2e2 case flags need for cloud contract exit clauses

News Caroline Donnelly Feb 13, 2013

The Cloud Industry Forum is calling on IT buyers to know their rights should their cloud provider go under

The Cloud Industry Forum (CIF) has seized on the recent collapse of IT services firm 2e2 to remind end users about the importance of having an exit clause in their contracts with cloud providers.

2e2 was placed into administration on 28 January. Last week, some of its customers were asked to commit to funding the ongoing operation of the firm’s datacentres while their data is migrated elsewhere.

Since then several datacentre hosting firms – including Memset and Phoenix – have stepped in with offers of help.

Meanwhile, the CIF has urged IT buyers to use the case of 2e2 to check what their rights are should their chosen cloud provider hit the skids.

Andy Burton, chair of the CIF, said: “As a matter of principle, cloud users should always plan rationally upfront and seek contractual clarity and reassurance from providers in order to understand how the service would be delivered, who is accountable, and the process and timescale to disengage and move data in a planned or forced termination.”

Burton said a contract needs to cover all eventualities, including supplier failure, but the onus in on customers to ensure their rights are covered.

The CIF said end users should check their contract provides them with suitable compensation agreed should service levels not be met, and who will be liable should a service failure occur.

“Cloud service providers, like all external suppliers, cannot act as insurers of a customer's business.  Remedies under a contract may form part of, but should not be considered to be an entire, risk mitigation strategy,” Burton added.

A good cloud contract should also provide users with a plan of action to help users get back on their feet should the worst happen.

“Buying a cloud service is no different to buying any other IT solution, if it is a critical part of the business operations then appropriate business continuity [and] disaster recovery plans need to be in place,” said the CIF in a statement. 

“The good thing about [disaster recovery] in the cloud is there are many more economically viable options for smaller companies to participate in, and it’s no longer the privilege of the larger company.  Be prepared.”