A Lawyer’s View: Negotiating Cloud Computing Agreements

By Michael P. Bennett
The Corporate Counselor
March 11, 2010

Cloud computing has been characterized as a paradigm-shifting phenomenon that will change how we purchase IT resources. Though given different names, cloud computing has been around for some time, and the legal lessons learned from experience with traditional software licensing and outsourcing agreements can and should be applied to cloud agreements, but there are new issues which will need new solutions.

Cloud computing is a loose term that describes a variety of data storage, processing, and application services, normally provided by a third party using equipment not located on the customer’s site. These services include providing raw processing power on demand, special purpose applications on a subscription basis, and remote data storage. An early form of cloud computing was Application Service Provider or ASP services, and another is currently known as software as a service or SaaS. Cloud services are normally provided using internet technology, where the customer uses inexpensive hardware and an internet browser to access the service and/or remotely stored data.

The ease of access and simplicity of using cloud applications are part of its attraction. Unfortunately, the same cannot be said for the legal issues related to cloud computing. While traditional software licensing and IT outsourcing agreements can be used as a model for cloud computing, there are new risks and business practices not addressed in those older agreements that must be considered.

OUTSOURCING AGREEMENTS AS A MODEL FOR CLOUD AGREEMENTS

Cloud computing agreements are basically services agreements, as …

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