Last month, it was revealed that the National Security Agency had re -awarded a massive and hotly contested cloud computing contract worth up to $ 10 billion to Amazon Web Services.
A large government agency that takes over $ 10 billion of cloud services could be assumed to have little leverage in terms of the agreement. However, for major companies, the opposite may be true – the cloud provider holds many of the cards, in a legal or contractual sense, with terms that can come back to bite the consumer.
Global end-user spending on public cloud services is expected to grow 20% in 2022 to a total of $ 495 billion, from $ 411 billion in 2021, according to Gartner. By 2023, end-user spending is expected to reach nearly $ 600 billion. So a lot of money is pouring in now into the cloud sector. It’s time to touch the feet of the fire vendors; they don’t hurt for profit.
“Often complex and vendor -centered, cloud subscription agreements require a unique negotiation approach,” wrote Adam Mansfield, head of training of Microsoft, Salesforce, and ServiceNow consulting services at UpperEdge. “Companies using cloud applications should approach their cloud agreements with proper rigor and make sure they include the necessary upfront and downstream protections as well as flexibility while also addressing various security concerns. ”
In his successful work on the topic of cloud negotiations, The Ultimate Guide to Cloud Subscriptions Agreements (available for free download), Mansfield said that subscription companies can assert themselves in cloud agreements . Remember, everything is negotiable. Here are some important tips Mansfield provides on negotiating on reasonable terms with a cloud vendor:
- Beware of the on-demand myth: “Most cloud subscription agreements don’t reflect a truly flexible, on-demand model,” Mansfield said. Instead of measuring usage, they tend to be similar to on -premises software agreements, “with fixed payment fees for a specified set of products and a dedicated number of users.” Experienced users of the software in place can see all the familiar pitfalls, he added, such as “autorenewals and required multi-year upfront commitments.”
- What cloud vendors want are definite revenue streams: “Typically, organizations must contractually commit to multi -year terms that require advance payment of fees for each year of the term,” he said. Vendors want predictable profits above all else.
- Make sure price protection is set: “Cloud subscription agreements are often vague about the protections against price increases applied to any additional products or users added during the term,” Mansfield warned. Make it clear that adding additional products or users will be subject to the original pricing agreement.
- Beware of renewal hikes. After three years, it can be assumed that there is some level of vendor lock-in, making the transition to another platform more complicated. “Having price protections in place at the time of renewal is critical,” he urges. Renewal time means time of price increase. A good contract should at least limit any potential increases when it’s time to renegotiate a new contract.
- Manage downtime terms with precision: Even the most established cloud provider has a share of glitches that cause downtime for customers. Although given that cloud agreements include executable service -level agreements (SLAs), Mansfield urges cloud customers to insist on strict measurement periods for SLAs. “The longer the measurement period, the more the downtime effects dissipate,” he said. “Once downtime starts, the clock needs to start ticking in terms of downtime calculation.” Importantly, there should be “clear and specific penalties defined and enforced,” he continued. Don’t buy free application time, which is “of little value to businesses if they are not satisfied with the service in the first place. A better penalty structure should include service credits that increase as the length of downtime. “
- Ensure free and clear termination: When vendors fail to meet the provisions of the SLA, customers must cancel the agreement without penalty. “The vendor’s obligations at the end need to be clearly stated,” Mansfield added.
Cloud interactions are now alive with forward-looking businesses seeking flexibility and flexibility to compete in today’s economy. Cloud providers are partners in this journey, and it is important that these interactions are initiated and maintained on an equal footing.