|
Page 1 of 3
By Thomas Hoffman
The benefits of cloud computing and Software-as-a-Service agreements—including lower up-front costs, reduced capital and operating expenditures and instant upgrades—are well-documented, even for such a nascent market.
What's more mysterious, though, is how these deals are structured by service providers and what they portend for unwitting customers who could potentially fall prey to perpetual licensing schemes and ambiguous service level agreements.
"The whole cloud movement, at the infrastructure layer, is still a very early-stage market and customers still have to do a significant amount of due diligence before entering into these agreements," says Ben Pring, an analyst at Gartner, Inc.
Like many CIOs, Korn/Ferry International CIO Dan Demeter always makes sure to include exit and performance clauses in technology services agreements he enters into on behalf of the Los Angeles-based executive recruitment firm. "It's very important to have a very clear understanding of what's expected," he says.
Demeter says his biggest concern with cloud computing and SaaS agreements is getting locked into paying for any service that Korn/Ferry decides to stop using for whatever reason and continue to be contractually obligated to continue paying for it.
For instance, Korn/Ferry is currently testing applications from two SaaS-based information-gathering services. Although Korn/Ferry has yet to sign contracts with either of the two vendors, Demeter and his team are "actively" talking with the two firms about contract parameters, including exit clauses and performance metrics, he says.
Robert Rosen, CIO at the National Institute of Arthritis and Musculoskeletal and Skin Diseases in Bethesda, MD, says security concerns around the management and oversight of patient data has kept the division of the National Institute of Health from entering into any hosted services agreements.
Still, contractual uncertainties also feed into his anxieties, he says. "You have a couple of problems with this as a CIO," says Rosen, the past president of SHARE, an IBM user group. These include guarantees that customer data won't be misused and will be returned to them after an agreement has been terminated, says Rosen.
"And what do you do if the vendor goes belly up?," asks Rosen. Under traditional enterprise software licenses, notes Rosen, customers can place provisions in their contracts to have the vendor's code placed in escrow in the event that a software maker went out of business. Those types of assurances don't necessarily apply in the cloud, says Rosen.
Next: Secure the Exit Clause
|
