Category Archives: Eversheds

Suppliers over-promise on cloud deliverables – survey

Vertrag Stiftbergabe ablehnenA recent survey from law firm Eversheds claims 27% of cloud deals have fallen through due to suppliers not meeting client expectations during contract negotiations.

Despite 77% of respondents claiming they intend to increase cloud spend over the next 18 months, the research claims that a number of deals have not come to fruition due to supplier over promising on what can be delivered within the agreement.

Differing views on what should and can be delivered are only coming to light in the final stages of contract negotiation, when buyers are finding out that suppliers cannot deliver on what had previously been promised.

On top of the 27% who have terminated talks, a further 10% said they were tempted to walk away from the deal because of the differences. Suppliers also backed up these statistics, as 57% of the supplier side respondents said that they had lost deals at the contract stage.

“The number of deals breaking down at the last minute is unnecessarily high given that customers and suppliers have typically reached agreement, at least in principle, before deals get to contract negotiation,” said Charlotte Walker-Osborn, Technology & Outsourcing Partner at Eversheds.

“In cloud negotiations, issues which are both legal and commercial in nature tend to come out during contractual discussions because this is when both parties take an in-depth look at the agreed parameters around the deal. Only then, can it become apparent that differing views may be shared on certain key areas such as data privacy and related security issues,” said Walker-Osborn.

Data protection and residency has once again proved to be a contentious issue, as 33% of the customers surveyed said this was the reason they walked away from the deal. Visibility over the suppliers supply chain was another reason, as 28% of customers claimed this was the reason for the breakdown.

“Cloud purchasers are anxious about where data is hosted for two reasons. The first is regulatory. Data protection and privacy regulations vary across jurisdictions, but most countries require companies to know where their data is hosted and being processed,” said Paula Barrett, Global Head of Privacy at Eversheds.

“Conscientious suppliers will ensure relevant regulatory requirements are covered by the contractual terms. However, some suppliers still fail to include fairly mandatory terms that the law requires their clients to have in place. The second reason is because government authorities in some jurisdictions have the right to access personal data, so it is natural that businesses are concerned about where their data will reside,” said Barrett.

The survey also hints that the mass market is still to be convinced of the reliability and robustness of cloud platforms, despite early adopters demonstrated the value. 48% of cloud buyers highlighted that they would like service credits to compensate for any losses in the event of a service outage as a failsafe, whereas only 20% of service providers were likely to include them in an agreement.

Despite the appetite for cloud services being present in the industry, a lack of clarity from suppliers at the outset has seemingly quashed a number of potential deals, which could potentially be avoided with suppliers taking a more proactive stance on data protection concerns, as well as a more sympathetic view of customer caution when implementing new technologies.