Who Owns Your Cloud?

Ed Sullivan, Aria Systems‘ CEO passed along a blog post of his to me today – a good one which dovetails nicely into a blog post I’ve been meaning to write about social web on the cloud and continuity planning. Cloud computing, or ubiquitous computing as a utility provides some clear cost savings and clear benefits, but there are certain things to watch out for before you sign on the dotted line. I’ve involved in software as a service (Saas), Web 2.0 and Cloud the overwhelming majority of my career, and I’ve found the savvy business unit owners I’ve worked with always ask the same two questions. Here’s the cliffs notes on what they ask, which is what you should too before putting your social web startup on cloud services:

Do I Own My Customer List?

The short answer is maybe – it entirely depends on the provider’s master service agreement. One service we’ve been asked about frequently is Amazon’s Devpay. The service’s Processing Agreement contains a number of boilerplate terms, but one two sections stand out which should concern anyone looking to jump on the cloud computing bandwagon. Take a look at section 8.2 in the processing agreement below, to which I’ve added highlights to key sections

8.2 Purchase Data. In order to allow you to manage Subscriptions, we may provide to you certain information pertaining to End Users, including, the name, e-mail address and any other information that we make available to you (“Purchaser Data“). We own all Purchaser Data that we provide to you and you have limited rights to disclose and use Purchaser Data. Specifically, you will not directly or indirectly: (a) sell, barter, disclose, transfer, convey or make available any Purchaser Data (except you may disclose this information as necessary for you to perform your obligations under a Subscription or under this Agreement and provided that you ensure that every recipient uses the information only for that purpose and complies with the restrictions applicable to you related to that information); (b) use any Purchaser Data for any purpose, other than as is necessary to manage Subscriptions you sell through the Service, including, without limitation, marketing or promotional purposes;

So I’m no lawyer, but it seems under the Devpay agreement, you do not own your customer list, because any customer information provided to you as a customer would come through DevPay’s servers. Hence, they are technically providing that information to you as per contract terms. Any attempt to “transfer” customer data for marketing reporting purposes is ground for contract breech. What if you need to populate a production server with user data? Tough luck. Further more, if you walk away from the Devpay service, you’re also walking away from your customer list per this agreement, at least part of it if not all of it. And of course, here is what happens if you’re found in breech:

7.2 Suspension or Termination by Us. We may suspend or terminate the Service, for any reason at any time without prior notice to you. Termination of the Service will result in the closure of your Payment Account and termination of this Agreement. Without limiting the foregoing, we may suspend the Service and access to your Payment Account (including without limitation the funds in your Payment Account)

No customer list, lost funds, and from what I can tell very limited rights to maintain operation while the misunderstanding is sorted out. The goal here by the way is not to pick on Amazon – several of the folks I’ve met from Amazon are great people. However, the goal here is to highlight onerous terms in cloud services contracts. The kind you should laugh at and walk away from.

What Happens When the Cloud Turns into Rain?

This is my tongue in cheek way of asking what happens to a customer’s services if a cloud computing provider folds. “We won’t – we’re a big name and have plenty of cash” is a frequent answer. Rubbish. HP’s cloud services initiative recently folded, leaving customers scrambling to ensure business continuity. They aren’t the only ones in trouble. Yahoo Briefcase, the personal file sharing service also announced a shut down this month. Now granted, the Briefcase product was in dire need of an upgrade (Just 30MB ? Seriously?). But the larger point is that cloud services can and do get plug-pulled.

Now having ample resources or positive cash flow is one thing, but cloud services was an experiment for HP, and apparently an unprofitable one. So they pulled the plug on a line of business which isn’t core to their strategy. Which begs the question: is your cloud services provider in the business of providing cloud services? Or is the cloud service just another business unit, which can be shut down without bringing down the entire business’ strategy? Poor profitability or lack of solid market segmentation can bring down a cloud service just the same as lack of capital. In fact, it’s a bigger threat in my opinion.

Key Learnings:

1. Make Sure you Own Your Data. Devpay’s intention may not have been to take ownership of their clients’ customer lists, but a strict reading of their terms of service allows just that. If your vendor insists on such terms, promptly show them the door.

2. Insist on a Continuity Plan. Business can and do fold units or run out of capital. Ask yourself if your cloud services provider in the business of providing cloud services. A “no” answer should be a red flag. Also, think long term. To be sure, a discussion of a proper business continuity plan are beyond the scope of this post. However, code escrow, planned switchover to partners, web services or on-demand data extraction, and lengthy maintenance windows post-closure are all parts of a comprehensive plan.

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This entry was published on March 5, 2009 at 7:30 PM. It’s filed under Uncategorized and tagged , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

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