5 of the Greatest Tips for Negotiating a Cloud Contract

5 of the Greatest Tips for Negotiating a Cloud Contract

Choosing to migrate your company’s IT infrastructure and data to the cloud is one of the biggest business decisions that you can make. Before you can initiate the process of moving your resources into a cloud environment, however, you must select a cloud services provider and draw up a contract.

The majority of companies use cloud agreements to focus on two main areas: service availability and performance. When negotiating a cloud contract, it is important to take a close look at your cloud services and what you expect of a vendor. From data ownership responsibilities to exit strategies, your contract must address your cloud partnership from beginning to end.

Here are some tips that you should follow when negotiating a cloud contract:

1. Do your own research.

It can be difficult to negotiate with a provider on their pre-established cloud terms. Perform your own due diligence and review their offerings before agreeing to a contract.

During your review, you should examine several key areas, including performance history and client references. Gaining a comprehensive view of the proposed terms will help you determine whether a particular provider is the best fit for your organization.


You shouldn’t confine your research to a single cloud provider. Every vendor has different products and services to offer, each of which will be available at different rates. You should take the time to look at various providers, evaluating each one for their cloud offerings and what you can expect to pay for them. In a contract negotiation, you should be able to counter a vendor’s terms with a more affordable alternative.

2. Negotiate data ownership.

Your cloud contract should include provisions that outline the specifics of data ownership. Make sure your contract reflects your specific needs. The information you will store in the cloud is your most important asset. In negotiating your contract, you should, therefore, ensure that you will retain ownership of your data—even when housing it in your provider’s data centers.

It is crucial that you verify the level of control that your vendor will have over your data, both in terms of using it and making changes to it. You don’t want your vendor to have full control of your data. However, you should include provisions that ask them to create backups of your data on a regular basis.

The matter of data ownership also extends to data privacy. During contract negotiations, work with your provider to determine who will be responsible for the security of your data. The majority of providers are willing to leave the bulk of data security in your hands, preferring instead to focus on the protection of their networks.

However, cloud vendors have vastly improved their data security measures. Many maintain compliance with important security regulations. You should evaluate potential vendors for their adherence to these rules and for the other measures they will take to safeguard your data.

3. Don’t agree to services you don’t need.

Much of the beauty of the cloud lies in the fact that you can scale your services at any time, whether you need to add more users or incorporate a new business application. As such, you shouldn’t let your provider or your excitement about utilizing the cloud to sway you into deploying services that your organization isn’t ready to use.

Just because you think you may be prepared to add a new software in a year’s time, doesn’t mean you should include it in your contract. When the time comes, you may find that you are not so ready for that platform after all.

As such, your original contract negotiations should only cover the services that you need immediately. You can purchase new ones as you need them.

4. Establish renewal terms.

Your contract should also include provisions for extending your cloud agreement with your provider. It’s common for providers to raise subscription rates when it comes time to renew services.


As a result, you should negotiate the level of increase they are allowed to implement. This will protect you from incurring unexpected fees and large price increases down the road.

During negotiations, you and your vendor must also establish a renewal timeline. The majority of vendors will ask you to renew in multi-year increments. However, annual renewals will give you more flexibility to either continue your service or move on to another provider.

5. Go in with an exit strategy.

In addition to renewal rates, your contract negotiations should cover your proposed exit strategy. You must ensure that you have the option to terminate your agreement without incurring fees.

However, this doesn’t mean that you should be able to bow out of your contract for no reason. Your exit strategy must explicitly outline the scenarios in which you will be permitted to terminate with no penalty.

For instance, you should negotiate permissions to exit your agreement if your cloud vendor fails to meet their promised service levels. If they experience consistent downtime or deploy an inadequate response to cloud incidents, then you should be allowed to end your agreement.

Your exit strategy should also include provisions about data transfer. Some providers will delete your information as soon as you terminate your contract. Others will give you a grace period of about a month to move your data from their servers. Negotiating the length of data retention will ensure that you have the necessary time to transfer your cloud resources to another vendor.