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Negotiating Cloud Service Agreements

Awesome: in our experience, it is the repair that triggers the most negotiations. In a compensation clause, one party promises to defend the other against legal action and pay for comparisons or related judgments. Most cloud service agreements have intellectual property exemptions and are often hot-negotiated. The parties dispute issues such as whether the supplier should compensate claims for technology built to customer specifications and whether compensation should include combinations of vendor and third-party technology. Relatively new compensation also appears in some cloud services contracts. Customers want providers to defend data breaches. On the other hand, suppliers are afraid of having to defend cases caused by customer errors or simply fearing costs, so that they resist. And some providers even ask the opposite: the customer releases the data protection controller. They claim that customers can store all data on computers hosted by providers in the cloud, and the price of this open door is a compensation from the customer who covers the costumes via the data. Eustice: In general, laws and regulations lag behind technology because the former are progressing much more slowly than the latter. However, in some areas, governments are making considerable efforts to catch up and regulate certain categories of sensitive data that companies put into the cloud. For example, the United States adopts new export control rules to define when the technology is “exported.” When a company puts regulated data into the cloud, the new rules require that data be encrypted end-to-end. This requirement imposes an additional security requirement for companies active in this area.

The best way for companies to comply with these requirements is to be aware of these requirements before entering into cloud service contracts and to ensure that these contracts comply with the rules for sensitive categories of data stored in the cloud. Good cloud contracts should always relate to the assurance that the parties must bear. Cloud service providers should have insurance for data loss cases that cause interruptions. End-users should consider initial insurance to cover expenses related to data loss or breach. Mark Lundin is a KPMG partner and over the past 15 years has helped emerging technology companies implement governance, risk and control (CTM) processes and effectively meet complex third-party security requirements. Its customers include the world`s leading cloud providers, security service providers, IT infrastructure providers and businesses with complex IT environments. He leads a national cloud and security insurance team and encourages KPMG`s participation in several international standards organizations.

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