Many businesses today are turning to cloud services to benefit from cost savings and operational efficiencies. When purchasing cloud services, many companies focus too narrowly on what their needs are today. Failing to consider future needs can translate into unanticipated costs as usage and requirements change.
To get the most benefit from cloud services and to keep costs predictable, companies should examine their current needs and consider their future requirements. Once requirements are fully understood, a cloud services agreement that is flexible enough to grow and change with the company can be designed.
In general, cloud contracts are built on standard language designed to protect the cloud provider. To protect a company’s future interests, it’s important to negotiate terms in the following areas.
Reconcile User Accounts
Ensure the company has an opportunity to audit and reconcile user accounts at renewal time. Many cloud contracts charge the customer based on the number of user accounts, but accounts are often duplicated or dormant due to personnel changes. To avoid being charged for inactive accounts, the contract should allow the company to reconcile those accounts so only active, valid accounts are included.
Prepare for Future M&A
Consider the possibility for future merger and acquisition activity. Buying or merging with another company has the potential to add a large number of users to the service at one time. This can trigger overage charges. Negotiate protections into the initial contract that allow for these types of fluctuations without incurring penalties.
Ask for a separation of production and nonproduction processes, which can affect user numbers. Users accessing the cloud services for nonproduction processes—including testing, training, and development—can increase costs if terms are not negotiated for these circumstances.
Seek Volume Discounts
Secure volume pricing for reaching user thresholds. In many cases, cloud providers will offer a discount when a certain number of users is reached. Sometimes the provider will only apply that discount to the number of users in excess of the threshold. Negotiate terms that require those discounts to apply to all users.
Allow for Flexibility
Ensure users can migrate among services without incurring additional costs. Cloud contracts often are inflexible and lock companies into specific services and user types. However, a company’s needs will certainly change over time. A contract that allows for changes in the number and type of user accounts will benefit the company as its needs change.
The decision to move to the cloud can be a big one. Once the choice is made, it’s easy to craft the deal to meet the company’s current needs without taking into account future changes. But failure to build flexibility into the contract can negate the initial benefits offered by the cloud.
A business should consider both its current and future operations and negotiate cloud contracts to take such requirements into account. This will ensure the company gets the most out of its cloud investment.