The best and worst of cloud contracts

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The best and worst of cloud contracts

iTnews names the best and shames the rest.

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Providers of cloud computing services continue to ask users to sign up to onerous terms around data privacy, security and service availability, according a comprehensive study by Shelston IP, commissioned by iTnews.

Our second edition of Cloud Cover dissects the generic cloud computing contracts offered by Amazon Web Services, Cloud Central, GoGrid, Google, IBM, Joyent, Melbourne IT, Microsoft, Ninefold, Nirvanix, OpSource, Oracle, Rackspace,, SAP, Softlayer, Telstra and VM Vault.

Today we can reveal the best and worst practices identified by law firm Shelston IP within the 53 contracts studied to help inform end users of what to avoid.

Shelston IP partner Mark Vincent told delegates at the Australian Data Centre Strategy Summit that there has been significant progress made in promoting best practices within cloud computing contracts since the first Cloud Cover report was published two years ago.

“Clearly end user organisations have been making demands of suppliers that are being heard,” he said. “Initiatives like the UK Government’s G-Cloud or the Open Data Center Alliance are setting new benchmarks for suppliers to adhere to, and some of those best practices forged at enterprise level is filtering down into generic contracts.”

Whilst our 2011 study focused almost exclusively on clauses end users should attempt to avoid, the maturity of the market in 2013 warranted an equal amount of analysis around what Shelston IP sees as ‘best practice’ – the terms end users should be seeking in any cloud contract. 

Rackspace and Microsoft have clearly done their homework since the 2011 study, oft-cited for best practice approaches to their cloud contracts, with Oracle and providing a level of maturity tainted only by a few glaring issues.

We conclude today’s summary with a list of what end users should expect from their contracts.


As in the 2011 study, the analysis of the 53 contracts found that most cloud providers are unable to provide guarantees around their security posture.

Locally, Macquarie Telecom’s cloud contract suggests that the customer is responsible for ensuring adequate security.

The generic contract for US-based cloud provider Nirvanix took it one step further, stating that:

“[We are] not responsible for any unauthorised access to, alteration of, or the deletion, destruction, damage loss or failure to store any Content or other data which you submit in connection with your account.”

Over half of the cloud providers surveyed provide some level of assurance around security – but even these tend to be arbitrary.

Several of these providers agree in their contracts to maintain “reasonable” and “appropriate” measures related to both physical security (as promised by and Softlayer) and specific security technologies (SAP promises to use encryption, password protection and firewalls).

Google is out on its own when promising to adhere to “reasonable security standards no less protective” than those in place for its own data “of a similar type”. As in the terms “reasonable” and “appropriate”, this clause is subject to legal interpretation.

Vincent told iTnews the terms “reasonable and appropriate” would need to be tested in a court for better definition, and would depend on the circumstances of each contract.

The best practice, according to Vincent, was when cloud providers included in their contracts a commitment to specific security compliance standards, such as ISO/OEC 27000, 27001 and 27003.

Standard contracts for both Rackspace and Microsoft point to the promises made on their websites around these credentials. Rackspace makes specific commitments on its website — eferred to within its contract — that promise annual, independent audits of these security standards, documented change management procedures, secure document/media destruction and robust processes around the handling of security incidents.

Oracle also offers the opportunity — via what appears to be an arduous process — for a customer to independently audit its security posture.

“The willingness of some cloud providers to contractually bind themselves to meet the standards referred to in promotional material, such as that provided on their web sites, is a welcome step,” Vincent said.

He noted that promotional material on web sites are subject to protection under Australian consumer law if found to have been untrue or misleading. This would go some way to dealing with the lack of definition of words such as 'reasonable' or 'appropriate'.

Data breaches

The report found a divide between those providers that offer data breach notification within their contracts.

Whilst the Australian Law Reform Commission has long pushed for laws around such notifications, Australian organisations are still not required by law to notify customers when their information leaks out, and in turn very few cloud providers commit to such transparency.

Softlayer and GoGrid both warrant that they will contact customers if data is leaked, but only if required by law.

Again, it was Rackspace, Microsoft and Oracle that promoted best practice in their contracts — all promising to immediately or promptly report data breaches to customers.

Read on for our summary of service availability and transition out clauses + a quick checklist of best practice...

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