negotiating cloud agreements the proven playbook

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| 1 © 2011 UpperEdge Negotiating Cloud Agreements – The Proven Playbook Revealed

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  • 1. Negotiating Cloud Agreements The Proven Playbook Revealed 2011 UpperEdge | 1
  • 2. Presenter Background Adam Mansfield Director of Services, UpperEdge, LLC UpperEdge Overview Bio IT Sourcing and Commercial 10 years experience within the contract Advisory Firm negotiation profession Provides strategic advice, Specializes in the sourcing and relevant insight, and precise negotiation of cloud, enterprise market intelligence to IT and software and services agreements strategic sourcing executives Advised Global 2000 companies on over Sole objective is to ensure our 80 cloud, enterprise software and clients establish high-value, services agreements best-in-class relationships with their most important IT suppliers 2011 UpperEdge | 2
  • 3. Agenda Cloud Computing Overview Growing Acceptance for Cloud Computing Cloud Providers Objections to Negotiation How to Create Leverage Contract Negotiation Issues and Tips Takeaways 2011 UpperEdge | 3
  • 4. Cloud Computing - Overview Cloud Computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g. networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction Source: National Institute of Standards and Technology (NIST) Special Publication 800-145, January 2011 2011 UpperEdge | 4
  • 5. Cloud Computing - Overview Hybrid CloudsDeploymentModels Private Community Public Cloud Cloud CloudServiceModels SaaS PaaS IaaS Broad Rapid Measured Network Elasticity Service AccessCharacteristics On Demand Resource Self-Service Pooling Source: National Institute of Standards and Technology (NIST) Special Publication 800-145, January 2011 2011 UpperEdge | 5
  • 6. Growing Acceptance for Cloud Computing Reduced deployment cycles Access to innovation Flexibility / Scalability/ Agility Lowered overall costs Freed up funds for other strategic initiatives 2011 UpperEdge | 6
  • 7. Cloud Providers - Objections to Negotiation We are unable to offer Have you heard this before? custom contractual provisions (i.e. service levels, renewal terms, audit rights, data protectionsetc.) because we need to be in a position to offer a scalable service to many customers in order to provide our low cost solution. 2011 UpperEdge | 7
  • 8. How to Create Leverage Competitive environment Perceived competition and viable alternatives Replacing a competitors offering (cloud based and on-premise) Market share is vital Long-term/downstream revenue opportunities Revenue increases as user counts and offerings expand Utilization of company name on public client list Public recognition of adoption 2011 UpperEdge | 8
  • 9. Contract Negotiation Issues 2011 UpperEdge | 9
  • 10. Pricing / Discounting Issues - Far from On-demand - Multi-year deals with upfront payment - Shelfware Negotiation Tips - Additional discounting for multi-year commitment with annual upfront payment - Prices locked during the term - Ability to scale up and down 2011 UpperEdge | 10
  • 11. Renewal Terms Issues - Cost increases at the end of the initial term - Auto-renewal language Negotiation Tips - Price lock during first renewal term - Price increases should be capped for subsequent contract renewals - Auto-renewal language removed 2011 UpperEdge | 11
  • 12. Data Protection Issues - Data ownership and access rights - Data after termination - Use of data by the cloud provider - Backup schedules and policies Negotiation Tips - Ownership of all data maintained - Data returned and removed providers servers - Data should not be use for providers own purposes - Clearly defined backup schedule and policy 2011 UpperEdge | 12
  • 13. Security and Audit Rights Issues - Limited security provisions - Inadequate security breach remedies - Right to audit Negotiation Tips - Access rights must be clearly defined - Location of data needs to be known - Notice of a security breach within a reasonable period of time - Periodic audits of data security controls, processes and procedures 2011 UpperEdge | 13
  • 14. Service Level Agreement Issues - Boilerplate agreements - Penalties for system disruptions, provider performance, downtime inadequately addressed - Key performance metrics are not defined - Access lost when providers servers fail Negotiation Tips - Measurement period for uptime needs to be clearly defined - Penalty structure if uptime not achieved - Significant service credits that escalate as downtime increases - Monthly reports on key availability, continuity and performance metrics must be provided 2011 UpperEdge | 14
  • 15. Termination Rights Issues - Ability to terminate for breach - Obligations upon termination are ambiguous and/or inadequate - Transition services not adequately address Negotiation Tips - Unilateral right to terminate for convenience - Ability to terminate for continuous failure to meet service levels - Clearly defined transition services - Providers should not have the ability to terminate and/or suspend services abruptly 2011 UpperEdge | 15
  • 16. Takeaways LOWER COSTS + QUICK DEPLOYMENT LIMITED RISK CLOUD AGREEMENTS ARE IMMATURE DUE-DILIGENCE EVEN ESTABLISHED IS EVEN MORE PROVIDERS IMPORTANT SOLUTIONS HAVE UPTIME ISSUES 2011 UpperEdge | 16
  • 17. Thank You Are you? UpperEdge Service About to embark on an ERP Transformation Sourcing Advisory Service Project? Strategic Advice on creating and implementing highly effective sourcing strategies utilizing market intelligence Preparing to renew an Enterprise Agreement Commercial Advisory Service with a Strategic Supplier? Negotiation Strategy creation and implementation utilizing knowledge of Supplier Business Practices and Pricing About to receive Resource Rate increases from Benchmarking Service your Services Provider? Provider Benchmarking utilizing a comprehensive rates database and Mark to Market Assessments Contact: Adam Mansfield [email protected] 617.412.4324 Check out our Supplier Scouting Reports For strategic insights on IT which provide unique insights into sourcing visit: market and key supplier developments www.upperedge.com/blog www.upperedge.com/insights 2011 UpperEdge | 17