A significant number of cloud sales deals break down at the contract negotiation stage, according to new research from international law firm Eversheds and The Lawyer.

Despite an increased demand for cloud services, there are mismatched expectations between suppliers and customers at the contract negotiation stage, which is hampering deals. The research, which surveyed 350 cloud providers, purchasers and industry advisors worldwide, says more than half (57%) of cloud suppliers have seen deals fail at the eleventh hour.

Of the businesses surveyed, more than a quarter (27%) walked away late in the negotiation process, while an additional 10% had come close to abandoning the deal. 

“The number of deals breaking down at the last minute is unnecessarily high given that customers and suppliers have typically reached agreement, at least in principle, before deals get to contract negotiation,” said Charlotte Walker-Osborn, technology and outsourcing partner at Eversheds and head of the firm’s Technology, Media and Telecoms Sector Group. 

“In cloud negotiations, issues which are both legal and commercial in nature tend to come out during contractual discussions because this is when both parties take an in-depth look at the agreed parameters around the deal,” Walker-Osborn said. “Only then can it become apparent that differing views may be shared on certain key areas such as data privacy and related security issues.”

More than half (51%) of cloud services providers think price is the key factor in deals breaking down, while customers cite other issues. Almost two thirds (60%) of customers who have walked away from a deal cite the inability to reach agreement on terms and conditions as the reason, with data protection provision being the most contentious area.

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