Contracting in the Cloud – a view from Andomise

I attended a breakfast session sponsored by a bunch of companies a couple of weeks back – led by Andomise and Coupa, with Market Dojo also involved. The theme was “the Impact of the Cloud on Procurement” - very topical.  Andomise are an IT firm who amongst other things support Coupa’s UK expansion, and one of their Directors is Dom O’Riley, a fine musician, who performed with his star musical friends at our event last Autumn.

Clouds. Software included.

Anyway, different speakers highlighted various aspects of “cloud” and its implications for procurement. Andy Mathieson of Andomise spoke about key issues procurement executives should look out for when actually contracting for cloud based solutions. That was interesting; we’ve talked a lot here about cloud based vendors and products from a capability point of view, but we’ve said less about the actual procurement challenges if you’re an IT buyer or category manager contracting for cloud-based services.

Software procurement has always struck me as a bit of a black art. I was (I believe) the first person in the UK to take up the new and at the time revolutionary Microsoft “Select” option back in 1992 when I was CPO for Dun & Bradstreet Europe, but I really don’t consider myself an expert in that field. And I had great respect for people who worked for me at NatWest who knew how to take on Oracle, or the dreaded Computer Associates, when it came to software licensing and negotiations!

So, back to Andomise. Here are some of the key points Mathieson made.

  • The penalties that vendors will accept (as part of contracts or SLAs) are typically limited to annual subscription level with cloud services – that is a lot less than you are likely to get in a traditional big-bang software purchase.
  • Negotiating bespoke changes to the product may be difficult with some cloud based vendors – you need to assess the willingness of the provider to do that early in the buying process if it is important to your organization.
  • How do you make sure you can extract yourself from the contract? You need to cover off exit processes, transfer of data etc. when you contract.
  • On a similar note, make sure you can't be bullied! If you have the software inside your firewall, you can generally refuse to pay the annual fee if you’re in dispute, but keep using the software while you negotiate. You can’t do that with Cloud – the vendor can cut you off.
  • Insist on full disclosure – where is the vendor hosting the data? Who else is involved? What security procedures and precautions are in place? What are they doing with your data?
  • Be aware of how are you being charged, be careful around rights to audit, and how many users you have on your system if pricing is based on that.

It was only a short session, but it was certainly Interesting stuff, and made me think about the differences between contracting for cloud services against the traditional software licensing model. We’ll come back to this topic again – and thanks to Andomise and the other organizers for the session.

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