How lawyers' red tape entangles cloud innovation

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This article appeared in the November 2017 issue of CRN magazine.

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How lawyers' red tape entangles cloud innovation

COMMENT  |  Australian enterprises are continuing to invest in cloud at an exceptional rate. In parallel, requirements for suitable and robust frameworks alongside this investment grows. Security, privacy and governance requirements are increasing each year for good reason.

Meanwhile, lawyers – can’t live with them, try to live without them – are essential for any enterprise. They guide through legal and regulatory requirements and find hidden surprises that linger in fine print. They write contracts, they enforce contracts and they look for loopholes in contracts.

In the old world of IT outsourcing, lawyers and contract complexity were made for each other. To quote American rock singer-songwriter Warren Zevon, all parties had to “send lawyers, guns and money” to negotiate an outsourcing deal.  Well, hopefully not the guns, but the ease in which lawyers would engage for both the service provider and buyer to justify billings was not discrete.

One services vendor, whose name has long departed the tech world through mergers and acquisitions, used to boast about both the size and aggression of their legal team. When it came to enacting the contractual fine print, or informing the client of any breach of contract, regardless how slight, none were better. Not exactly a strong basis for a customer-centric engagement. In part, this is why IT outsourcing was never about the customer requirements, satisfaction and outcomes, but vendor profit margin, first, second and third.

Given the history, one would assume that the enterprise would be an easy transition legally. Sadly, and despite legal firms getting directly into the advisory market, this answer is no.

Every week, vendors and buyers of cloud computing solutions alike relate to capioIT difficulties faced in getting the legal profession to prepare contracts that are cloud and opex. For example, one CIO of an Australian property services provider spoke to capioIT about his ongoing frustration that while legal frameworks around landlord contracts are clear and consistent, the same cannot be said for cloud computing contracts with SaaS and IaaS providers.

The dream of the one-page contract is typically far from reality for enterprises and services providers. The key challenges around the legal contracts relate to data ownership, security and governance, outages, responsibility on the buyer side and simply a failure to fully understand the cloud ecosystem, investment and culture.

Particularly difficult

The traditional contract with a fixed level of service, a fixed start and end date, and price is easy. A cloud-based contract structure with a model that can increase in investment one month, and then drop the next with changing scope and pricing has proven particularly difficult.

The ability to extend this legal framework to business outcomes and shared benefits is even more difficult and kills deals.

 What does this mean? Legal aspects relating to innovation and cloud are incredibly important to get right, especially security, privacy and governance aspects. Unfortunately, but unsurprisingly, the regulatory environment is also lagging – which hurts innovation. Worryingly the gap is widening, not closing.

The answer is education. The legal fraternity must take it upon itself to ensure that professionals can understand the cloud model and as a result prepare contracts that, in an accelerated fashion, capture the nature of the cloud and opex ecosystem.

As highlighted, lagging legal frameworks silence innovation. When lawyers cannot agree on the requisite fine print, then solution implementation is delayed. When legislative environments cannot agree to the frameworks then solution implementation is delayed. Combined they significantly slow innovation down. As a result, innovation, such as the ride-sharing sector, will simply circumvent the process and hope for the best.

Either way, consumers of innovation lose. No-one wants that to be the outcome.

The legal frameworks around cloud and opex contracting are critical. Alongside the legislative environment, delays cost organisations, reduce the speed of innovation and ensure business benefits are delayed.

The cloud is here to stay, so it is imperative that the legal profession be front and centre of shifts to improve the speed and simplicity of contracting. Vendors need to support this. No part of the ecosystem can afford to exclude themselves from the push to simple, standard contract terms for cloud. Success will drive innovation. What more inspiration does anyone need?  

Phil Hassey is a digital devil's advocate, recovering economist and CEO of capioIT, an advisory firm focused on helping organisations understand customer-centric emerging technology

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