Cloud contracts

As we started scoring cloud vendors, the biggest area that pretty much all the vendors do poorly at is contracts.

Some of the questions we ask about contracts are:


If I want to leave, for example if they get bought by a competitor, can I get my data out and go?

This varies, but often times the ability to leave is either not mentioned, or it explicity says "You can leave when the term is up". 

Many times having the data by itself is almost useless, unless you have someplace to put it. Migrating out of salesforce.com without being able to re-use that data in another system would be difficult and costly.

Are there financial penalties for service level agreement failure.

These are almost universally, a joke. If you read closely most of them say "If the service is unavailable for a day, we will refund up to 3% of the monthly fee". This pretty much equates to, we won't charge you if you didn't get to use it. Not much incentive to fix a problem.

Other times we have seen clauses that say "You will receive this credit, but you must notify us, in writing, within 72 hours". Unless you are really good, that never happens. 

Are maximum increases baked in? 
By default this never happens, mostly because the vendors don't want you to think about that. In essence though the cloud vendors, once they hook you, can increase the rates until it is almost worth going somewhere else. Sort of like gas prices in the US. They, whoever they are, raise the rates until it's almost worth buying a more fuel efficient vehicle, or driving less. Almost, but not quite.


How much notice do you need to give us to terminate? 
Rarely, but it has happened, a vendor will terminate you. If that happens how much notice do they need to give you? Is that enough time to find a new vendor, migrate the data and train on the new system? Usually it's either 30 or 60 days. You realistically probably need 6 months for a big SaaS. If it's something more commodity like VMware in the cloud, 30 days may be fine.


How much notice do we need to give them if we want to leave?  
As a customer you want this to be as little as possible. Normal is 30 days. We have seen some that require 6 months notice.

Does the contract auto-renew? If so what are the terms?
Ideally this auto-renews at the current rate, but sometimes it will cancel, which if you are not expecting that, can be horrible. Other times it will renew, but at list price. If, for example, you negotiated 50% off of list, that means your monthly bill just doubled. Even worse, it may have doubled for the next 12 or 24 months depending on the contract.


Cloud contracts can be tricky and many vendors aren't used to amending their terms. Only by working together can we encourage vendors to be a little better about what we are allowed to do as customers.