Cloud computing is the term used to describe the delivery of
internet-based data storage and other IT services. Generally, cloud
computing services are provided to an organisation by a third party
provider (Provider), who hosts the services off-site. The two main
categories of cloud computing are:
Infrastructure as a Service (IaaS): IaaS involves the
replacement of local network infrastructure with external hardware,
storage and network components that are owned, housed, operated and
maintained by the Provider and utilised in return for a fee.
Software as a Service (SaaS): SaaS involves the provision of
web-based applications, which are hosted by the Provider and do not
generally require local installation. Popular examples of cloud
applications include search engines, internet-based email services
such as Gmail and Hotmail, and social networking sites including
Facebook and MySpace.
Cloud computing contract issues
The use of cloud computing services gives rise to a number of
potential legal and commercial issues that need to be considered in
each cloud computing service contract including:
the Provider's responsibility to secure an
organisation's data including physical, operational and
the Provider's privacy and confidentiality obligations in
relation to the collection, storage, use and disclosure of personal
information. The Provider must comply with all applicable privacy
laws, which may differ depending on the jurisdiction in which the
data is physically stored
ownership of intellectual property, the Provider's right to
use the organisation's data (for example data mining) and the
non-disclosure of information stored on the Provider's cloud
the imposition of service level benchmarks on the Provider and
the consequences of service failures
data back-up, disaster recovery and business continuity
planning to ensure a business is not adversely affected when there
are issues with the cloud
whether the level of coverage provided by current insurance
policies is sufficient to cover business interruption or loss of
client data resulting from problems with the cloud
how long the data is retained by the Provider for compliance
with document retention policies, legal and taxation
whether subcontracting by the Provider is prohibited or
controlled - subcontracting may mean an organisation's data
will be disclosed to third parties
ownership and portability of data and applications - this may
become an issue if attempting to switch Providers in the future.
Can the organisation make a back-up of its data at any time? How
long does that right last after termination of the contract?
insolvency planning - what will happen to essential data or
applications if the Provider becomes insolvent, or if the
organisation's usage fees are not paid on time? Will the
Provider's business failure impact on the future of the
organisation using its cloud computing services?
due diligence prior to contracting to ensure the Provider's
ongoing viability, reputation and service quality.
What does it mean for you?
Organisations considering cloud computing as an option must
carefully balance the issues against any indentified cost saving
associated with a switch to cloud computing. Adequate due diligence
on a prospective Provider and careful consideration of the terms of
the cloud service contract are strongly recommended.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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