provider:

  • Beware of myths about “on-demand” services “Most cloud subscription contracts do not reflect a truly flexible, on-demand model,” warns Adam Mansfield. Instead of measuring usage, they tend to look like on -premises software contracts, “with fixed fees for a particular set of products and a set number of users. ” Experienced users of the software in the area may experience all the familiar pitfalls, he added, such as “automatic renewals and upfront multi-year commitments required.”
  • What Sellers Want Are Definitely Revenue Flows : Often, companies have to commit to a multi-year contract, which requires prepayments for each year of the contract, he explains. Above all, suppliers want predictable profits.
  • Make sure price protection is in place “Cloud subscription contracts are often vague about the price increase protections applied to any additional products or users added during the contract term,” warns Adam Mansfield. Make it clear that adding additional products or users will be subject to the original price agreement.
  • Beware of renewal increases : after three years, it can be assumed that there is a certain level of vendor lock-in, which makes it difficult to switch to another platform. “It’s important to put price protections in place at the time of renewal,” he stressed. Renewal timing is synonymous with price increases. A good contract should have at least any potential increase when re -negotiating a new contract.
  • Rules on stopping the process with precision : Even the most established cloud service providers have their share in problems that lead to downtime for customers. Although cloud computing contracts obviously include enforceable service level agreements (SLAs), Adam Mansfield urges cloud computing customers to insist on strict measurement periods for SLAs. “The longer the measurement period, the more the downtime effects are diluted,” he asserted. “Once downtime starts, the clock needs to start ticking in terms of downtime calculation. It’s important to define and apply” clear and specific penalties “, he continued.” Don’t believe in free time application, which is ” there is little value to businesses if they are not satisfied with the service in the beginning. ”A better penalty structure should include service credits that increase as the length of downtime increases.
  • Ensure free and clear termination : When providers do not meet the provisions of the service promises, customers should be able to terminate the agreement without penalty. “The supplier’s obligations in the event of termination must be clearly stated,” Adam Mansfield added.

Promises in cloud computing are now driving forward-thinking businesses looking for the flexibility and flexibility needed to compete in today’s economy. Cloud service providers are partners on this journey, and it’s important that these commitments are initiated and maintained on an equal footing.


Leave a Comment