While cloud offerings are maturing and buyers are becoming more knowledgeable of service contracts, research firm Gartner warns CIOs still need to tread carefully when signing on the dotted line.

Many cloud service contracts contain structural shortcomings that could put their organizations at risk, warns Gartner. “It’s essential that organizations planning for cloud services do a deep risk analysis on the impact and probability of their risks, and they should also plan mitigation for the most critical issues,” Alex Bona, a Gartner research vice president, said in a statement. “This might cost additional money, but it is worth the effort. Risk should be continuously evaluated, because contracts can change ­– sometimes without notification.”

Gartner identified four risky issues that CIOs should pay particular attention to:

  • Cloud sourcing contracts are not mature for all markets. When analyzing cloud sourcing contracts, look to see if the provider had an organization of your size in mind. Gartner says it often sees cloud-sourcing contracts that do not meet the general legal, regulatory and commercial contracting requirements of large enterprises.
  • Contract terms generally favor the vendor. Enterprises that outsource successfully often do so by creating a partnership-style relationship with their vendors. Gartner warns cloud service contracts do not lend themselves to such partnerships – mainly because of the high degree of contract standardization. As such, CIOs need to be aware that vendors will resist customization and user expectations need to be managed accordingly.
  • Contracts are opaque and easily changed. Gartner says it has often encountered contracts that refer to web pages for additional terms and conditions. Those terms and conditions have been known to change without the customer’s knowledge. It recommends that CIOs ensure any terms of the contract cannot change during the contract period, and ideally, for at least the first renewal term.
  • Contracts do not have clear service commitments. When choosing a vendor, Gartner says buyers should understand what they can do if the service fails or performs badly. They ensure credit mechanisms will lead to a change in the providers’ behavior should they not meet their service level commitments.


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