Last month, I wrote about part of my recent conversation with in-house counsel from several major public Canadian and U.S. cloud vendors in connection to the Canadian IT Law Association's Annual Meeting in October. Here are some more thoughts from them on the big issues surrounding cloud computing.
Standards
While most financial institutions and governments now want to see their cloud vendors comply with various security standards, and in fact many large vendors agree to do so in their marketing materials, fewer are willing to represent and warrant compliance with such standards in their contracts.
Part of the problem here is cloud computing standards are still in their infancy and many are in their draft phase. Also, there is a veritable alphabet soup of standards/associations in this space, including the CSA (Cloud Security Alliance), ENISA (European Network and Information Security Agency), INCITS (International Committee for Information Technology Standards), and ISO (International Organization for Standardization), to name a few.
Some cloud vendors will only agree to comply with financial standards rather than specific cloud computing standards; others will only contractually agree to comply with certain key elements of the standards but not the standards themselves (or even worse, industry specific standards) to minimize liability.
Others proudly state they comply with various standards, including ISO 27001, ISO/IEC 27002 code of best practices for information security management, NIST controls, PCI compliance, and even the newer ISO 27018 standard to protect personally identifiable information (PII) for the public cloud computing environment.
This last standard, published Aug. 1, 2014, provides control objectives, controls, and guidelines for implementing measures to protect PII in public cloud computing environments and is applicable to all types and sizes of organizations, including public and private companies, government entities, and not-for-profit organizations, which provide information processing services as PII processors via cloud computing under contract to other organizations.
ISO 27018 seeks to address such issues as keeping customer information confidential and secure and preventing personal information from being processed for secondary purposes (e.g., advertising or data analytics) without the customer's approval. If this standard takes off in Europe, compliance in Canada will remain a definite possibility and there will be some onus on cloud vendors here to comply with it.
Transition services
My cloud vendors all agreed the ability of the customer to retrieve data is critical but unfortunately most companies do not spend enough time thinking about transition.
While some SaaS vendors allow customers to export their own
data, such vendors are not in the extraction business per se and do
not provide transition services. Vendors acknowledge that sometimes
the details relating to transition — especially regarding
what happens to customer data post-termination — are not
always in the contract itself and that details of the actual
destruction policies may be found, if ever, on their internal web
sites and do change over time.
The clauses should continue to be negotiated carefully as the
vendors frankly stated it is unlikely that they or their
competitors will destroy their archived data in the absence of
explicit legal requirements to do so. Even then it is difficult to
ensure the process is carried out thoroughly.
And of course, this level of detail regarding destruction —
which is required by regulated industries — does not come
cheap. As one vendor noted, "for any kind of data transfer or
destruction, expect to pay some data charges . . . you will need to
get granular in the agreement. There is no easy
solution."
Are cloud agreements becoming more commoditized?
The SaaS vendors were all over the map on this. Many felt quite
strongly that public cloud agreements are supposed to be
straightforward, standard, and basically unchangeable.
The "yes" camp firmly believed in "very standard
terms and parameters" for their public cloud services
offerings and would not change them unless absolutely required to
meet "OSFI requirements." One vendor bluntly said while
there are more attempts by clients to negotiate these agreements,
"our prices for standard services are set for
non-negotiation" and therefore they try not to negotiate to
maintain efficiencies.
Other cloud providers said "no" regarding commoditization
and were adamant SaaS cloud agreements are becoming less
commoditized. Saying such contracts were originally not always
negotiable, the "market power of key clients is now
influencing decisions to negotiation."
Also, companies in this space are very conscious of their
competitors and are always watching others in the industry to see
what they are doing; if one company changes their position on a
clause (i.e. by increasing the scope of a key indemnity, for
example), often others will do so as well.
A number of vendors did complain clients often want to use their
own forms of legal paper — whether the document is
appropriate or not — and the "battle of the forms"
causes negotiation delays. One vendor noted there is "lots of
back and forth — it's getting worse, not
better."
Another vendor found that they were "spending too much time
revising our agreements" and reacted by recently reviewing and
revising their standard terms. They seemed to have a much better
acceptance with their revised document. "We still have to make
changes when dealing with universities and the public sector but
there are generally fewer changes," said the vendor adding,
"We will negotiate terms to get the business."
The bottom line: a customer's ability to make changes to their
cloud agreement (particularly a public one) will depend upon the
general willingness of the cloud provider, the size of the deal,
the nature of the customer (regulated industry, public sector,
etc.), and what the competition is doing.
Service levels
Interestingly, and somewhat surprisingly to me, most cloud vendors
indicated service levels in their SaaS agreements were not being
hotly negotiated. Is it because often lawyers leave this section to
the business team? Or is it because by their very nature of being a
shared service, service levels for a public cloud offering are hard
to change?
Some vendors believe clients don't always understand service
levels and it is "lawyers [who] will always ask for something
here to impress the business." Some clients do have internal
expertise and seek changes to specific service levels but "you
have to understand how this one change will affect other service
levels in a public cloud so this is not easy to do."
Most vendors felt there should not be a lot of changes to service
levels created for public clouds and that clients really need to
understand what those numbers actually mean, i.e. does downtime
affect the availability of product or the underlying
infrastructure? It's fine to demand high uptime of
software/systems but what about guarantees re performance,
functionality?
What do customers want when they seek changes to service levels?
Most are looking for increased uptime ratios and credits and many
vendors felt clients were in fact "overly tied to percentages
and availability, looking for credits." Rather than getting
credits, one vendor said if a client is unhappy, it should just
negotiate a termination right, because vendors too want to keep
service up as much as possible.
Service levels are frankly difficult to measure as different
clients want different things. As one of my own (user) clients
expressed it, "It's less about numbers — what is
downtime? It's more about how this will impact the
business. I typically want money back but this is hard to get from
a vendor. I will definitely seek credits. I want meaningful fix
times, validate fix times, and a right to terminate if things go
wrong." All this should be included in any negotiated cloud
agreement.
Private clouds
While acknowledging private clouds are useful for some clients
(including those that want a hybrid cloud), many vendors felt such
structures were "not the real cloud" as "private
clouds lose the point." Others felt private clouds cost too
much for most clients and are therefore not a real option for most
non-regulated clients.
Noted one vendor: "There is a perception that [private clouds]
are more secure but we think that using a multi-tenancy approach
accomplishes this anyway."
While some clients are clearly willing to pay more to feel more
secure, other clients are satisfied directing vendors to store data
in certain jurisdictions, i.e. the E.U. rather than the U.S. At the
same time, given rapid shifts in the marketplace, vendors are
watching one another to see what sells and whether the private
cloud market becomes ever more attractive.
"Private clouds are the new wave," said one.
"Private clouds are not currently part of our business model
but we are watching closely."
While I am grateful these cloud vendors took the time to speak to
me about these important issues, I definitely walked away feeling
our discussions represented only a small and brief snapshot of this
rapidly changing industry and if I came back to speak to these same
individuals in a year, much would be changed. Accordingly, watch
this space for updates!
Originally published on Canadian Lawyer Online - IT Girl Column
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