Feeds:
Posts
Comments

Posts Tagged ‘compliance’


We are in the early stages of the Cloud outsourcing phenomenon. Therefore, there are few (if any) contract protection and vendor evaluation best practices developed in this area. However, it appears that there are some major differences between the Cloud and traditional outsourcing contracts. Some of the differences include:

  • Cloud contracts are smaller in value.
  • Cloud contracts are shorter in duration.
  • Cloud contracts appear to cover individual services (multiple agreements) versus an all-inclusive traditional outsourcing contract.
  • Due to the network centric nature of Cloud products and services, greater emphasis should be placed on security, content, and intellectual property protection, and infrastructure back-up, redundancy and contingency planning.
  • Insurance coverage should include – business disruption, Cloud vendor stability, and liability.

As a result, your company should take extra precautions with its initial Cloud contracts and watch for both precedents that are favorable to your own position, or on the other hand, that might bind you into unfavorable situations at a later time.

Key Contract Topics and Considerations

Cloud Contracts

Cloud Contracts

Since there are a wide range of Cloud and outsourcing services, the following topics should be addressed in all outsourcing contracts. Some topics will apply specifically to Cloud. As part of the research, we have noticed that instead of writing one large, all inclusive Cloud outsourcing agreement, a growing number of companies are writing smaller, service specific agreements, covering a growing number of Cloud products and services, but on an individual agreement basis for each service. This gives companies the flexibility to deal with either one or multiple Cloud vendors for different products and/or services. It also gives companies the ability to negotiate different terms for different services and pilot various Cloud products and services.

As an example, some companies have separate Cloud outsourcing agreements covering each of the following services:

  •  Hosting Services – covers the licensing of software products both on the vendor’s and customer’s location (client/ server arrangement) leased from third parties.
  • Internet Access Service – defines type, speed and costs of service.
  • Virtual Private Network Service – covers extranets, and intranets.
  • Security services – covers firewall and other security services.
  • Professional Services – covers labor intensive technical services, such as help desk, programming, systems design, network management, and Web design.

Cloud/outsourcing contract topics to be covered include (this is not intended to be an all inclusive list):

  • Description of product, service, and/or deliverables (sometimes, it may be useful to identify exclusions to the agreement).
  • Responsibilities of both parties.
  • Contract term, renewal and termination conditions.
  • Ownership of hardware, software, network, content and facilities.
  • Pricing, rates, financing options, penalties and rewards.
  • Performance, warrantees, and service level guarantees (vary by type of product or service).
  • Governance, issues management and reporting, dispute resolution, escalation, recourse and remedies.
  • Back-up, disaster recovery, contingency and insurance coverage.
  • Change management process, approvals and triggers.
  • Termination triggers and process.
  • Confidentiality, non-disclosure, security.
  • Intellectual property and content protection.
  • Maintenance and service – remote and on-site.
  • Software license treatment (also, consider renting initially with a right to buy over some period of time).
  • Rights of customer if vendor goes out of business.
  • Single point of contact.

Figure 1: Outsourcing Vendor Selection and Evaluation

Develop a plan and business case
  • Baseline model
  • Requirements and needs
  • Economics
  • Have a formal procurement process
Manage an RFP process
  • Competitive bid
  • Due diligence
Screen on three principal criteria
  • Hardware Factors (servers, firewalls, desktops, etc.) – Performance, pricing, reliability, capacity, modularity, availability, support and maintenance, back-up and recovery, speed, etc.
  • Software Factors – open standards, multiple platforms, efficiency, flexibility, language, interface and integration support, pricing, documentation, conversion support, maintenance, third party license arrangements, modularity, back-up and recovery, etc.
  • Network Factors – open standards, multiple protocols, geographic coverage, access speeds, capacity (bandwidth on demand), availability, network management, back-up and recovery, reliability and up-time, mean time to repair, security, power protection, pricing, etc.
Institutionalize methods Establish methods for ongoing performance and contract management.
Review Periodically review transition plan and exit arrangements.
Need more information? Contact Shaun
Advertisements

Read Full Post »


TalendEverything you need, you get Software-as-a-Service (SaaS) or “Cloud Solutions” is one component of an overall strategy to improve business process. Align business users and IT and get more from your cloud and on-premise data – DON’T WAIT TO INTEGRATE!… Learn more

The rapid adoption of cloud applications, platforms, and infrastructure has resulted in more fragmented data and an increased need to integrate data “in the cloud” with data in on-premise applications and databases. Line of business managers and SaaS administrators need rapid time to value and self service. Meanwhile, the IT organization is tasked with avoiding costly data silos eliminating untrustworthy point solutions.

Read Full Post »


Cloud Computing Beats Snow

Read Full Post »


Sacher Partners is an accredited Salesforce.com consulting partner, with over 11 years experience supporting customers in maximizing their use of Salesforce.com and Force.com.

Salesforce Consulting Partner

See what more than 59,000 companies have already discovered: salesforce.com delivers results. It’s the most complete CRM in the industry—dovetailing sales with marketing and customer service to keep you on top of every lead, every deal, and every customer.

Successful Customer Relationship Management (CRM) is a journey and not a destination. As your company grows and your customers needs change your organisation will need to adapt in order to remain competitive. This landscape will need to be reflected within your Salesforce.com solution.

Partner with Sacher Partners as your expert Salesforce.com Solutions Administrator to help secure your future CRM solution

Read Full Post »


Define your strategy. Determine the basic strategy your are employing (e.g., why you are going to us an Cloud Computing and what it is going to provide for you). We have identified several generic strategies that are available including time to market and cost reduction, and several variations. Without knowing your basic raison d’etre for going the Cloud Computing route, it will be impossible to evaluate your success, or to value the service you are buying.

Assess your current platform and investment. You need to determine the compatibility of the proposed Cloud Computing with your platform, both from a technology point of view as well as from a systems maturity viewpoint. Look for application sets that are not well developed in your organization, and have a relatively small number of interfaces to other applications, that will tend to be relatively stable over time, and that do not require a large amount of customization to meet your needs.

Cloud Computing

Cloud Computing

Determine source of value added for Cloud Computing. Evaluate where the Cloud Computing will give your value added. Are you merely replacing an application process or are you going to get something from using the Cloud Computing that you could not obtain otherwise? Understanding this helps to set the pricing for the service. Another critical factor is the level of commoditization in the market. Cloud Computing will charge premiums for services that are unavailable elsewhere.

Estimate integration issues (and who is going to pay for them). Our research suggests companies will tend to underestimate the cost and complexity of integration between their infrastructure and the Cloud Computing. You may be able to save by having the basic development of the system paid for by the Cloud Computing, but if there are counter-balancing integration challenges that must be funded by your own organization, the Cloud Computing advantage may disappear. Understanding who is going to pay for what during the entire lifetime of the Cloud Computing relationship is necessary to truly understand the value you are getting.

Contract service level agreement (SLA). Negotiation of SLAs for the Cloud Computing relationship can not be done too carefully. The trend is to have a single point of contact for any problem – either application or network performance – that is being contacted in case of problems. First, second, and third tier escalation and Problem Determination Procedures (PDPs) and Trouble Ticket Tracking need to be defined well and subjected to a testing period.

Implement “vanilla,” then add value. Our analysis indicates that a user should go as long as possible (in the contracted relationship) without introducing customization or any other changes in the services being purchased. Contacting for the “vanilla” layer of services will give the best price-performance. When absolutely necessary, and after the bugs in the Cloud Computing relationship have been worked out, you can then begin to add value to the contract gradually by introducing extra services (and features) as required. According to the VCM, the key to limiting the unpredictability of long-term contract costs in an outsourcing relationship is to avoid customization as long as possible. One advantage in the Cloud Computing model is that it almost always provides a vanilla level of basic services that can be hitched onto in order to stabilize the long-term costs of the contract.

Do a cost analysis. For any consideration of the Cloud Computing model, a cost analysis needs to be done so that the Cloud Computing option is compared to alternative paths. Any cost analysis has a diverse set of variables cost factor elements that can be either included or excluded from the analysis, and depending on what is included the analysis outcome varies. One advantage to the Cloud Computing contingency is that it is possible to receive a fixed fee commitment from the Cloud Computing along with a clear bill of services. Although what is included will vary from contract to contract and from one service provider to another; nevertheless, it should be possible to define the services in a bundle that can be compared to your own costs of providing them internally, although there will be many judgement calls concerning where to load on costs.

Chapter 2 of this report reviews the value proposition being made by Cloud Computing. What value to customers are they bringing to the market, and what are the factors that determine whether it is likely to be successful?

Chapter 3 details the basic types of Cloud Computing and describes the “delivery chain” from infrastructure and applications through networks to desktops that must be managed to produce high performance in Cloud Computing.

Chapter 4 introduces our Why-What-Who-How framework for making decisions about going with an Cloud Computing approach.

Chapter 5 reviews the basics of negotiating an Cloud Computing contract for services.

Chapter 6 identifies the current risks and limitations of the Cloud Computing model, and proposes various amelioration strategies that can be employed. We have also provided three appendices.

Appendix A provides a checklist of factors to consider when evaluating an Cloud Computing.

Appendix B provides a watch list to monitor for the Cloud Computing sector.

Appendix C provides a more detailed look at the Cloud Computing value proposition from a cost standpoint.

Article By Shaun White http://www.sacherpartners.eu Learn More

Read Full Post »


Why?

Why provision application services externally? Since the Cloud Computing market is still emerging, you should only consider Cloud Computing if the value propositions are directly translatable into business advantage for your firm. You should clearly understand the underlying business forces, competitive pressures, and urgency that may make Cloud Computing an attractive option. Is first mover advantage for a greenfield operation or spin-out likely to translate into lasting competitive advantage? Is flexibility to exit a business, or rapidly ramp up business volume important? Can you reliably forecast the transaction processing scale required of your technology infrastructure twelve months in the future? Could the wrong in-house technology decision now create an unscalable wall that blocks business growth? Should you ration capital funds, and focus them solely on core, differentiating assets, not operating infrastructure?

Cloud Computing Decision Sequence

Cloud Computing Decision Sequence

In the first stages of the decision processes, it is necessary to carefully determine and assess the underlying forces that are compelling change in your IT infrastructure or business. In some cases, the reason could be that external competitive pressures are forcing your enterprise to develop new eBusiness services, or to go to market in a different way. Or the external pressures could be simply along the low-cost provider trajectory. In any case, there can be a variety of external forces that will compel the organization to make significant changes in its business processes and how it delivers IT support to make them work.

At the same time, significant internal pressures can be a driving for adoption of the Cloud Computing model. For example, if there is a chronic shortage of IT personnel, then it may be completely impossible to deliver the required IT services any other way. There may be core competency issues coming to the surface, (e.g., if there is consensus around the idea that many IT services should be done by outsiders, leaving key personnel to focus on activities that support core competencies of the organization, instead of frittering away their talent elsewhere).

What?

What are the specific business results and performance levels the Cloud Computing solution must deliver? Since few vendors have tackled the end-to-end service delivery chain (and demonstrated consistent competence provisioning each specific service), it’s critical to understand the performance characteristics and limitations of the applications, networks, infrastructure and support services (starting with help desks) that make up your Cloud Computing delivery chain. Are the application’s business process design and the Cloud Computing technology integration sufficient to support everyday business operations? Will the technology infrastructure (network and operations) prove reliable, and sufficiently robust, to meet transaction processing needs? Should you limit the number of vendors providing service to reduce finger pointing, or should you consciously involve sufficient partners to optimize contingency and exit planning?

Who?

Who should you choose as your providers? And should the arrangements be viewed as transactions, or as longer term strategic partnerships? Since contracts are predominantly short-term, the accepted rules for prioritization, risk, and relationship management could shift dramatically. Should you structure arrangements to capture intended financial advantages quickly, while hedging your company’s most critical risks? Or should you take the time to negotiate arrangements that address each potential issue in advance? Will your service level agreements be little more than mutual goals in a situation where contracts may expire before default agreements and remedy options can be enforced? This forms the baseline against which the Cloud Computing model is compared. After the base line costs for providing the service internally is established for a period of time, usually 2-3 years, the next step is for the user to contact different Cloud Computing vendors and begin their selection and development of contracts.

How?

How should you organize to manage transition and ongoing operations in an Cloud Computing-based service model? Is “service sourcing” destined to become a key competency in your organization? Will dramatic changes redefine the role of your IT organization, or will the continuing evolution away from custom development be sufficient? Will traditional internal application maintenance and support become obsolete? Can technology and service integration be outsourced, or will rapid integration become a core competency that distinguishes operational and technology leaders? This has several implications and challenges:

  • IT Organization. The IT organization must readjust itself to working and “interleaving” with an outside service provider. This can mean either that people will be re-assigned to more ‘core’ activities for the company, or they will leave. Support structures and how the help desk operates must be debugged, and changed so that users or customers are not disadvantaged by the transition to the new model.
  • Project Management. The way in which the IT organizations, and the business units that drive priorities in IT must change to accommodate the new Cloud Computing delivery model. Instead of making demands against internal resources, now it is necessary to work with partners, and this changes completely how the budget approval and planning process operates.
  • Business Processes. Finally, in order to make full use of the Cloud Computing provisioning of IT services, it is clear that many if not all business process must be changed, or at least modified, in order to adjust to the new model. For example, policies for handling sensitive data that is going to be stored and processed by the Cloud Computing must be worked out. Also, it is important to keep track of business processes over time to see if any significant potential for synergy or consolidation appears.

In summary, the Why-What-Who-How framework for choosing Cloud Computing starts with the large “macro” forces that are shaping the utilization of IT in the organization, then narrows down the options by first understanding the scope of what is required. After that is determined, the nature of the required application set determines the general type of Cloud Computing to choose. After that, pro forma cost estimations are made to establish a base line for cost and expenditure that is a point of comparison for the Cloud Computing model. Cloud Computing are then selected on a variety of both financial and non-financial data, and contracts, including SLAs are negotiated and registered. After that, still the organization faces a serious amount of work in adapting to the new provisioning model.

Article by Shaun White Sacher Partners Ltd

Read Full Post »