Get comfortable in the cloud: Part 2

(Editor’s note. This is the second of two parts. Read Part 1.)

Advisors can help their clients gain comfort in migrating to the cloud by reviewing and negotiating a vendor’s Terms of Service (TOS).  Ensure that key points of importance are put in writing, especially in the following areas:

  • Privacy and data security: This is a primary concern for business owners.  Advisors should review the TOS along with any SOC reports to gain comfort in the vendor’s safeguards.  The TOS should mirror the findings in the SOC reports.  If not, make sure to understand the reason for the discrepancy. 
  • Data ownership:  The TOS should spell out clearly who owns the data.
  • Jurisdictional issues:  Advisors should know where their client’s data is stored.  If data is physically stored offshore, can it be seized by a foreign government?  Where is the court of domicile? Answers to these questions need to be clearly defined in the TOS. 
  • Maintenance and support:  The TOS should spell out what will happen and when, including when the system will be upgraded to comply with new laws or financial reporting regulations.
  • Availability and reliability:  The TOS should define the service level commitments (SLC) and what recourse, if any, the client has if they are not met.  Can the client terminate the agreement if the cloud provider is not performing?  What assistance, if any, is the cloud provider obligated to provide for the transition?
  • Disaster recovery:  Disaster recovery should be covered in the TOS, but it is not always part of the standard agreement.  Lots of pop-up cloud providers don’t have secondary data centers and back-up server farm locations.  Again, the cloud provider’s TOS should mirror its SOC reports.
  • Exit strategy. The TOS should explain how the exit process will happen.  Who is going to extract data?  How will it be accessed?  What format will the data come in and what is the time frame for access?  Who pays for the exit work?

In summary

Many business owners need guidance to navigate a move to the cloud. With sound advice and an understanding that they have already been using the cloud via Facebook or Netflix, they can overcome the barriers, both real and psychological, and reap the benefits of moving their business data to the cloud. An advisor who understands the questions to ask and terms to negotiate will not only continue to prove his or her value, but also help ensure the client does not suffer losses to the competition by maintaining the status quo.